key success factors and analysis of sme development: kenya

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Key Success Factors and analysis of SME development:

Kenya

Eelko Luning and Daan Giesen

© 2006 Woord en DaadThis document can be freely copied and distributed under the following conditions:

The author’s name or names has to be included in every copy of this document This notice should be included in every copy of this document This document should only be copied or distributed as a whole This document should not be distributed for profit


1. Financial forcesKenya is considered a so-called ‘Heavily Indebted Poor Country’ (HIPC), by the IMF. In the following we will analyze what that means for SME development.

1.1 Financial backgroundThe currency is Kenya shilling (KSh), with KSh 20 = 1 Kenya pound (K£), The Ksh is generally believed to be rather stable compared to other currencies in the region. The table below shows some financial indicators, source is the Economist Intelligence Unit1.

2001 2002 2003 2004 2005GDP at market prices (KSh bn) 1.025,90 1.038,80 1.141,80 1.277,10 1.462,00GDP (US$ bn) 13,1 13,2 15 16,1 19,4Real GDP growth (%) 4,4 0,4 2,8 4,3 5,2Consumer price inflation (av; %) 5,7 2 9,8 11,7 10,3Population (m) 31,4 32 32,7 33,5 34,3Exports of goods fob (US$ m) 1.891,40 2.162,50 2.412,20 2.722,70 3.276,50Imports of goods fob (US$ m) 3.238,20 3.159,00 3.554,80 4.320,20 5.896,80Current-account balance (US$ m) -341,2 -136,9 67,8 -378,4 -1.494,30Foreign-exchange reserves excl gold (US$ m) 1.064,90 1.068,00 1.481,90 1.519,30 1.798,60Total external debt (US$ bn) 5,6 6,1 6,8 7 7,3Debt-service ratio paid (%) 16 16,6 15,8 12,1 9,3Exchange rate (av) KSh:US$ 78,56 78,75 75,94 79,17 75,55

With these numbers Kenya is the biggest economy in East Africa, both in GDP as GDP per capita terms. GDP growth is not spectacular, but growth in real terms is constant. The high inflation may be difficult for SME entrepreneurs to handle with, as it implies price uncertainty;however government policy is aimed at reducing inflation. Kenya has a high trade deficit, since its exports are largely outnumbered by imports, more threatening is the fact that the deficit seems to be increasing. The debt service ratio is a measure to what extend a country can service its debt. This ratio is rather high in comparison to Kenya’s neighbors.

1.2 Banking and lendingBanking and the financial industry are a rather large sector in Kenya. Once again the problem is that most activity is focused on the urban areas, i.e. lending in rural areas is considered tough. It is estimated that only 10 per cent of the Kenya population have access to banking service. Banks can be categorized in three groups, foreign owned, state-owned and privately owned, it is striking that the foreign banks have the least activities in rural areas2. Currently Kenya has about 51 commercial banks, 8 non-bank financial institutions, 4 building societies and 2 mortgage finance companies.3 The central bank of Kenya4 should be the controlling instance, since it got that task from the Ministry of Finance, however at this stage control is rather poor.5. Some banks are worth mentioning. First,Citibank Kenya that took over the Kenyan branch of ABN AMRO, might still have some Dutch influence. Second, the privately owned co-operative bank Kenya, that offers a special SME package6. Third, we found the k-rep bank7, or Kenyan Rural Enterprise Program bank, has partly Dutch ownership and is a specific development Bank. Its owners include International Finance Corporation(IFC), part of the World Bank, the African Development Bank (ADB), the Netherlands Development Finance Company (FMO) and Triodos Bank, a community development bank based in the

1 http://www.viewswire.com2 African Economic Outlook Kenya, OECD, 20053 http://www.citibank.com/eastafrica/kenya/homepage/4 http://www.centralbank.go.ke/index.asp5 Poverty Reduction Strategy Paper, IMF, 20056 http://www.co-opbank.co.ke/personal.php?cat=4&sub=607 http://www.k-repbank.com/


Netherlands linked to the DOEN foundation. Kenyan lending rates are highly volatile and credit spreads are huge, the tendency is downward however, which provides an opportunity for SMEs looking for credit. This can be seen from the following EIU data:

1999 2000 2001 2002 2003Commercial bank Loan (%) 25,2 19,6 19,5 18,3 13,5

Please note that rural interest rates may be a lot higher (up to 25%), since loans are often informal. Moreover access to credit can be hard for SME’s. Kenya's small enterprise sector receives less than 3% of total lending.8 Known problems in obtaining credit as a starting SMEs are: lack of credit history, no valuable items to put up for mortgage, etc. SMEs could be helped in obtaining access to afordable credit if ´Woord en Daad´could supplement guarantees to banks.

