Investment
June 1, 2017
2 minutes read

Reasons Why Small Medium Enterprises are Closing Shop in Kenya

Kenya's economy thrives on small businesses commonly known as SMEs. Statistics show that 90 percent of businesses in Kenya are…

Kenya’s economy thrives on small businesses commonly known as SMEs. Statistics show that 90 percent of businesses in Kenya are SMEs which are supporting the livelihood of millions of Kenyans across all the social classes.

For the past five years, however, more than 50,000 Small Medium Enterprises have closed shop in Kenya. This has left millions of Kenyans, the majority of them being the youth jobless with nowhere to turn for help.

According to statistics, more than 150,000 direct jobs have been lost in Kenya for the past one year alone. This actually spells doom to the economy. The government and other agencies have often stated their commitment to rectify the situation and bail out the economic ailing Kenyans without actually trying to figure out the real reasons why these SMEs are packing their bags.

First, one major killer of SMEs in Kenya is corruption. For a business to thrive in Kenya, it all depends on do you know anybody syndrome. All the way from setting up a business, trying to register a business as well as getting the legal permit to operate, corruption is the ruler of them all. This has led to many young SMEs giving up along the way and opting out of the business.

The second is that Kenya has become an unfriendly economy for small businesses. The cost of living has just skyrocketed at the expense of the poverty-stricken majority who are left with nothing but to consume their capital and opt-out of the business. The Kenyan economy at the moment only serves the big boys with the small boys being left to fend for themselves.

Thirdly, inadequate laws and guidelines to protect SMEs in the country. many SMEs fear setting up know and registered businesses due to heavy taxation as well as complicated rules that are involved in the process.