The high cost of living and expensive loans will curtail the growth of small businesses in Kenya this year, a new report shows.
The findings by Mastercard show that 65 per cent of SMEs in Kenya have identified the rising cost of goods and services as a major concern that will impact their growth this year.
Further, the SME Confidence Index shows that 61 percent of local businesses still grappling with the lingering effects of the pandemic, while 52 per cent say inflation is a major factor impacting business growth.
The increasing base lending rate by the state has seen four out of 10 SMEs report that they are concerned about paying back loans from banks and governments.
The situation has been so dire with at least eight Kenya-born tech start-ups having closed down in the past two years.
On a positive note, the integration of different payment platforms has emerged as the greatest opportunity that will spur the growth of Small and Medium Enterprises in the country this year.
This coming even as the rising cost of goods and services and the impact of Covid-19 remain key factors that are impacting business in Kenya
Mastercard senior Vice President and country manager for East Africa and Indian Ocean Islands, Shehryar Ali says that as companies recover from the pandemic and return to the growth phase, the research shows that 73 per cent of SMEs in Kenya are concerned about the rising cost of doing business in 2023.
A further 44 per cent also reported that access to capital funding is increasingly becoming a challenge.
“Kenyan SMEs are optimistic about their business growth prospects with a notable focus on the transformative potential of digital payments. Additionally, easy access to capital funding (23 per cent) and red tape regulations (23 per cent) remain key challenges,” said Shehryar Ali.
According to the African Tech Startups Funding Report released by research firm Disrupt Africa, Kenyan tech start-ups received a total funding of $574.8 million (Sh85 billion) last year, representing a near doubling from $292 million (Sh43.2 billion) in 2021.
The country’s 91 startups got the third-largest capital inflow in Africa in the review period at 17.2 percent of the total new funding recorded in the continent.
The findings of the report by Mastercard now in their second edition, reveal that while 66 per cent of SMEs across Kenya are confident about business growth, 97 per cent of businesses believe that omnichannel payments present the biggest opportunity for them followed by digitizing their business (96per cent) and access to training and development support (95 per cent).
The report says that from surviving to thriving in the post-Covid world, small and medium enterprises (SMEs) in Kenya have demonstrated optimism and confidence about the next 12 months.
Mastercard points out that factors contributing to business growth include training and upskilling staff (94 per cent), easier access to financial services and credit funding (93 per cent), better data, analytics and insights (91 per cent) and being able to transact internationally (83percent).
The survey reveals that 87 per cent of medium-sized businesses are far more optimistic about the next 12 months as compared to 66 per cent of micro and small businesses surveyed.
Almost 70 per cent of SMEs in Kenya project an increase of similar revenue in 2023
According to the Kenya Institute for Public Policy Research and Analysis, SMEs contribute to over 90percent of the total labor force and play a key role in poverty reduction and economic development.
They are also a source of innovation, competitiveness, goods and services, and entrepreneurial skills. There are over 7.4 million SMEs employing approximately 14.9 million Kenyans in various sectors of the economy.