POLICY IMPLICATIONS FOR PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN KENYA
Abstract
Background: Small and Medium Enterprises (SMEs) are engines of growth, vital to most economies. While Kenya’s SMEs continue to create numerous jobs and boost the country’s GDP, they face a myriad of challenges that always hamper their performance. SMEs are hindered by inadequate capital, limited market access, poor infrastructure, inadequate knowledge, skills, and rapid changes in technology. Unfavorable regulatory environments present other bottlenecks to this vital cog of the economy.
Study Objective: The aim of this paper was to determine the policy implications for performance of SMEs in Kenya. The specific objectives were to identify the key factors influencing performance of SMEs in Kenya; to determine the challenges faced by SMEs in Kenya and to provide policy recommendations on performance of SMEs in Kenya.
Methodology: This study applied a systematically review of recent literatures including a critical analysis of empirical of past findings on the subject matter. The study findings indicated that finance and access to new markets remains the most critical challenge affecting the SMEs in the country.
Conclusions and Recommendations: The study concludes that SMEs inadequate finances and technical knowledge significantly affects the performance of the SMEs. The study recommends on increased innovation and productivity by strengthening the SMEs through, incentives, financial grants and technical assistance.
Keywords: Financing, Innovation, Markets, Challenges, Performance, SMEs & Kenya
References
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Ajuna, A., Ntale, J., & Ngui, T. (2018). Impact of training on the performance of women entrepreneurs in Kenya: Case of Meru Town. International Academic Journal of Innovation, Leadership and Entrepreneurship, 2(2), 93-112.
Aladejebi, O. (2018). The impact of the human capacity building on small and medium enterprises in Lagos, Nigeria. Journal of Small Business and Entrepreneurship, 6(2), 15-27.
Al-Haddad, L., Sial, M. S., Ali, I., Alam, R., Khuong, N. V., & Khanh, T. H. T. (2019). The role of small and medium enterprises (SMEs) in employment generation and economic growth: a study of marble industry in emerging economy. International Journal of Financial Research, 10(6), 174-187.
Aondo, R. (2018). Challenges Facing Kenyan Women Entrepreneurship In Micro-Finance Credit Accessibility: A Case Study Of Machakos County. International Journal of Business and Management Invention, 81-88.
Asad, M., Chethiyar, S., & Ali, A. (2020). Total quality management, entrepreneurial orientation, and market orientation: Moderating effect of environment on performance of SMEs. Paradigms; a Research Journal of Commerce, Economics, and Social Sciences, 14(1), 102-108.
Awinja, N. N., & Fatoki, O. I. (2021). Effect of digital financial services on the growth of SMEs in Kenya. African Journal of Empirical Research, 2(1), 79-94.
Azzan, K. S. (2021). Effect of Micro-finance on Financial Performance of Small and Medium Enterprises in Kwale County, Kenya (Doctoral dissertation, University of Nairobi).
Baariu, V. L., Gathungu, J., & Ndemo, B. (2021). The relationship between competitive strategy drivers and performance of manufacturing small and medium enterprises in Nairobi County, Kenya.
Baharun, R., Mi, T. J., Streimikiene, D., Mardani, A., Shakeel, J., & Nitsenko, V. S. (2019). Innovation in healthcare performance among private brand’s healthcare services in small and medium-sized enterprises (SMEs).
Chege, S. M., Wang, D., & Suntu, S. L. (2020). Impact of information technology innovation on firm performance in Kenya. Information Technology for Development, 26(2), 316-345.
Chepngetich, P. (2016). Effect of financial literacy and performance SMEs. Evidence from Kenya. Evidence from Kenya.
Christopher, Y. K., Jane, S., & Yussuf, K. (2021). Effect of Process Innovations on Performance of Small and Medium Manufacturing Enterprises in Nairobi County, Kenya. African Journal of Education, Science and Technology, 6(4), 88-101.
Cicea, C., Popa, I., Marinescu, C., & Cătălina Ștefan, S. (2019). Determinants of SMEs’ performance: evidence from European countries. Economic research-Ekonomska istraživanja, 32(1), 1602-1620.
