Major Challenges Facing Small Scale Businesses in Kenya

  

Date Posted: 11/1/2012 3:03:48 PM

Posted By: amo84   Membership Level: Silver  Total Points: 742

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Indeed,to come with a logical definition of a small scale business is not that easy.It is dependent of quantity of output,say number of employees,stakeholders and also varies from one industry or firm to any other.
A small scale business I can assert to be managed in sole proprietorship or partnership and whose output is relatively small. Since colonial times,Kenya has had mushrooming small scale businesses and it has been significant to the very survival of many inhabiting this country. Asians, for instance, started small shops dating 1950's where two to three Africans had their employment and could earn something small and this has always been the behavior to date.
There are various challenges that has hampered progress in such trading systems in terms of expansion, service provisions, its running, credit availability among others. These include :-

a)Financial Constraints
Finance has made it difficult to progress and provide quality services.For example, many such micro businesses, as some call them,deal with primary products and readily available cheap resources. Financial institutions find it hard to consider lending loans to them as no securities would warrant the repayment or fine subject to breach of contract or failure to fulfill given conditions.

b)Poverty Effect
Many of those being in the businesses are striving themselves out of poverty and find it suitable in securing little cash for daily upkeep. This has made it hard to enhance expansion in various areas and such conditions may be marked by poor household conditions.

c)Relative Boundaries
Ethnic groupings,religious differences,regional limits and education has become a major problem currently to these businesses. The drivers of this economy lack universality as taking everybody as human being. Considering people in terms of regions and language group has made their market too small and even idea transfer has never been born.

d)Competition
The low comparative advantage in production of certain goods as compared

to our trading partners including China has restricted entry to the businesses as production cost may be high relative to the cheap imported goods.

e)Lack of Advanced technology
Technology is fundamental and a prerequisite to higher output levels and reduced production costs. This has made them not to flourish and participate in regional trading due to low quality output.

f)Education Limitations
Many engaged in this have little information on savings and bank involvement in helping financing the business and interest rates. They hold money and in the long run not investing.
Moreover, poor road networks,lack of support from the government,dealing in the same products, dumping, higher taxation and lack of subsidies or markets and storage facilities affect negatively these businesses
Nevertheless, it should be noted that the survival of the mass of Kenyans depends greatly on them.Government should chip in and put legislation to these businesses sponsoring any art of invention.

g) Insecurity
Security poses a great challenge to Small scale business owners in Kenya. Many of the businesses suffer loss due to theft or thugs invasion who steal from them or terrorist activities like bombing which cause a great amount of loss in terms of destruction. Various means to help prevent or deter this challenge have been tried like; use of security firms or guards to safeguard their businesses while others opt to sleep in their business premises as a security measure. This therefore implies higher cost of doing business as they respond to security challenges.

h) Competition
Competitions comes in terms of good customer service followed by discount offers which vary according to clients whereby the use of price as a competitive edge by selling more cheaply than their competitors. Selling of variety of products, selling on credits, selling of quality goods and services and offering customers additional services like free training and transportation.
Using price therefore to compete may mean lower profits, even if it may translate into higher volumes. However this strategy can be employed by every body hence spelling a death knell for the business given the fierce competition in the small business sector.

i) Debt Collection
Debt collection is among the challenges faced in small scale business. Whereby most of the debts are either gained or lost which depends solely on customers loyalty. They are usually collected at the end of the month. Others avoid giving goods and services on credit and others demand down payment before giving a service. Lack of debt payment means a severe loss to the client and therefore remains a challenge

j) Hawkers
Hawkers pose a challenge to small scale business because they sell cheaper and their goods are of high quality. Competing with hawkers on price is debatable since hawkers move from one place to another bargaining on price since most of them don’t consider a lot of profits but to see their goods sold out.

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