1.3 Sub conclusion Banking is well developed in Kenya, but regulation should be improved. Credit access seems to be poor for SME’s, especially in rural areas. Economy is not growing spectacular, but magnitude is relatively big.

2. Economic and Socioeconomic ForcesIn general it is important economically to realize that Kenya is in a trade union with Uganda and Tanzania, called the East African Community (EAC) since January 2005. Kenya’s partners in the EAC are amongst the fastest developing economies on the continent.

2.1 Definition SME and economic magnitudeSME is not very well defined in Kenya, there is no official government source providing a definition. According to OECD SME in Kenya is any enterprise employing up to 50 people.9

The same source shows that in 2003 18% of total GDP originated from SMEs, employing in total 3.2 million people. SME development is heavily stimulated by the government, who regards SMEs as perfect tools for generation of employment and stable economic growth.

2.2 Supporting organizations and development toolsApart from the government and some of the banks mentioned before, interesting organizations in SME / entrepreneurship development are:

UNIDO10

K-MAP11

Centre for enterprise development (CED) of KIM12

Regional centre of enterprise development of the SBC network13

Inter-regional Economic Network (IREN) Kenya14

GroFin15

Growing Sustainable Business program of UNDP16

Chambre of Commerce

There seem to be many more organizations active in this area in Kenya, however not all of those are independent from the government or active on the internet. Some of the

8 http://www.cipe.org/publications/fs/ert/e30/prate30.htm9 African Economic Outlook Kenya, OECD, 200510 http://www.unido.org/doc/1932311 http://www.cipe.org/publications/fs/ert/e30/prate30.htm12 http://www.kim.ac.ke/ced.html13 http://www.africa.upenn.edu/Comp_Articles/SBC_Network_12727.html14 http://irenkenya.org/15 http://www.grofin.com/home.asp?pid=14716 http://www.undp.org/business/gsb/kenya.html


organizations above will now be discussed further, for others more information can be found through the footnotes.

First, the UNIDO initiatives are focused on rural areas. These have four focus areas, or componentsas they are called by UNIDO. These components include: Leather (products), Fish Industry, Beekeeping and Dairy. SME development in these areas may be easier through UNIDO support.

Secondly, K-Map, or Kenya Management Assistance Program seems an interesting organization. The organization enables companies to become a member, where membership has grown to 200 companies that contribute roughly 800 counselors to a skills bank. They have invested more than 120,000 hours guiding and advising over 10,000 existing and potential small businesses in the manufacturing, tourism, engineering, agribusiness, communications and service sectors throughout Kenya. Multinational corporations represent 26% of the total membership, while the remaining 74% are domestic Kenyan companies. The sponsors include multinationals such as Philips Electronics, Toyota Motors, Shell Kenya, PricewaterhouseCoopers, Proctor & Gamble, and General Motors. K-MAP is also active in promoting more flexible legislation for entrepreneurs through CISBE, which is their lobbying movement.

Thirdly, Kenya does have a central Chamber of Commerce and Industry17, related to the Ministry of Trade and Industry.

Instruments that are observed to enable SME development vary from improving access to credit, to investing, to training and consulting entrepreneurs. Improving credit access is done through NGOs providing micro-loans, guarantees that are given by financial and non-financial institutions. An interesting tool observed is flexible mortgaging, where the collateral can be practically anything (e.g. a machine), so not just immovable property, which is offered by the Co-operative bank of Kenya18. Especially guarantees could be very useful tools. More information on the tools used can be found through the links provided in the footnotes.

2.3 Key sectorsAgriculture still remains the dominant sector in the Kenyan economy, accounting for 22.6% of the GDP (or 24.2% including fishing and forestry).Agriculture accounts for a significant proportion of employment (both directly and indirectly), as well. Although government policy has encourages industrialization, no real growth in manufacturing can be observed. Yet at its current level Kenya is still the most industrialized country in the Eastern Africa Region.