Dalton, V. (2020). The challenge of engaging with and reporting against the SDGs for SMEs such as Sydney Theatre Company. Journal of Management & Organization, 26(6), 975-994.
Esaku, S. (2020). Job creation, job destruction and reallocation in Sub-Saharan Africa: Firm-level evidence from Kenyan manufacturing sector. Cogent Economics & Finance, 8(1), 1782113.
Hoetoro, A. (2020). The Dynamics of Performance Improvement among SMEs Clusters in East Java. In 23rd Asian Forum of Business Education (AFBE 2019) (pp. 291-296). Atlantis Press.
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Kaggiah, G. M., Salimi, Z., & Morton, D. (2022). Legal Framework for Reversing the Waning Sustainability of SMEs in the Construction Industry Due to Payment Paralysis in Malawi and Kenya. International Journal of Formal Sciences: Current and Future Research Trends, 13(1), 102-118.
Kamuri, S., & Odhiambo, R. (2020). Calculated Risk-Taking and Performance of Value-System Actors in the Leather Industry in Kenya. African Journal of Business and Management (AJBUMA), 6(1), 244-262.
Kathambi, B. E., Muthama, J. N., & Ang'u, C. (2021). Essence of Water Governance for SMEs for Sustainable Consumption in Nairobi, Kenya.
Kilimis, P., Zou, W., Lehmann, M., & Berger, U. (2019). A survey on digitalization for SMEs in Brandenburg, Germany. IFAC-PapersOnLine, 52(13), 2140-2145.
Kiveu, M. N., Namusonge, M., & Muathe, S. (2019). Effect of innovation on firm competitiveness: the case of manufacturing SMEs in Nairobi County, Kenya. International Journal of Business Innovation and Research, 18(3), 307-327.
Kot, S., Haque, A. U., & Baloch, A. (2020). Supply chain management in SMEs: Global perspective. Montenegrin Journal of Economics, 16(1), 87-104.
Mohammed, E. B. (2019). The Influence of Government Regulation on the Performance of Small and Medium Enterprises-the Case of Automobile Parts Industry in Nairobi Kenya, University of Nairobi.
Molina-García, A., Diéguez-Soto, J., Galache-Laza, M. T., & Campos-Valenzuela, M. (2022). Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field. Review of Managerial Science, 1-40.
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Mutiso, S., & Njuguna, R. (2021). Organizational orientation and performance of technical and vocational education training authority institutions in Nairobi City County, Kenya, Kenyatta University.
Muturi, W., & Njeru, A. (2019). Effect of Equity Finance on Financial Performance of Small and Medium Enterprises in Kenya. International Journal of Business and Social Science, 10(5).
Mwangi, G. (2018). Assessing the Influence of Accounting Outsourcing on Financial Performance of Small and Medium Enterprises in Thika Subcounty, Kenya. Manag Econ Res J, 4(2018), 4945.
Mwenda, K. S. (2020). A Critical Analysis of the Legal Framework for Foreign Direct Investment in Mining in Kenya Mwenda Karei. University of Nairobi.
Nganu, M., & Hannah, B. (2018). Influence of Content of Entrepreneurship Training on Performance of Small and Micro Enterprises in the Information and Communication Technology Sector in Nairobi City County, Kenya.
Ngetich, B. (2020). Access to business information, business finance, managerial skills and performance of SMES in Kenya.
Ngungi, M. M. (2021). Critical factors that influence growth of technology-based Small and Medium Enterprises: case of software as service providers in Nairobi, Kenya. Strathmore University.
Nizaeva, M., & Coşkun, A. (2018). Determinants of the financing obstacles faced by SMEs: An empirical study of emerging economies. Journal of Economic and Social Studies, 7(2), 81.
Njoroge, M. N., & Mugambi, F. (2018). Effect of electronic banking on financial performance in Kenyan commercial banks: Case of Equity bank in its Nairobi Central Business District branches, Kenya. International Academic Journal of Economics and Finance, 3(2), 197-215.
