P.Sadaka

With a background in Security Services together with a solid academic history, P.Sadaka is ideally placed to lead the Company. His strong focus on getting the job done and looking after the customers is the driving force behind the whole team. His experience spans both Bio metric Access Control and Supply Chain activities with a strong concentration on safety aspects. Having a strong desire to develop the best team and be the employer and provider of choice to our customers is P.Sadaka's philosophy.

FACTORS AFFECTING GROWTH OF SMALL SCALE ENTERPRISES IN KENYA: A SURVEY OF SELECTED ENTERPRISES AT ONGATA RONGAI

FACTORS AFFECTING GROWTH OF SMALL SCALE ENTERPRISES IN KENYA: A SURVEY OF SELECTED ENTERPRISES AT ONGATA RONGAI'

BY SADAKA M PETER'

A RESEARCH PROPOSAL SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF DIPLOMA IN MANAGEMENT (BUSINESS MANAGEMENT OPTION) OF THE KENYA INSTITUTE OF MANAGEMENT

MAY 2011

DECLARATION

Declaration by the Student

This research study is my original work and has not been presented to any other examination body. No part of this research should be reproduced without my consent or that of The Kenya Institute of Management.

Name: Sadaka M Peter Sign: ......................................... Date: .........................

Declaration by the Supervisor

This research has been submitted for defense with my approval as the Kenya institute of management supervisor.

Name: Daniel Makori Sign: ........................................ Date: ..........................

For and on Behalf of the Kenya Institute of Management

Name: ......................................... Sign: .......................................... Date: ............................ Branch Manager Nairobi

ACKNOWLEDGEMENT

My unqualified gratitude goes to the Almighty God, the merciful, and the provider who lavishly gave me the endurance, resilience, foresight, and thoughtfulness to undertake this project and complete it to the satisfaction of The Kenya Institute of Management. I wish to specially thank my supervisor Mr. Daniel Mogaka Makori for his contribution and inputs which made the work a reality. I wish also to acknowledge the motivation and the contribution I got from Ushindi Stephen and the family members who inspired me to vigorously pursue the execution of this research with my utmost zeal. I wish to acknowledge the contribution of my girl friend and colleagues who gave me total support and encouragement towards my pursuit to obtain a Diploma in Business Management. Lastly I wish to acknowledge all those who supported and encouraged me to come this far.

ABSTRACT

The main aim of this research was to establish the vibrancy for Kenyan small scale enterprise SSEs so that they can play the expected vital role as an engine of growth and development efforts. The specific objectives of the study were: To determine the effect of managerial skills, finance, government policies and technology on the growth of small scale enterprises. The ultimate beneficiaries of the research includes; the government, entrepreneurs and the future researchers among others.

A review of theoretical literature was conducted. It gave more information about factors affecting the growth of small scale enterprises and the research questions. The researcher employed a descriptive research design in collecting the data from the respondents. The researcher used stratified sampling technique to select a sample that represented the entire population of 120 enterprises from which a sample of 50 was used. Stratified was used because it gave all the elements in the population an equal chance. A carefully crafted questionnaire was constructed and piloted in order to detect any ambiguities. The responses to the questionnaire were complimented with personal interviews.

LIST OF ABBREVIATIONS/ ACRONYMS

-CBK -Central Bank of Kenya

-GDP -Gross Domestic Product

-LCDs -Less Developed Countries

-MDGs -Millennium Development Goals

-SSEs -Small Scale Enterprises

-USAID -United States Agency for international Development

OPERATIONAL DEFINITIONS OF TERMS

-Annual Turnover It refers to the total revenue earned the whole year.

-An Entrepreneur It refers to a person or individual who organizes and manages a business crafts systems in an organization for economic development.

-Collateral This term refers to the security for getting a loan.

-Copious A term that refers too many.

-Conception Framework Indicates the relationship between the independent variable and dependent variable.

-Finance It refers to any money that is used to boost the operation of a business.

-Investment Refers to savings and personal resources.

-Management Refers to the social process of identifying and effectively utilizing organizations resources.

-Per Capita Income It is the average income per person in a given country.

-Policy May be defined as a procedure to an action that assumes consistency in way of doing things.

