Challenges faced by small and medium enterprises in Kenya

  

Date Posted: 11/4/2012 11:44:00 PM

Posted By: Viona  Membership Level: Silver  Total Points: 879

---

Small and medium enterprises often referred to as SMEs play a very fundamental role in the economy. However, these enterprises are not able to operate to their optimum level due to the challenges they face.

The following are challenges faced by small and medium enterprises.

1. Lack of adequate managerial training.

More often than not small and medium enterprises establish managerial strategies through trial and error mechanism. Their managerial techniques only focus on operational plans rather than strategic plans of their organization. In addition, these managerial techniques are not standard with those of other global managers. Consequently, managers of small and medium enterprises are not able to adequately handle challenges facing enterprises.

2. Lack of adequate finance and limited access to credit.

Many small and medium enterprises do not have access to finance and credit especially from financial institutions such as commercial banks.This is because of the lending conditions given to them such as collateral for the loan. These enterprises may not be able to provide collateral such as immovable assets due to their small asset base. Consequently, most of these enterprises resort to borrowing from friends and relatives. However, this type of finance is inadequate to cater for all the needs of the medium and small enterprises. As a result, lack of credit forces the management to use cheap and local technology which most times is inappropriate.

3. Rapid technology changes.

Technology change poses a big challenge to the growth of small and medium enterprises. Most of these enterprises are not able to adopt new technology due to its high initial and installation costs. In addition, this new technology, more often than not, does not suit the needs of these enterprises. For example, a small enterprise located in a rural area cannot reap the full benefits of internet connection due to lack

of rural electrification. Adopting to new technology has also been hampered by the slow rate of economic growth in Kenya.

4. New laws and regulations.

Everyday, the government and other stakeholders continue to introduce new regulations for industries and enterprises in Kenya. New laws are being enacted in a bid to regulate the operations of enterprises. These laws are also meant to spearhead sustainable economic growth in the country. However, such regulations sometimes pose tremendous threat to the growth of small and medium enterprises in Kenya. This is because some of these laws are too tough.

5. Inadequate knowledge and skills.

Every managerial position regardless of whether in a small shop, supermarket chain or an enterprise warrants for adequate education and skill. However, research reveals that most of the managers of these enterprises in Kenya lack adequate education. In addition, they are not well informed in terms of managerial knowledge and skills.

Other challenges facing small and medium enterprises include poor infrastructure, poor management of resources and inadequate support from the government.

Small and medium enterprises should not be ignored. They can serve as the backbone of restoring our crippled economy back on its feet. Therefore, the government should intervene and help these enterprises gain momentum.

---

Next: The importance of insurance, its challenges and solutions.
Previous: Money matters: The difference between a millionaires and a poor man