Nzive, J. N. (2020). The Effectiveness of Publicly-Managed Fund in the Growth of SMEs in Kenya (Doctoral dissertation, United States International University-Africa).
Omondi, R. I., & Jagongo, A. (2018). Microfinance services and financial performance of small and medium enterprises of youth SMEs in Kisumu County, Kenya. International academic journal of economics and finance, 3(1), 24-43.
Osano, H. M. (2019). Global expansion of SMEs: role of global market strategy for Kenyan SMEs. Journal of Innovation and Entrepreneurship, 8(1), 1-31.
Pilz, M., Harris, R., Zenner-Höffkes, L., & Zirkle, C. (2020). Undertaking comparative VET research in international teams: The example of exploring recruitment and training cultures in SMEs in Germany, Australia and the United States. In Comparative vocational education research (pp. 291-309). Springer VS, Wiesbaden.
Safari, K. (2020). Contribution of Internationalisation to SME growth: Evidence from the Kenyan Manufacturing sector. Economics and Business, 34(1), 261-272.
Setha, M. N. (2018). Factors Influencing Small Business Start-ups in Phnom Penh.
Singh, R. K., Luthra, S., Mangla, S. K., & Uniyal, S. (2019). Applications of information and communication technology for sustainable growth of SMEs in India food industry. Resources, Conservation and Recycling, 147, 10-18.
Srinivasan, M. S., & Srinivasan, T. (2022). Confirmatory Factor Analysis for CSR perception on stakeholders in SMEs. Journal of Positive School Psychology, 4660-4671.
Wilson, V., & Makau, C. (2018). Online marketing use: small and medium enterprises (SMEs) experience from Kenya. Orsea Journal, 7(2).
World Bank (2020). Retrieved on 31st April 2022 from https://www.worldbank.org/en/topic/smefinance
Abdullah, N. N., & Othman, M. B. (2019). Examining the effects of intellectual capital on the performance of Malaysian food and beverage small and medium-sized enterprises. Technology (IJCIET), 10(2), 135-143.
Abisuga-Oyekunle, O. A., Patra, S. K., & Muchie, M. (2020). SMEs in sustainable development: Their role in poverty reduction and employment generation in sub-Saharan Africa. African Journal of Science, Technology, Innovation and Development, 12(4), 405-419.
Ajuna, A., Ntale, J., & Ngui, T. (2018). Impact of training on the performance of women entrepreneurs in Kenya: Case of Meru Town. International Academic Journal of Innovation, Leadership and Entrepreneurship, 2(2), 93-112.
Aladejebi, O. (2018). The impact of the human capacity building on small and medium enterprises in Lagos, Nigeria. Journal of Small Business and Entrepreneurship, 6(2), 15-27.
Al-Haddad, L., Sial, M. S., Ali, I., Alam, R., Khuong, N. V., & Khanh, T. H. T. (2019). The role of small and medium enterprises (SMEs) in employment generation and economic growth: a study of marble industry in emerging economy. International Journal of Financial Research, 10(6), 174-187.
Aondo, R. (2018). Challenges Facing Kenyan Women Entrepreneurship In Micro-Finance Credit Accessibility: A Case Study Of Machakos County. International Journal of Business and Management Invention, 81-88.
Asad, M., Chethiyar, S., & Ali, A. (2020). Total quality management, entrepreneurial orientation, and market orientation: Moderating effect of environment on performance of SMEs. Paradigms; a Research Journal of Commerce, Economics, and Social Sciences, 14(1), 102-108.
Awinja, N. N., & Fatoki, O. I. (2021). Effect of digital financial services on the growth of SMEs in Kenya. African Journal of Empirical Research, 2(1), 79-94.
Azzan, K. S. (2021). Effect of Micro-finance on Financial Performance of Small and Medium Enterprises in Kwale County, Kenya (Doctoral dissertation, University of Nairobi).
