HUSTLE MAG MARCH 2020 FINAL

MAIN STORY
MICRO & SMALL ENTREPRISE
Micro and small
enterprises:
A desert in the oasis
So many financial institutions, but no affordable
credit for local micro, small and medium
enterprises
By Tony Kiganda
In Nairobi, the small and medium
enterprises ecosystem seems to have
evolved over time to incorporate easy
access to credit.
The many innovation hubs dotting
the city paint a picture of a vibrant startup
ecosystem where innovators, investors
and venture capital funds co-exist
blissfully.
But away from these hubs, the reality
of struggling start-ups with little to no
access to capital plays out in the capital as
well as in most parts of the country.
In Africa, there is an infrastructure to
help entrepreneurs build their businesses,
but there are not enough success
stories to write home about, says Vineet
Rai, the founder of Aavishkaar-Intellecap
group, a pioneer in provision of solutions
that help build and scale profitable
enterprises.
His two outfits saw a gap in early stage
start-up funding in Africa and sought to
fill it by venturing into the continent in
2012.
To the uninitiated, starting and running
a small business in Kenya seems like an
easy task, until the need for more funds
presents itself.
Indeed, many entrepreneurs with brilliant
ideas churn out new start-ups every
month, but an acute challenge of funding
targeting early stage businesses means
that few succeed past the first two years.
A survey by the Kenya Bureau of Statistics
revealed that 2.2 million startups closed
down in the last five years. Others
stagnate at the start-up stage for years
as they lack funds to scale, ultimately
throwing in the towel when the going gets
tough.
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HUSTLE EAST AFRICA
Vineet Rai, founder, Aavishkaar-Intellecap group.
When these enterprises take a hit, the
economy suffers. The industry, better
known as the informal sector employs
a huge number of people, turning the
wheels of the economy.
Yet lack of funds to sustain and grow a
business continues to affect thousands of
micro and small enterprises in Kenya.
Mr. Rai explains that the problem is not
lack of venture capitalists because there
is a significant amount of funds flowing to
slightly larger enterprises.
Brian Ongosi, the head of finance
at Platinum Credit said that banks are
seemingly investing in government bonds,
giving the ‘risky’ SME sector a wide berth.
It’s an open secret that small enterprises
find it difficult to get capital, he says.
Intellecap and Aavishkaar have essentially
been crowd sourcing entrepreneurs
to show them off to investors.
“Our goal is to search, sift, support and
skill entrepreneurs,”says Nisha Dutt, the
chief executive officer at Intellecap.
We work extensively with entrepreneurs
to help them succeed and make an
impact.
Intellecap’s effort is just one among
many initiatives been fronted by different
stakeholders in a bid to support small
businesses.
The government’s initiatives focus
more on job creation for SMEs as well as
easy access to credit.
For a start, the Kenyan government
runs a 30 per cent procurement policy
that sees 30 per cent of all government
tenders being given to special groups,
comprising women, youth and people
with disabilities.
This affirmative measure has brought
in some results, though analysts feel that
small entrepreneurs are losing out to
rich individuals and larger corporates as
they lack enough capital to execute the
tenders.
This is backed by data from the Public
Procurement Regulatory Authority’s
report that shows that the special groups
handled 18.17 per cent of the 2017 halfyear
procurement budget of Kshs 208.3
billion. Though laudable, this falls short of
the 30 per cent.
The capping of interest rates presented
an excellent opportunity for local small
and medium enterprises to access affordable
credit from banks.
The noble move was seen as a panacea
to the spiraling problem of high interest
rates that was locking out most Kenyans
from affordable credit.
However, the initiative yielded negative