Origins of gross domestic product, 2004 % GDP

Agriculture, fishing and forestry 24.2

Transport, storage & communications 10.3

Wholesale & retail trade 10.1

Manufacturing 9.9

Financial services 3.8

Building & construction 3.6

Others 38.1

2.4 Informal sectorCurrently, more than 70% of all businesses operate in the informal sector in Kenya. This high informality rate clearly suggests the need for drastic reforms in the legal and administrative landscapeto enable informal business to become, formal SMEs. To help the government with efforts to achieve this, the Committee for the Improvement of Small Business Environment (CISBE) was founded, which

17

Kenya National Chamber of Commerce and Industry , Ufanisi House Selassie Avenue P.O. Box 47024 Nairobi, Tel: (2542) 220866/7, Fax: (2542) 340664, E-mail: [email protected] http://www.co-opbank.co.ke/personal.php?cat=4&sub=60


is related to K-MAP. The importance of this work is underscored by the key role SMEs must play in creating jobs and enhancing the competitiveness of Kenyan products.19

2.5 Sub conclusion The EAC trade union provides an opportunity to SME’s, who can easily export to the

neighboring nations, Uganda and Tanzania. SME sector broadly defined and important for growth and employment. Lots of (international) organizations active in SME development. Agriculture is most important sector. Informal sector is huge. Growth of informal micro-enterprises to SMEs is hard, due to regulations that make

formalization difficult.

3. Physical and environmental forcesKenya’s population is heavily concentrated in the central and western regions, which contain the most fertile agricultural areas. Farming output is diverse, consisting of various food crops and cash crops, and livestock. The most productive of Kenya’s farmlands are situated in the fertile central and western regions, whereas the rearing of livestock predominates in the semi-arid regions to the north and east.Kenya is suffering from droughts from time to time. This makes fertile land, suitable for agriculture, scarce and has caused many food-shortages.

4. Socio-cultural forcesIn describing the socio-cultural forces we will touch upon some socio-cultural problems in Kenya. We also want to touch on Dutch Kenyan relations in this paragraph, with specific focus on the current developments.

4.1 Socio-cultural problemsFirst of all the Kenyan population is still largely tribal, especially in the rural areas. This can be problematic, since the different tribes have had struggles throughout time. These tribal wars are mostly about scarce resources, such as water, or fertile land. Before any SME development activities are initiated by ‘Woord en Daad’ we would advise to get into the local tribal situation extensively. An indication of the tribes in Kenya: the Kikuyu (20.8%), the Luhya (14.4%), the Luo (12.4%), the Kalenjin (11.5%) and the Kamba (11.4%). Another social problem in Kenya is HIV/AIDS, which has even caused the population growth to become negative. The affects this would have in SME development should also be studied.A third socio-cultural issue is the wide income disparities in Kenya. In 1998-2002 the poorest 20% of the population received only 6.0% of national income, while the richest 20% took 49.1%. Looking at the GINI index of 2005, for Kenya

4.2 Relation Netherlands and KenyaThe Netherlands has always been a loyal partner of Kenya, both in trade as in development. In trade, the Netherlands is the fourth export partner of Kenya20. On the development side, the Dutch have been rather generous over the last years. During the reign of the corrupt President Moi, development funds were stopped. In January 2006, 1,5 million US$ was given to support Kenya through the recent food shortages, in general focus of development has been on environment and water21. Current developments are troubling the relation however, following a publication of Transparancy International, people from within the parliament and the Ministry of Foreign Affairs have argued to stop development funds to Kenya22. Since ‘Woord en Daad’ will probably bypass governments as much as possible this should not be a real problem, although it may influence the attitude towards the Netherlands in Kenya.

19 http://www.cipe.org/publications/fs/ert/e30/prate30.htm20 http://www.viewswire.com/21 http://www.minbuza.nl/22 http://www.vvd.nl/index.aspx?FilterId=974&ChapterId=1147&ContentId=4409


There is some evidence of Dutch businesses in Kenya, however the activities are quite insignificant and focused on urban areas. Known problem of Dutch companies in Kenya is dealing with the corruption.

4.3 Sub conclusion Tribal conflicts may trouble agricultural SME projects. The current developments in the attitude towards the Kenyan government are

threatening, since they may affect the bilateral relation. Good trade relation with the Netherlands.

5. Political ForcesVery important when starting SME business in a foreign country are political forces. We will analyze the political forces on all levels involved in starting an SME, and elaborate on corruption afterwards. More detailed information on starting an SME can be found in Legal Forces.

