Small businesses require more than financing to thrive

One reality the world has had to embrace over the last two years, is that businesses must be ready to operate in an environment that is increasingly Volatile, Uncertain, Complex and Ambiguous – or VUCA.

In the last two months, I have had opportunity of interacting closely with business owners – here and abroad. In October, I travelled to Madrid, Spain where various exhibitors converged to showcase the best of the world’s value chain actors in the fruit industry.

The exhibitors ranged from leading exporting countries, global logistics companies, input and machinery providers, large exporters to upcoming players, especially from developing countries. Here, I got a first-hand feel of the various opportunities Kenya’s fresh produce exporters are targeting in the international markets. It is encouraging to note that Kenya’s earnings from the export of fruits in 2021 remained stable amid the disruptions of the Covid-19 pandemic to stand at Sh18.4 billion, accounting for 11.7 per cent of horticultural export earnings.  

Late that month, I had a front-row opportunity to interact with owners of SMEs drawn from 9 counties in the Western, North Rift and Coastal regions. Here, entrepreneurs under the auspices of the Kenya National Chamber of Commerce and Industry (KNCCI) in partnership with Absa Bank and county government officials shared their experiences.

Reflecting on the stories from entrepreneurs here and abroad, four things stood out as key issues that face SMEs; access to finance, markets, information as well as mentorship and coaching.

Access to finance remains one of the biggest perennial challenges facing SMEs worldwide. According to the World Bank, about half of formal SMEs do not have access to formal credit. SMEs are less likely to be able to obtain bank loans than large firms.

As a result, the International Finance Corporation (IFC) estimates that 40 percent of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of Sh634 trillion every year.

That said, it is not enough for banks to provide liquidity to SMEs. It is also important to help them access markets for their products and services. Though this may be achieved through groups and associations that bring together SMEs, financial institutions can also play a powerful role.

This is what inspired the county engagement forums that Absa has held in partnership with KNCCI over the last two years which have so far provided over 10,000 entrepreneurs to network and market their solutions.

Thirdly, the information asymmetry between buyers and sellers has been noted to be a hindrance to trade. I believe banks can help improve access to information to SMEs by providing networking platforms and events.

The writer is the Business Banking Director at Absa Bank Kenya PLC

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