Challenges of Doing Business in Kenya

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Kenya is the hub of East Africa driven by small and medium enterprises, also known as SMEs.

SMEs play a huge role in many economies because they create jobs, contribute to GDP, aid industrial development, satisfy local demand, support large firms with innovative input, and so on.

80% of the employment in Kenya is fueled by SMEs where a new middle class is growing and stimulating demand for new goods and services.

The economic growth in countries like Kenya has been supported by infrastructure investment efforts and strong private consumption. Many African countries are relying on entrepreneurs to support future growth.

Starting a business trade and investment in Kenya's private sector offers entrepreneurs a niche opportunity they may not have elsewhere.

These entrepreneurs, however, need to be wary of the challenges of doing business in Kenya to succeed their way to the top.

Here are a few challenges facing small and medium enterprises in Kenya:

#1. Lack of Training

Unlike other countries, SMEs in Kenya generally establish their managerial strategies through trial and error.

Managerial practices typically focus on operational plans rather than establishing long-term strategic plans.

The managerial techniques that Kenyan entrepreneurs use are unlike other global practices, which prevent them from handling challenges that the enterprise may face in the future.

#2. Limited Access to Finances & Credit

It’s challenging for SMEs to receive financial support, like a line of credit, from Kenyan institutions and commercial banks.

The lending conditions are different in Kenya than in other countries. Collateral is typically needed for a loan and smaller businesses like SMEs may not be able to provide such assets due to their size.

Many enterprises borrow from friends and family members, but that is not a practice that is sustainable long-term. As a result, SMEs may resort to using cheaper, local technologies and equipment which oftentimes are inadequate for the job.

#3. Rapid Development in Technology

One of the fastest-growing sectors in Kenya is technology.

Changes in technology pose a huge challenge to the growth of SMEs because many of these enterprises can’t afford to invest in new innovations often, or at all.

Only sometimes does it pay to invest in new technologies in Kenya. A small business in a rural area, for instance, cannot reap the full benefits of the internet because of the lack of technology in the area.

#4. New Laws & Regulations

Industries and enterprises in Kenya are hit with new laws and regulations every day.

New laws are often carried out by the government and stakeholders to regulate the operations of enterprises.

These laws can pose a huge threat to the growth of the economy because enterprises don’t have control over certain operations, therefore, their potential is limited.

If the potential of these enterprises is limited, the growth of the economy is too.

#5. Lack of Education & Skills

Every managerial position requires employees to have an adequate education with relevant skills.

Most business managers in Kenya lack an education, which prevents companies and other employees from growing to their full potential.

When businesses are faced with a challenge, managers are unsure how to handle these challenges because they have no experience or background.

Poor infrastructure, poor management of resources, and inadequate support from the government are a few other challenges SMEs face in Kenya. While SMEs have the potential to restore many crippling African economies, the government needs to intervene and help these businesses gain momentum.

Overcoming these challenges will take some time, but Kenya has a lot of potential to be an entrepreneur's success story.

Before opening a small business or large enterprise, you'll have to invest in the right market research to see if your product meets the needs of the surrounding community. Invest in a company like Kasi Insight to give you the consumer data you need to stand out in the Kenyan market.

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