Challenges of Small and Medium Enterprises in Kenya

1728 WordsOct 20, 20127 Pages
SMALL AND MEDIUM-SIZED ENTERPRISES "SME" stands for small and medium-sized enterprises – as defined in EU law: The main factors determining whether a company is an SME are: 1. Number of employees, and 2. Either turnover or balance sheet total | |Employees |Turnover |or |Balance sheet total | |Company category | | | | | |Medium-sized |< 250 |≤ € 50 m |≤ € 43 m | |Small |< 50 |≤ € 10 m |≤ € 10 m | |Micro |< 10 |≤ € 2 m |≤ € 2 m…show more content…
Credit constraints operate in variety of ways in Kenya where undeveloped capital market forces entrepreneurs to rely on self-financing or borrowing from friends or relatives. Lack of access to long-term credit for small enterprises forces them to rely on high cost short term finance. There are various other financial challenges that face small enterprises. They include the high cost of credit, high bank charges and fees. The scenario witnessed in Kenya particularly during the climaxing period of the year 2008 testifies the need for credit among the common and low earning entrepreneurs. Numerous money lenders in the name of Pyramid schemes came up, promising hope among the ‘little investors,’ that they can make it to the financial freedom through soft borrowing. The rationale behind turning to these schemes among a good number of entrepreneurs is mainly to seek alternatives and soft credit with low interest rates while making profits. Financial constraint remains a major challenge facing SMEs in Kenya (Wanjohi and Mugure, 2008). National Policy and Regulatory Environment The national policy and regulatory environment has an important impact on technology decisions at the enterprise level. The structural adjustment programs (SAPs) implemented in many African countries are aimed at removing heavy policy distortions, which have been viewed as detrimental to the growth of the private sector. SAPs tend to
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