5.1 Involvement of government in starting and developing SMERules and regulations of starting an SME will be discussed later, but it is important to know, what (levels of) government institutions are involved. In setting up a SME, the following governmental institutions are involved23:

Kenya Revenue Authority Commissioner of Oaths, or notary public Attorney General’s Chambers Nairobi City Council Ministry of Trade National Social Security Fund

National Hospital Insurance FundThe central Kenyan government has a policy of supporting SME development. It sees opportunities in a larger SME sector to bridge the gap24 between micro-enterprises and large (multi-national) companies. Policy is to enable SME to create employment and economic growth.25 Significant evidence that the policy has been effective is not available, the ‘gap’ is still very much present. Besides, as mentioned before, it is very hard for micro-enterprises to grow to SMEs, which is largely due to government regulation.

5.2 CorruptionOn the Transparency International Corruption Perceptions Index 2005, Kenya shares place 144 out of 159 on the Corruption Perception Index with a score of 2.1 on a scale of ten.26 This would make Kenya one of the most corrupt nations in 2005. Quite striking that the current Kenyan president Mwai Kibaki of the National Rainbow Coalition won the presidency elections in 2002, following a campaign centered on an anticorruption platform. The former President Moi was known as one of the most corrupt African leaders. We must conclude however that Kibaki’s policy is not working yet, the more since recent studies by Transparency International have indicated that development funds have been used to buy government vehicles instead of delivering help to the poorest.27 Corruption in Kenya should be fought by the Kenya Anti Corruption Commission (KACC), which was installed after the last elections. However, this organization has not always been able to prove its stability and efficiency, which is partly due to the restrictive government policies. Notable is that the Dutch government has financed the KACC office partly.28

This February the evidence of some effectiveness in corruption fighting is provided through the dismissal of three ministers. Organizations, such as the Name and Shame Corruption Network

23 http://www.doingbusiness.org/ExploreTopics/StartingBusiness/MoreDetails.aspx?economyid=10124 Financing SMEs in Africa, Policy Insights No. 7, OECD25 African Economic Outlook, Kenya, OECD26 http://www.icgg.org/corruption.cpi_2005_data.html27 http://www.vvd.nl/28 http://www.minbuza.nl/


(NASCON), argue that there is still a lot of work to be done, since a lot of corrupt politicians are still in place.29

5.3 Sub conclusion Positive thing is that fighting corruption is an issue, and the KACC is in place. Effectiveness of corruption fighting needs to be increased. Kenya is still one of the most corrupt nations in the world. Quite a lot of government institutions are involved in setting up an SME. SME development has been encouraged in government policy for years, but results

have not been proven.

6. Legal ForcesLegal forces will be subdivided in legal aspects of starting a business and labor law.

6.1 Starting SME: Rules and LegislationThe table below, provided by the Doing Business chapter of the World Bank30 provides a summary on regulations in starting up a business, such as an SME. Kenya ranks 93rd out of 155 countries on the global ranking on the ease of starting a business.

Starting a Business (2005)

The challenges of launching a business in Kenya are shown below. Entrepreneurs can expect to go

through 13 steps to launch a business over 54 days on average, at a cost equal to 48.2% of gross

national income (GNI) per capita. There is no minimum deposit requirement to obtain a business

registration number.

Indicator Kenya Region OECD

Procedures (number) 13 11.0 6.5

Time (days) 54 63.8 19.5

Cost (% of income per capita) 48.2 215.3 6.8

Min. capital (% of income per capita) 0.0 297.2 41.0

In comparing Kenya to OECD nations, its scores are way behind, except for the minimum capital. However, one can argue that this is not the correct benchmark. Benchmarking against the other nations in its region is perhaps more valuable. With regard to the number of procedures, Kenya scores worse than its surrounding nations, however regarding the aspect of time and especially costs setting up a business can be done much more efficient in Kenya. Altogether we would conclude that starting a business in Kenya easier compared to its neighboring countries. More detailed info on the exact procedures can be found through the World Bank31, we would advise ‘Woord en Daad’ to study these extensively.

6.2 Labor lawThe table on the next page from the World Bank32 will summarize the implications of labor law to entrepreneurs. Altogether Kenya takes place 42 out of 154 countries on the rigidity of employment ranking.Interpreting the numbers in the table, we can distinguish a positive side and a negative side. Firing and hiring is relatively easy and cheap compared to other countries in the region, and Kenyan

29 http://www.ipsnews.net/news.asp?idnews=3216830 http://www.doingbusiness.org/ExploreEconomies/Default.aspx?economyid=10131 http://www.doingbusiness.org/ExploreTopics/StartingBusiness/MoreDetails.aspx?economyid=10132 http://www.doingbusiness.org/ExploreEconomies/Default.aspx?economyid=101


employees seem very flexible. This is beneficial to an entrepreneur who has a flexible workforce, which may improve efficiency. The downside of these statistics is the degree of protection the employee has, which is thus relatively low in Kenya. However, since we analyze the ease of starting and developing SMEs we would accentuate the positive effects to the entrepreneur.


