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Challenges Facing Small Businesses in Kenya

Vincent Nyoike
Vincent Nyoike Kenya

Starting a business in Kenya is not a walk in the park. Many entrepreneurs start businesses, but only a few of them thrive. It is because of the many challenges facing small businesses in Kenya, ranging from lack of capital, registering a business, and paying taxes. When people are unable to start businesses, the level of unemployment, poverty, and crime rates tend to rise. Besides, some punitive government policies are killing SMEs and discouraging entrepreneurship. In this article, we are going to highlight challenges facing small businesses in Kenya and their solutions.

1. Access to Business Funding

Funding small businesses is the greatest challenge facing entrepreneurs in Kenya. Many people have business ideas but do not have the capital to launch the business. Starting and expanding a business requires significant startup capital. However, many Kenyan entrepreneurs do not have access to funding.

Solution: People who want to start businesses can get funding from Youth Enterprise Development Fund, Uwezo Fund, and Women Enterprise Fund. When starting a business, look for a low-risk funding like venture capitalists and crowdfunding. Entrepreneurs can also get funding and mentorship from business incubators and accelerators in Kenya.

We discourage our audience from seeking bank loans to start a business. Bank loans are good for business expansion, but not for launching a business.

2. Punitive Taxes

High taxation for businesses in Kenya is making many businesses collapse. Businesses that are in existence are charged high taxes that threaten their survival and growth. Many businesses are struggling to raise funds for innovation and growth due to high tax expenses.

Solution: The Kenyan government should offer tax incentives to new and struggling businesses. This will help such businesses remain afloat instead of collapsing. Taxes should be friendly and not punitive. During tough economic times, the government can also offer tax holidays to struggling businesses to help them stay afloat.

3. Unnecessary Regulations

Before starting a business, entrepreneurs are required to have many necessary business licenses and permits. Some of these business licenses and permits include single business permits, fire safety certificates, signage and advertising license, and food and health permits. All these licenses and permits cost money and take a lot of time to acquire. Such requirements make many entrepreneurs shy away from starting businesses.

Solution: The government should consolidate some of these businesses' licenses and permits to reduce time and money spent looking for them. The government should consolidate agencies dealing with business licenses and permits to ease business licensing.

4. Minimal Innovation

The other challenge facing entrepreneurs and businesses in Kenya is minimal innovation. Businesses fail to come up with new products, services and way of doing business. Businesses that are innovative tend to grow and expand faster compared to static businesses. Many businesses fail to improve their products and services and fail to attract new customers.  

Solution: Businesses need to invest a lot in innovation and product improvement. Entrepreneurs can interact with their customers and get to know how they can improve the quality of their products and services. Entrepreneurs can also attend trade fairs, exhibitions, and workshops and learn how they can improve their way of doing business.

Read also: How to register a business in Kenya. 

5. Lack of Proper Training

The other biggest challenge facing entrepreneurs in Kenya is the lack of training. Many entrepreneurs lack skills like accounting and marketing that are necessary for a business to succeed. Instead, businesses in Kenya operate through trial and error. Managerial skills are very important to start and grow a business, which many entrepreneurs lack. The lack of these skills makes entrepreneurs unable to solve the challenges facing their businesses.

Solution: Entrepreneurs should take advantage of the many vocational training institutions and get formal training. Skills like accountancy, managerial, and marketing are important to the success of any business. This way, entrepreneurs will be in a position to start and expand businesses. Entrepreneurs can also attend trade fairs and exhibitions or get training and mentorship from business incubators and accelerators in Kenya.

Read also: How to open a business bank account in Kenya. 

Summary of Challenges Facing Small Businesses in Kenya

The above are the challenges facing entrepreneurs that make businesses collapse in Kenya. The lack of funding is the major challenge facing businesses in Kenya. The government should focus on addressing these challenges to promote entrepreneurial culture in Kenya. Entrepreneurship will help eliminate unemployment, poverty, and crime rate in Kenya. 

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