Baariu, V. L., Gathungu, J., & Ndemo, B. (2021). The relationship between competitive strategy drivers and performance of manufacturing small and medium enterprises in Nairobi County, Kenya.
Baharun, R., Mi, T. J., Streimikiene, D., Mardani, A., Shakeel, J., & Nitsenko, V. S. (2019). Innovation in healthcare performance among private brand’s healthcare services in small and medium-sized enterprises (SMEs).
Chege, S. M., Wang, D., & Suntu, S. L. (2020). Impact of information technology innovation on firm performance in Kenya. Information Technology for Development, 26(2), 316-345.
Chepngetich, P. (2016). Effect of financial literacy and performance SMEs. Evidence from Kenya. Evidence from Kenya.
Christopher, Y. K., Jane, S., & Yussuf, K. (2021). Effect of Process Innovations on Performance of Small and Medium Manufacturing Enterprises in Nairobi County, Kenya. African Journal of Education, Science and Technology, 6(4), 88-101.
Cicea, C., Popa, I., Marinescu, C., & Cătălina Ștefan, S. (2019). Determinants of SMEs’ performance: evidence from European countries. Economic research-Ekonomska istraživanja, 32(1), 1602-1620.
Dalton, V. (2020). The challenge of engaging with and reporting against the SDGs for SMEs such as Sydney Theatre Company. Journal of Management & Organization, 26(6), 975-994.
Esaku, S. (2020). Job creation, job destruction and reallocation in Sub-Saharan Africa: Firm-level evidence from Kenyan manufacturing sector. Cogent Economics & Finance, 8(1), 1782113.
Hoetoro, A. (2020). The Dynamics of Performance Improvement among SMEs Clusters in East Java. In 23rd Asian Forum of Business Education (AFBE 2019) (pp. 291-296). Atlantis Press.
KAAA (2020). Kenya Agri-business and Agro Industry Alliance. Retrieved on 30th March 2022 from http://kaaa.co.ke/
Kaggiah, G. M., Salimi, Z., & Morton, D. (2022). Legal Framework for Reversing the Waning Sustainability of SMEs in the Construction Industry Due to Payment Paralysis in Malawi and Kenya. International Journal of Formal Sciences: Current and Future Research Trends, 13(1), 102-118.
Kamuri, S., & Odhiambo, R. (2020). Calculated Risk-Taking and Performance of Value-System Actors in the Leather Industry in Kenya. African Journal of Business and Management (AJBUMA), 6(1), 244-262.
Kathambi, B. E., Muthama, J. N., & Ang'u, C. (2021). Essence of Water Governance for SMEs for Sustainable Consumption in Nairobi, Kenya.
Kilimis, P., Zou, W., Lehmann, M., & Berger, U. (2019). A survey on digitalization for SMEs in Brandenburg, Germany. IFAC-PapersOnLine, 52(13), 2140-2145.
Kiveu, M. N., Namusonge, M., & Muathe, S. (2019). Effect of innovation on firm competitiveness: the case of manufacturing SMEs in Nairobi County, Kenya. International Journal of Business Innovation and Research, 18(3), 307-327.
Kot, S., Haque, A. U., & Baloch, A. (2020). Supply chain management in SMEs: Global perspective. Montenegrin Journal of Economics, 16(1), 87-104.
Mohammed, E. B. (2019). The Influence of Government Regulation on the Performance of Small and Medium Enterprises-the Case of Automobile Parts Industry in Nairobi Kenya, University of Nairobi.
Molina-García, A., Diéguez-Soto, J., Galache-Laza, M. T., & Campos-Valenzuela, M. (2022). Financial literacy in SMEs: a bibliometric analysis and a systematic literature review of an emerging research field. Review of Managerial Science, 1-40.
MSEA (2021). Micro & Small Enterprises Authority. Retrieved from https://msea.go.ke/#
MSEA (2021). Micro & Small Enterprises Authority. Retrieved on 31st March 2022 from https://msea.go.ke/
Muathe, S., & Kavindah, L. (2021). The Interplay of Entrepreneurial Innovation, Government Regulation and Performance: any Lessons for The SMEs. A Theoretical Review Eunice Dushime. European Scientific Journal, ESJ, 17(12), 235.