Hiring & Firing Workers (2005)

The difficulties that employers in Kenya face in hiring and firing workers are shown below. Each index

assigns values between 0 and 100, with higher values representing more rigid regulations. The

Rigidity of Employment Index is an average of the three indices. For Kenya, the overall index is 28.

Indicator Kenya Region OECD

Difficulty of Hiring Index 33 48.1 30.1

Rigidity of Hours Index 20 63.2 50.4

Difficulty of Firing Index 30 47.8 27.4

Rigidity of Employment Index 28 53.1 36.1

Hiring cost (% of salary) 5.0 11.8 20.7

Firing costs (weeks of wages) 47.0 53.4 35.1

6.3 Sub conclusion Starting up an SME in Kenya seems to involve more procedure, but can be done more

efficient in terms of cost and time, compared to its region. Workforce in Kenya is flexible, which enables a quick and efficient starting up of an SME.

7. Labor ForcesAs mentioned before around 3.2 million Kenyans find employment in SMEs, which are thus considered a major factor in employment generation.

7.1 Employment distributionThe data in the table below, extracted from Laborsta of the ILO33, refers to distribution of paid employment amongst the nine sectors defined by ISIC.

1998 1999 2000 2000 (%)

Total 1664,9 1673,2 1677,4 100%1. Agriculture, Hunting, Forestry and Fishing 308,8 311,3 311,6 19%2. Mining and Quarrying 5 5,2 5,2 0%3. Manufacturing 216,9 219,2 217,9 13%4. Electricity, Gas and Water 23,2 22,7 22,3 1%5. Construction 79,2 78,6 78 5%6. Wholesale and Retail Trade and Restaurants and Hotels 150,7 153,6 155,5 9%7. Transport, Storage and Communication 85 83,8 83,4 5%8. Financing, Insurance, Real Estate and Business Services 84 84,5 84,7 5%9. Community, Social and Personal Services 712,1 714,2 718,9 43%

In interpreting these data, it is important to realize a lot of employment in Kenya is self-employmentand thus not paid, especially in the agricultural sector. Including these in the analysis would yield totally different results, unfortunately this data or more recent data is not available for Kenya. Most important conclusion is that paid employment is gradually increasing, and services/public sector, agriculture and manufacturing are the most important generators of paid employment.A CIA 2001 estimate indicates that the unemployment in Kenya is around 40%.34

33 http://laborsta.ilo.org/34 http://www.cia.gov/cia/publications/factbook/geos/ke.html


7.2 Level of education

Adult literacy rate (15+) (%)

Youth literacy rate (15-24) (%)

School Expectancy (years)

GER primary education (%)

GER secondary education (%)

GER tertiary education (%)

Kenya 73.6 80.3 8.5 92.4 32.9 2.9World 81.9 87.5 10.5 103.6 65.2 26.7

Developing nations 76.4 85.0 9.9 103.9 58.3 13.0Sub-Saharan Africa 59.7 72.0 9.1 91.1 28.4 2.5

Analyzing the table above, with data from Unesco35, there are three aspects literacy, school expectancy and gross enrolment rates. Kenya is able to significantly outperform its region with respect to literacy, which creates an advantage in the business context. School expectancy is somewhatshorter than the region, although the enrolment rates are higher on all educational levels. This is somewhat contradictory, still all the statistics are rather low, which may pose a threat in setting up an enterprise.

7.3 EntrepreneurshipWithin Kenya itself entrepreneurship education seems to be scarce. Some international organizations mentioned before (paragraph 2.2) try to improve this situation, such as KIM. A particular interesting program in that respect is the Training for Entrepreneurs and Micro, Small, and Medium Enterprises offered by the GBSN (Global Business School Network) in collaboration with IFC / World Bank36. For more information we refer to their website37. We also found out that certain pastoral communities have engaged themselves in training entrepreneurs.38 For more information on entrepreneurship training we refer to hyperlinks provided before.

7.4 Sub Conclusion Services, agriculture and manufacturing sector provide most paid employment. Unemployment is very high. Literacy is rather high, but education level lacks behind. Entrepreneurship is poorly educated. Several international organizations are determined to improve entrepreneurship education.

