Small Medium Enterprises (SMEs) contribute to about 90% of all new jobs created in Kenya. They continue to contribute immensely to almost half of all Gross Domestic Product (GDP) in African countries and their importance to the economy is only just being realized. Many researchers are now conducting in-depth research into SMEs as key drivers of economies and how to improve them.
However, much of this hype goes to SMEs in urban areas. Most research is done in urban areas, forgetting that there is a big lot of SMEs in the rural areas. This ensures that opportunities for growth for the local SMEs is low and hence take a longer time span to break even.Most SMEs generally die within the first 3 years of operation, studies should be done to see the lifespan of rural SMEs which I am sure will be much lower. This is because SMEs in rural areas do not get the same opportunities as those in urban areas.
Lack of finance, markets, skills, lack of opportunities and proper corporate governance structures are some of the constraints SMEs face in general.
Could there be a way for SMEs in rural areas to scale up? I believe yes, through the organisations that operate within the communities.
Companies that operate in certain regions should spearhead local content support for SME businesses in that region. They should buy local and if the locals cannot deliver on quality, they should invest in training so that they can deliver to their standards. Trickle-down growth on the community will be reached at if local SMEs will be empowered by the same organisations that benefit from the existence of the local communities or their natural resources.
Access to Finance
Even when some SMEs get opportunities with big organisations or otherwise, many do not have the financial muscle to see the delivery through. When they seek financial assistance from finance institutions, SMEs don’t usually have fixed assets that banks require as collateral. The interest rate capping, on the other hand, has compelled banks to increase their risk alleviation measures, locking out many SMEs. Organisations should step in and bridge the gap for SMEs to allow them to access financial aid. For example, Tullow Oil together with Invest In Africa is conducting a Turkana SME recruitment Drive for SMEs to benefit from a credit Guarantee Scheme whose aim is to help SMEs improve their credit. This makes it easier for them to access finance without having to give collateral.
Provide markets for locals
Companies have the obligation of protecting farmers or suppliers from exploitation by middlemen by buying directly from them at good prices to enable the locals to grow. They should ensure they buy directly at good prices and look for long-term sustainability of the communities working around.
The companies should also engage in partnership with the local governments to build hospitals, schools and other amenities that will bring about development in their areas of operation. They should work towards the development of local infrastructure and even provide bursaries and scholarships to locals. The Equity wings to fly is one such project that has continually set the pace.
Provide access to skills
Skills are an important factor if local SMEs are ever going to scale up. Training opportunities more often than not fall to the urban SMEs who are more likely to access these opportunities. Additionally, crucial technologies that would make their work easier take too long to reach to the locals. The companies should once again take matters into their own hands and carry out training that imparts skills for local businesses to enable them to grow and even provide better services and products. They should be at the forefront of providing latest tech to SMEs to try them out and enable them to compete for opportunities with other bigger urban SMEs.
Partnerships for success
Organizations should partner with the local county governments and local Community-Based Organisations (CBOs). These can be through creating marketing avenues for locals through trade fairs, training, and financial support and through Corporate Social Investments (CSI) avenues. When the relationship between the locals and the organisations both thrive.