Small and Medium Enterprises (SMEs) are the lifeblood of Kenya’s economy, contributing significantly to employment, innovation, and economic growth.
However, one of the most persistent challenges faced by SMEs is access to affordable and reliable financing.
Traditional banking models often fail to address these enterprises’ unique needs, particularly in an environment where economic volatility can make credit markets more restrictive.
According to HF Group Chief Executive Officer Robert Kibaara, the SME credit denial rate in Kenya is at 60 percent highlighting the need for strategy among these enterprises.
Consulting firm Wylde International attributes the high financing gap to various issues including limited experience in running a business, lack of collateral, being listed on the Credit Reference Bureau, lack of consistency in the bank statements, and lack of business permit, among others.
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The firm revealed that strategy is the most important part of financial planning for SMEs as over 90 percent of the surveyed businesses agreed that having a strategy will help them plan better for future financing.
Julius Ouma, the CEO of Faulu Microfinance Bank shared some strategies SMEs can adopt for success in the future, among them separating personal and business finances strategically.
Ouma also highlighted the need for entrepreneurs to protect their businesses against unexpected events with insurance.
Moreover, reinvesting retained earnings for growth and wealth creation is another strategy that would guarantee SMEs’ success in the future.
According to Ouma, SMEs should also embrace digital solutions for enhanced transparency and efficiency.
According to the Kenya National Bureau of Statistics (KNBS), about 400,000 micro, small and medium enterprises (MSMEs) have been dying within the first year of inception, in the last five years, raising concern over the sustainability of this critical sector.
Over 80 percent of annual jobs created come from the MSMEs sector which also contributes up to 33.3 percent of GDP.
