Primary and secondary school leavers are more prepared to venture into business than university graduates.
According to a study released by the Kenya Private Sector Alliance (Kepsa) yesterday, the young adults are the brains behind the majority of businesses started in the country. They are only surpassed by diploma holders, who have intermediary skills and account for 55 per cent of the new business owners.
The bulk of businesses operating in the country are run mostly by entrepreneurs who have not attained any university education.
Data from the latest survey on micro, small and medium enterprises (MSMEs) indicates that university graduates rank lowest in the establishment of a business.
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A large number of independent business owners had up to a high school education. When you add college and certificate holders, the number shoots up to 78 per cent.
A number of young entrepreneurs who are below 35 years old have built successful business empires through hard work and determination — despite leaving school without a degree to their name.
The study by Kepsa indicates that primary and secondary school leavers make up 23 per cent of business owners in the country, while those with diplomas and certificates account for 55 per cent.
Those who have attained a degree and graduate education accounted for 22 per cent of entrepreneurs.
According to Kepsa, despite the rise in young entrepreneurs who form the majority of MSMEs, this lot still feels excluded from the formulation of key government policies that have a direct bearing on the startups.
“We have medium and large enterprises but most of the time we bundle up micro-enterprises in this category,” said Kepsa Head of Policy, Research and Analysis Victor Ogolla.
“We need a special department within the Kenya Revenue Authority to deal with MSMEs.”
Business owners who skipped out on education, according to analysts, all shared some common threads: self-reliance, a good idea and a willingness to take risks.
At the same time, Kenya scored low in the inclusion of MSMEs in public procurement with business owners reporting little consideration in receiving government tenders and contracts.
The study also found that more businesses are started by men (62 per cent) compared to those started by women at 38 per cent.
Young people also feature prominently in the SME sector with 41 per cent of businesses led by entrepreneurs under the age of 35 and another 41 per cent by those between the ages of 35 and 45.
Those above 45 constituted 18 per cent of establishments.
Other challenges cited by business leaders include establishing linkages to the export market, with Kepsa asking the government to deliver on promises of supporting the private sector.
“Our foreign missions should have in their key performance indicators a measure of how much they go out of their way to promote Kenyan businesses in their respective countries and establish viable market linkages for our businesses,” said Mr Ogolla.
According to the Kenya National Bureau of Statistics (KNBS), micro-enterprises make up the majority of businesses and constitute the highest number of jobs created.
It further notes that 71.9 per cent of licensed establishments are started using family funds as the main source of capital, while 4.2 per cent of business owners got loans from family and friends to start their business.
According to the KNBS survey, banks finance 5.6 per cent of licensed MSMEs, chamas 1.4 per cent and cooperatives 0.4 per cent. The government funds only 0.1 per cent of MSMEs, while two per cent of businesses reported other sources of capital apart from the ones listed.
“In all counties with exception of Nairobi, micro-sized establishments constituted more than 90 per cent of all licensed establishments,” said the KNBS survey conducted in 2016.
At the same time, KNBS found that only 16 per cent of licensed establishments were worth more than Sh1 million, with 83.6 per cent of them reporting a net worth of less than Sh50,000.
Trade Principal Secretary Chris Kiptoo said the government remained committed to establishing a favourable working environment for the private sector. “A total of 93 issues have been raised by Kepsa during the roundtables and according to this presentation, 91 have been resolved and only two are remaining,” he said.
“The president established the National Development Implementation Committee and other development coordination structures at national and county level that will sustain engagement with the business community including Kepsa to identify and implement viable options to challenges affecting SMEs.”
Last month, Cabinet passed the Business Law (Amendment) Bill 2019 that proposed a raft of changes to the country’s business legislation.
If approved by Parliament, the law will allow entrepreneurs to register their businesses online with digital signatures and contracts now granted equal legal prominence with the company seal.
At the same time, parties in an agreement can now sign and exchange contracts electronically with the requirement that contracts should carry company seals also removed.
This includes land purchases, where the processing of stamp duty will now be done electronically, as well as the transfer of property and securities between different parties.
Legal wills, negotiable instruments and title deeds will, however, still require physical signatures to be recognised by law.
The Bill aims to improve Kenya’s ranking in the World Bank Ease of Doing Business Index from the current 56 out of 190 economies to top-30 by 2022.