Mutiso, S., & Njuguna, R. (2021). Organizational orientation and performance of technical and vocational education training authority institutions in Nairobi City County, Kenya, Kenyatta University.
Muturi, W., & Njeru, A. (2019). Effect of Equity Finance on Financial Performance of Small and Medium Enterprises in Kenya. International Journal of Business and Social Science, 10(5).
Mwangi, G. (2018). Assessing the Influence of Accounting Outsourcing on Financial Performance of Small and Medium Enterprises in Thika Subcounty, Kenya. Manag Econ Res J, 4(2018), 4945.
Mwenda, K. S. (2020). A Critical Analysis of the Legal Framework for Foreign Direct Investment in Mining in Kenya Mwenda Karei. University of Nairobi.
Nganu, M., & Hannah, B. (2018). Influence of Content of Entrepreneurship Training on Performance of Small and Micro Enterprises in the Information and Communication Technology Sector in Nairobi City County, Kenya.
Ngetich, B. (2020). Access to business information, business finance, managerial skills and performance of SMES in Kenya.
Ngungi, M. M. (2021). Critical factors that influence growth of technology-based Small and Medium Enterprises: case of software as service providers in Nairobi, Kenya. Strathmore University.
Nizaeva, M., & Coşkun, A. (2018). Determinants of the financing obstacles faced by SMEs: An empirical study of emerging economies. Journal of Economic and Social Studies, 7(2), 81.
Njoroge, M. N., & Mugambi, F. (2018). Effect of electronic banking on financial performance in Kenyan commercial banks: Case of Equity bank in its Nairobi Central Business District branches, Kenya. International Academic Journal of Economics and Finance, 3(2), 197-215.
Nzive, J. N. (2020). The Effectiveness of Publicly-Managed Fund in the Growth of SMEs in Kenya (Doctoral dissertation, United States International University-Africa).
Omondi, R. I., & Jagongo, A. (2018). Microfinance services and financial performance of small and medium enterprises of youth SMEs in Kisumu County, Kenya. International academic journal of economics and finance, 3(1), 24-43.
Osano, H. M. (2019). Global expansion of SMEs: role of global market strategy for Kenyan SMEs. Journal of Innovation and Entrepreneurship, 8(1), 1-31.
Pilz, M., Harris, R., Zenner-Höffkes, L., & Zirkle, C. (2020). Undertaking comparative VET research in international teams: The example of exploring recruitment and training cultures in SMEs in Germany, Australia and the United States. In Comparative vocational education research (pp. 291-309). Springer VS, Wiesbaden.
Safari, K. (2020). Contribution of Internationalisation to SME growth: Evidence from the Kenyan Manufacturing sector. Economics and Business, 34(1), 261-272.
Setha, M. N. (2018). Factors Influencing Small Business Start-ups in Phnom Penh.
Singh, R. K., Luthra, S., Mangla, S. K., & Uniyal, S. (2019). Applications of information and communication technology for sustainable growth of SMEs in India food industry. Resources, Conservation and Recycling, 147, 10-18.
Srinivasan, M. S., & Srinivasan, T. (2022). Confirmatory Factor Analysis for CSR perception on stakeholders in SMEs. Journal of Positive School Psychology, 4660-4671.
Wilson, V., & Makau, C. (2018). Online marketing use: small and medium enterprises (SMEs) experience from Kenya. Orsea Journal, 7(2).
World Bank (2020). Retrieved on 31st April 2022 from https://www.worldbank.org/en/topic/smefinance
Published
2024-06-14
How to Cite
Oketch, J. O., & Okeyo , W. (2024). POLICY IMPLICATIONS FOR PERFORMANCE OF SMALL AND MEDIUM ENTERPRISES IN KENYA. African Journal of Emerging Issues, 6(11), 1 - 14. Retrieved from https://ajoeijournals.org/sys/index.php/ajoei/article/view/632
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