Availability of capital as a factor to consider before starting a business in Kenya

  

Date Posted: 1/26/2017 1:43:37 PM

Posted By: lydiak  Membership Level: Silver  Total Points: 813

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Kenya has a huge human resource but a majority of youths are still highly unemployed. This has led to rising insecurity as some end up being involved in criminal activities to make ends meet. In our towns, you are likely to find young people idling around which means that the resource is underutilized and this affects even the country’s GDP and the general country economic growth. There is a big imbalance between the jobs available and the job seekers and therefore business ventures are being highly encouraged. Availability of capital is a factor that plays a major role in one making the decision to venture into business and on the type of business to venture into.

There are certain levels of capital investment to consider depending on the kind of business you intend to venture into. Some businesses don’t necessarily require any financial initial investment, while others require a small one and others a big capital investment. A business that doesn’t require any initial capital investment is, for example, a training business. This only requires finding the target market and sharing with them the skill, knowledge, talent or expertise that you have that can benefit them at a fee, for example, music and entertainment, MCeeing art and craft etc. Another business is a business that requires you to offer services that someone else requires but doesn’t have time for example being a messenger, helping someone arrange things, assisting someone to carry things from one location to another, doing laundry for someone etc. With time if the business is viable, you can register it as a business and this will only require a very small fee to do so. First, you think of a name then you can visit any huduma center across the country and get help on registration of the

business or do it online through the e-citizen portal. A name search will be done for a small fee usually less than a thousand bob and then get a license to run the business.

Some businesses require that you have an initial capital. There are those that require a small initial capital like buying a few goods in wholesale with an intention to sell them in retail at a higher price and make some profits. This can include products in various categories like clothes commonly known as ‘Mtumba’, or food items like potatoes, fruits etc. To sell them one can decide to do deliveries to the clients, or sell them online through social media platforms, or by taking the items to the market when there is a market day. Others can be sold through hawking once you obtain a license to do so. Another category includes finding a business premise, stocking it with products and looking for customers, for example, setting up a shop, a supermarket, a boutique etc.

There is another category of service delivery businesses that require bigger capital where one can invest in something like a van or a motorbike to transport people and goods from one place to another. This can eventually become a courier business. One can decide to venture into the logistics business by purchasing a motorbike, a tuk-tuk, a taxi cab, a matatu etc to do the commuting business. One can also set-up a salon, an M-pesa outlet or a barber shop, a printing business and all this require some capital to purchase the equipment needed.

Another category is the value-added products business like making fruit juice, yogurt, cooked food, porridge, cereals, snacks among others. Others include buying the raw materials and making a product, for example, mats, crochet, beads to make jewelry etc then one can look for clients through social gatherings, social media among ways. If this business grows, one can consider renting a premise and expand the business operations and eventually open a café, or a factory depending on the business field you are in. Another booming industry is making household and office furniture. In this business mostly timber is used but people are also becoming quite creative and some are even using old car tires, beads among other items. Old car tires are also being used to make shoes commonly known as ‘Akala’ in Kenya.

There is another category of service businesses that require one to find a business premise as an office. This business only requires one to be well versed in a certain field, for example, a person who has studied Law can set-up a law and associates firm, someone who has studied accounting and auditing e.g CPA can set-up an accounting and Auditing firm and so on and so forth.

There are several sources of capital one can consider. One can use own savings to start a business, borrow from family and friends, get a loan from financial institutions like banks, SACCOs, Chamas. Another source of capital is claiming future earnings where possible. M-shwari and KCB M-pesa can also be a source of capital. Financial institutions may require a form of collateral before they lend money to you and you are also required to have a good past credit history and avoid being listed by Credit reference bureaus.

Here I wanted to expound more on just capital as a factor to consider before starting a business but there are many other factors to consider which I will give a brief explanation on. They may include but not limited to:

Location; This is where one considers the area the business will be carried out. This can mean the city, town or even the county where the business will be set-up.

Passion; One can consider starting a business in the area they are passionate in, ask yourself if you can still do whatever you intend to do even without generating any income from it, that a good way to test what you are passionate about.

Competition; One can consider checking the businesses similar to the one they intend to start that exist in their area of interest.

Market demand; One can consider the products or services that are on demand and if there is a ready market for them.

Laws, rules, and regulations; One can consider if the business they want to set-up is legal and the laws and regulations governing that kind of business in Kenya.

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