8. Competitive ForcesCompetitive forces are important to SMEs considering the fact that growing markets enable new competitors, so we will focus on upcoming markets. Source is the EIU39, sectors defined will be the same as in the key sectors (paragraph 2.3).First, the transport and communications sector continues to register strong growth, closely linked to increase in mobile-phone business, port cargo handling and air passenger transport (linked to the rise in tourism). Notable in this context is the partnership between KLM and Kenyan Airways.The manufacturing sector could not grow significantly as a whole, but production rose in the case of cigarettes (by 24%), cement (by 23%), processed milk (by 16%) and beer (by 12%).The biggest sector of Kenya, agriculture, is performing better than in drought-affected 2004, although the improvement is evident mainly in the case of food crops, not cash crops. Moreover there is a current threat of a possible drought. Main cash crops for Kenya showed little improvement in 2005, with tea up by 1%, sugarcane up by 1.9% and coffee up by 0.8%. Important growth over the last few years has been realized in horticulture, or gardening plants, for export purposes growing by 7.8% or more.

35 http://www.uis.unesco.org/36 http://www.ifc.org/ifcext/bsn.nsf/Content/Programs_Kenya-MSME37 http://www.msmekenya.org/index.htm38 http://www.iiz-dvv.de/englisch/Publikationen/Ewb_ausgaben/57_2001/eng_mutuku.htm39 http://www.viewswire.com/


8.1 Sub conclusion Lot of growth markets, most not ideal for SME development. Agriculture growth is too much related to the climate, especially droughts.

9. ConclusionOpportunities Threats

1 Kenya has a big banking industry. Credit access seems to be poor for SMEs,

especially in rural areas. Kenya´s economy is relatively big in the

region.

Banking regulation is lacking behind. Economy is not growing spectacular relative

to neighbours

2 SMEs, who can easily export to Uganda and Tanzania, thanks to EAC.

SME sector important for economic growth and employment.

Lots of (international) organizations active in SME development.

Agriculture is most important sector.

Informal sector is huge. Growth of informal micro-enterprises to

SMEs is hard, due to regulations.

3 Agriculture suffers badly from droughts.4 Good trade relation between Netherlands

and Kenya. Tribal conflicts may trouble agricultural SME

projects. Current developments may affect the

bilateral relation negatively.5 Fighting corruption is a policy issue.

SME development is encouraged in government policy.

Kenya is still one of the most corrupt nations in the world.

Quite a lot of government institutions are involved in setting up an SME.

Low effectiveness of corruption fighting.6 Starting up an SME in is more efficient in

terms of cost and time, compared to its region.

Workforce in Kenya is flexible in the legal context.

Start-ups involve more procedures, compared to region.

Employee protection is rather low.

7 Services, agriculture and manufacturing sector provide most paid employment.

Unemployment is very high. Literacy is rather high, relative to region. Several international organizations are

determined to improve entrepreneurship education.

Education level lacks behind, relative to region.

Entrepreneurship is poorly educated.

8 Numerous growth markets. Agricultural growth relies on the climate, especially droughts.


9.1 Critical Success FactorsOnce again we need to conclude that the most critical factor to success is present: there is a demand for SME financing and developments. Given the large number of organizations active in this field it should not be a problem to find a local partner. Due to the corrupt nature of the government, we advise to research links to the government before selecting the partner. The Dutch background of ‘Woord en Daad’ can be seen as an advantage, as the Netherlands is a serious trading partner of Kenya. Moreover, the EAC provides a significant domestic market. Agriculture, an area in which ‘Woord en Daad’ has enough expertise, is an important SME area. Important success factor in Kenya is the relative ease of setting up a business and the hiring and firing of workforce, compared to neighboring countries. This may be a competitive advantage in setting up an SME, for which there are many growth markets to choose.

9.2 Recommendations Keep track of latest developments in bilateral relation Netherlands and Kenya. Monitor developments of KACC. Study corruption aspects of SME development projects carefully, try to minimize

government intervention. This may be hard given the number of procedures. K-MAP and K-REP may be interesting partners (see chapter 2). The latter has Dutch

roots. Study government regulations / policy on SME development. Special attention should be

paid to possibilities of informal companies to continue as SME, since changes in these regulations may occur thanks to lobbying efforts of for instance CISBE.

Study tribal relations and conflicts that are present in possible development regions. Study impacts of droughts on possible SME projects. SMEs could be helped in obtaining access to afordable credit if ´Woord en Daad´could

supplement guarantees to banks.

key success factors and analysis of sme development: kenya

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