Economic growth: Friendly environment critical to SMEs growth

Small Medium Enterprise (SMEs) have a huge potential to create long lasting social value especially because their business models, products and proximity caters for the everyday needs of the larger part of our population. Simply put, SMEs are well-positioned to intervene in the developmental challenges that we face in our country and we need to develop policies that increase capacity to do so. SMEs play a major role, especially in developing countries. Formal SMEs contribute up to 60 per cent of total employment and up to 40 per cent of GDP in emerging economies, according to the World Bank Doing Business Report (2018). Improving the business environment is hence a critical catalyst to fully leverage on SMEs in realising the development agenda of the country. Today, it is normal for companies to start small and gradually grow especially in the wake of globalisation. Our SMEs, however, continue to face a myriad of challenges that hamper their sustainability and growth and most of these key issues require policy interventions. Regulatory conditions are among the main factors affecting SMEs and entrepreneurship. In recent years, remarkable progress has been made to reduce the administrative burdens on start-ups, lower legal barriers to entry, and reduce the costs for regulatory compliance in different areas. The support offered by the government in the development of SMEs and the informal sector in protection, institutionalisation and access to market opportunities is welcome. However, the complexity of regulatory procedures, covering a wide range of areas such as license and permit systems, insolvency and tax, among others, remains a major obstacle to entrepreneurial activity. An effective and transparent regulatory environment is key for entrepreneurship and SME development at all stages of the business life cycle, including entry, investment and expansion, transfer and exit. Reducing the regulatory burden on SMEs can facilitate their participation in formal economy and help improve their productivity and competitiveness. The focus on creating a good environment for small businesses to thrive is key as some could end up being big corporations in the future. There are some initiatives locally, already making headway on this front. Kenya Association of Manufacturers, for example, has now set up a Manufacturing SME Hub, to uplift micro, small and medium businesses in value addition towards achieving the 15 per cent targeted growth of the sector by 2022. The hub’s objective is to provide the necessary support through policy advocacy formulation and capacity building to help businesses move from one level to the next. Partnerships derived from engagements within the hub such as the MoU signed recently by the Association with African Guarantee Fund for Small and Medium-sized Enterprises (AGF) are great avenues for manufacturing SMEs to leverage and benefit from. In the long term, having the right adaptive policies in place and the collaboration of all parties will lead to a greater environment for SMEs to thrive. Improving the business environment for SMEs is a priority in reaping their full potential. The writer is CEO, Kenya Association of Manufacturers —ceo@kam.co.ke.

Economic growth: Friendly environment critical to SMEs growth

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