SMEs on the spot amid Covid-19 Economic revolution – World Bank
March 2020 still remains a nightmare for most individuals in the formal employment. With over 75% retrenchment and at least 60% salary pay cuts, these group resorted on self employment by embarking on creation of small businesses.
Large firms had to suffer a heavy strike in maintaining a balance in the ‘Economies of scale.’ According to World Bank, Small and Medium Enterprises (SMEs) have played a major role in most economies, particularly in developing countries since the pandemic struck the whole world. SMEs account for the majority of businesses worldwide and are important contributors to job creation and global economic development. They have a representation about 90% of businesses and more than 50% of employment worldwide.
In Kenya, with number of increased restrictions and curfews, most companies had had to incur heavy losses. The economy had been barred from growing exponentially, the lock-downs in Nairobi and Mombasa counties which are among the high performing centres of revenue generation gave almost all developed companies a breakdown. Some companies had to reduce the number of workers in order to maintain a balance in the ploughed profit.
“600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SMEs development a high priority for many governments around the world,” World Bank.
While the rest of unemployed population had to be withdrawn from the working sector, an urgent need of satisfying daily needs pushed them to venture into small businesses. One year and some months now, the World Bank, statistics show that these small businesses are becoming the future of many economies in the world.
“600 million jobs will be needed by 2030 to absorb the growing global workforce, which makes SMEs development a high priority for many governments around the world,”said a report by the World Bank.
However, SMEs have had a heavy financial challenge to kickstart and maintain their business. Most of these, depend of internal funds and some little savings received by friends. The International Finance Corporation (IFC) estimates that 65 million firms, or 40% of formal micro, small and medium enterprises (MSMEs) in developing countries, have an unmet financing need of $5.2 trillion every year, which is equivalent to 1.4 times the current level of the global MSME lending.
The government of Kenya, has been on the spot to support small businesses through creation of enabling funds and soft regulations that would necessitate their ease of performance among large businesses in the country. The Kenyan government as well as other stakeholders supporting SMEs have endeavoured to offer assistance to SMEs in various forms to enable them manage and recover from the negative effects of COVID-19 . For instance, the Kenya government announced an economic Stimulus Programme that offered tax breaks, seed funded a credit guarantee scheme, directed payment of pending bills to SMEs among others.
Despite the projection by the World Bank, a major backdrop can be felt in the entire industry, SMEs prolific contribution to Kenya’s socio-economic development; they continue to perform below capacity riddled with high mortality rate of 75 percent within 3 years of inception underpinned on challenges such as access to finance, access to markets, access to information, lack of management skills, access to technology and unsupportive policies among others.
In Mombasa some regions of the Coastal strip of Kenya, some key MSMEs have had to shut down amidst competition from the growing demand market in Nairobi since the inception of the standard gauge railway. In one of the political rallies at Mwahima stadium and Freretown in Kisauni constituency, the Mombasa county governor Ali Hassan Joho, promised to step up and speed the operation of saving small businesses.
“I believe in the economy I have created, I am urging every youth to walk in out doors. Table with us your plan and we promise to help you and your businesses grow,” Hassan Joho
“I believe in the economy I have created, I am urging every youth to walk in out doors. Table with us your plan and we promise to help you and your businesses grow,” said the governor in March early this year.
The projection on SMEs have been lauded by the president too, who has been keen on his Big Four Agenda. He has accommodated a number of schemes that have stood up to help these small businesses grow.
The current state of the nation, has provided a great gap of improvement among many Kenyans. The number of creativity has scaled up by 60% which provides a 15% deviation from the year 2019, where an economic relaxation was evident by 45%.
In this wake of new economic ascension all attention goes to improving MSMEs for the benefit of the future. Big firms and companies of today have had to undergo a number of metamorphosis since entering the market and that’s what is included in this era. Just as the World Bank predicts the economic potential of the future at the hands of these small businesses, it’s yet time Kenyans need to embrace the fact and avoid the recorded deaths of their small businesses. Seeking clear performing methods such as consultancies and management would motivate their long stay in the market. Be ready for a revolution.