- Most countries have recognised small businesses as the engine for economic expansion.
- Small trader makes between 40 to 60%, which is enough for loan repayment and family upkeep.
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Money is the bloodstream of any business enterprise, and its availability and uninterrupted circulation are healthy for individual businesses and the entire economy.
Globally, the Government is the biggest spender, and therefore it identifies and allocates resources to the key areas that can bring about the most significant positive impact on the economy.
Most countries have recognised small businesses as the engine for economic expansion, providing incentives and an environment supporting their growth.
Venture capitalists, too, have invested in small startups, which later grew into huge businesses, providing products and services across continents.
One of the critical challenges facing small businesses is access to financial services at affordable rates.
Micro-lenders, including shylocks and microfinance institutions, have filled this gap for a long time by providing simplified and fast access to small traders and businesses.
Through them, they can buy goods at wholesale price, retail in their stalls and repay the loans by evening or within the same week.
Such traders have huge price margins and could absorb high-interest rates. For example, a banana trader buys a banana at Sh5 and retails it for Sh10, making a 100 per cent profit.
However, this does not consider the wastages, such as those which get pressed on the way or overripe before being sold.
When all these are considered, the small trader makes between 40 per cent to 60 per cent, which is enough for the loan repayment and family upkeep.
There would be no money remaining for expansion. The interest charged by the micro-lender is, therefore, not sustainable.
It cannot enable the business to expand, which could explain why many traders by the roadside remain in the same position throughout their entire life, despite the immense business skills they have gathered.
With all the skills and experience gathered in the trade, an enterprising fruit trader could quickly move to improve the business through value addition. For example, with sufficient stock, the overripe fruits could be used to make a higher-value vinegar and have a longer shelf life.
Several enterprising individuals start their businesses with great potential for expansion.
Still, they are curtailed by a lack of financial resources because most established banks classify them as high-risk and, therefore, either charge prohibitive interest or require collateral that the individuals may need to have.
Many individuals also need to learn about taking credit and the negative consequences that may arise if they cannot repay.
One incentive that would encourage the growth and expansion of small businesses is establishing a fund to provide low-interest loans, grants, and credit guarantee schemes tailored explicitly for small traders.
The hustler fund is filling part of this gap. Apart from easing financial constraints, such a fund will empower small businesses and enable entrepreneurs to secure funding for their ventures, expand their operations, invest in new technologies, develop innovative products and services, and create more job opportunities.
For example, the single carpenter behind the shops could, over time, invest in technology that would improve the quality and quantity of products and enable them to access a broader market.
Another incentive that would go hand in hand with access to finance is skills development to strengthen small businesses' capacity and competitiveness.
This could be tied to access to finance so that the traders are not only equipped with the capability to repay their loans but also expand their business.
Vocational and technical institutions nationwide could be used evenings or weekends as community learning centres or exhibitions/ incubation hubs.
Sponsored seminars that would also be a source of much-needed networking opportunities could also be carried out in these centres when the regular students are on break.
These activities will equip entrepreneurs with the knowledge and skills to thrive in the modern business landscape.