FINANCIAL GROWTH AND CHALLENGES FACING THE GROWTH OF SMEs IN KENYA
CHAPTER ONE; INTRODUCTION
In recent years, the nurturing of SMES have become the dominant theme of development economics. This rediscovery of the importance of the spirit of free enterprise was undoubtedly prompted by the failure of centrally planned communist economies. The achievement of impressive prosperity by certain East Asian and western countries also encouraged the start up of SMES (Mwaura, 2006)
A global perspective
There is no generally accepted definition of small businesses because the clarification of businesses into large scale or small scale is a subjective and qualitative judgement. For instance, in the US, Britain and Canada, small scale business is defined in terms of annual turnover and the number of paid employees. In Britain, small scale business is defined as that industry with an annual turnover of 2 million pounds or less and with fewer than 200 paid employees. In Japan, they are defined according to the type of industry, paid up capital and number of paid employees. Consequently, SMES are defined as; those in manufacturing with 100 million yen paid up capital and 300 employees, and those in the retail and service trades with 10 million yen paid up capital and 50 employees (Valsamakis and Sprague, 2001). There is no single, accepted definition of a small and medium enterprise (Storey, 1994, Valsamakis and Sprague, 2001). While the definition of a SME differs from country to country, the SME literature has typically used criteria such as sales volume, number of employees (for manufacturing) and fixed physical assets (Kathuria, 2000; Lefebvre et al., 1992; Valsamakis and Sprague, 2001).
In Kenya, microenterprises are those with 10 or fewer workers, small enterprises have from 11 to 50 workers and medium enterprises have from 50 to a 100 workers. There are however no records to show these classifications in Kenya. Censuses indicate that micro enterprises comprise the lion`s share of enterprises in Kenya while there are a few medium enterprises (Parker and Torres, 1994).
Today in Singapore SME community makes up over 90% of enterprises. Last year (2007) SMES contributed about 42% of the country’s GDP and employed more than half the workforce (Chandaria, 2007).
In Malaysia, where the government has acknowledged the growth potential of SMES, there is great collaboration with ministries and government agencies to synergize implementation programs that spur development resulting in strategic alliances with larger entities. The collaboration has provided SMES with greater access to markets, financing, technology transfer and best practices in human capital development. Through effective partnership the Malaysian government has projected SMES contribution to GDP to increase from 32 percent in 2005 to 37 percent by 2010. This will have an impact on total employment share by which SMES contribution will be 57 percent. This is according to a speech made by Dato' Seri Abdullah bin Haji Ahmad Badawi Perdana Menteri Malaysia on 6th June during the official launch of SMIDEX 2007 (Chandaria, 2007).
The development of the private sector varies greatly throughout Africa. SMEs are flourishing in South Africa, Mauritius and North Africa, thanks to fairly modern financial systems and clear government policies in favour of private enterprise. Elsewhere the rise of a small-business class has been hindered by political instability or strong dependence on a few raw materials. In the Democratic Republic of Congo, for example, most SMEs went bankrupt in the 1990s – as a result of looting in 1993 and 1996 or during the civil war. In Congo, Equatorial Guinea, Gabon and Chad, the dominance of oil has slowed the emergence of non-oil businesses. Very few countries have working definitions of SMEs, except some members of UEMOA/WAEMU and Mauritius and Morocco. So data on this is hard to compare, though patterns can be seen and...
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