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Factors that cause the failure of Small and Medium Enterprises (SMEs) in Kenya.


Date Posted: 4/11/2012 7:45:04 AM

Posted By: SimonMburu  Membership Level: Silver  Total Points: 838

Due to the craving levels of poverty and unemployment in many African countries Kenya inclusive, the African governments have shown a big interest in Small and Medium Enterprises and they encourage their unemployed to get involved in these small businesses in order to curb the problem of unemployment. The SMEs are the engines of many African economies although in some countries they have shown zero success due to the many challenges they are facing, in Kenya the SMEs are easy to start since Kenyans are creative, innovative and full of business ideas the reason why they are quite many, the biggest problem faced by these enterprises is that they don't last in the market for a considerable good time before being faced out by well-established businesses.

There are some factors that have promoted the failure of these small businesses and they are as follows:

1. Lack or Inadequate managerial training and experience: Most of these enterprises are of sole proprietorship business type and they are managed by their owners who might have a little or no managerial skills and experience at all. This means the business is in no room for creativity and innovation and hence it is in the risk of being faced out by competition or bankruptcy when no financial records are being kept. The government should embark onto this by establishing managerial training centers for small scale entrepreneurs.

2. Poor infrastructures: Most SMEs in the rural areas have the potential of growing and becoming successful but due to the poor state of roads and other essential infrastructures the prosperity and morale of the owners is highly affected. The government has done something on the infrastructure but a lot still needs to be done for the benefits of both large and small business.

3. Lack of sufficient market information: Most

SMEs lack the access to sufficient market information since most of the information is designated for the large and well-established businesses. This makes the SMEs unable to plan their sales since the market turn up is unpredictable. In order to overcome this problem the government should provide sufficient market information to the SMEs.

4. Change in technology: The technological change has made many SMEs to close down operations due to the high cost of adopting the new technologies. Some have been forced out of business since their products have become outdated and they are unable to update to the new technologies. We should also put into consideration that most SMEs are not able to acquire big and expensive machines and therefore many don't have or use a technology that is outdated. The introduction of incentives by the government will enable these business to acquire and enjoy new technologies.

5. National policies: High taxation rates have made many small business to close down since the gap between expenditures and profits is not conducive and some have even suffered losses leading to their closure.

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