-Technology Can be defined as the usage and knowledge of tool, techniques

CHAPTER ONE INTRODUCTION OF THE STUDY

1.1 Introduction

The small scale enterprises (SSEs) play a key role in the Kenyan economy. According to an economic survey (2006), the sector contributes over 50 percent of new jobs but the sector has not performed creditably well and hence not played the expected vital and vibrant role in the economic growth and development of Kenya.

1.2 Background of the Study

According to Pitt (1995).The small scale enterprises is a notion generated and put together for the purpose of starting and running a business for profit maximization thus contributing largely to economic growth and development. Due to challenges facing these innovative conceptions, SSEs therefore require more than what is made available in terms of resources allotment, attention, among others. Because of this, the creativity of new ideas decline thus not allowing the acquisition of relevant skills that gears the sub-sector towards the success of the business for economic development. The business can only enjoy creativeness and innovations through financial stability.

SSEs have been fully recognized by governments and development professionals as the main engine of economic growth and a major aspect in upholding private sector development and joint venture. The development of the SSE sector therefore represents an essential element in the growth strategy of most economies in the world and holds particular significance in the case of Kenya. SSEs not only contribute significantly to improved living standards, employment generation and poverty reduction but they also bring about substantial domestic or local capital formation and achieve high levels of productivity and capability. From a planning standpoint, SSEs are increasingly recognized as the principal means for achieving equitable and sustainable industrial diversification, growth and dispersal. In most countries, including the developed countries like Japan, USA and UKSSEs account for well over half of the total share of employment, sales, value added and hence contribution to GDP (Reynolds, 1993).

Small scale enterprises may fall under entrepreneurship, which is an economic phenomenon that greatly gained attractiveness in the recent past. According to the KASNEB Journal (2009), the term entrepreneurship refers to the practice of identifying, mobilizing, utilizing and exploiting ideas, concepts, opportunities and resource in order to generate an occupation, an income, attain self sufficiency or fulfillment as well as achieve the set objectives or goals. Entrepreneurship has existed since time in memorial and has played a key role in providing employment opportunities to the Kenyan people.

SSEs have been concentrating in retailing services industries hence providing the majority jobs in various sectors in the country i.e. agricultural, wholesale, and building and construction, transport, restaurants among others. Individuals’ intending to establish their own business has been much attracted to venture into SSE sub-sector because it requires limited capital to start. The population growth rate in the country has been on the rise, and this has led to unemployment and underemployment due to lack of proper planning this has also resulted to crop of small business units that serve as income generating to meet the various needs of the people. The Kenya Government is yet to realize its promise of providing more than 500,000 job opportunities per year since 2002.In order to curb the deficit in employment, the vision need to be achieved. When it’s not realized the country is still going to experience the element of unemployment and the emergence of unashamed SSEs for the sake of survival. However this enterprise s provides a chance to individuals to realize their dreams, ownership job security and financial liberty.

According to the ILO/JASPA “African employment report” (ILO/JASPA, 1998) The sector makes a significant contribution to the gross domestic product (GDP).Liberia (34.6%), Nigeria (24.5%), Kenya (19.5%) and Benin (17.7%).In Kenya the sector is expected to play a key role in employment creation, employment projection for 2000 indicated that 75% of urban jobs are to be from this sub-sector along with 50% of rural employment. (ILO, 1989).The sector currently employees (40-60%) of the urban labor force and contributes to a total urban incomes. However, it is generally recognized that SSEs face unique problems which affect their growth and profitability hence diminishing their ability to contribute effectively to sustainable development of the economy. Many problems cited have implication for technology, lack of access to credit facilities inadequate managerial and technical skills low level of education poor market information, inhibitive regulatory environment (Harper,1974, ILO1989, House et al,1991).

Until the early 1960s many economists viewed the continued of small scale business in less developed countries as justified by the scarcity of capital and management experience. It was often argued that with economic growth the small traditional business would in one sector after the other be superseded by modern form of large scale production in order to ensure an orderly transition. Small industries were seen to deserve more attention and support but mainly in sectors where modern techniques could be applied (Pitt, 1995).

According to the researcher problems and challenges facing SSEs contend with, are enormous, no doubts but it are curious to know the some SSEs are able to overcome them. This gives hope and provide a basis for optimism that there is a way out. There must be some survival strategies which are not known to many SSEs promoters. It is against this background that the researcher intends to explore and unravel some of the key business survival strategies which have worked for a few thriving SSEs. The benefit of this could be tremendous in that other SSEs facing threats of extermination as well as new and proposed new once could also borrow a leaf from them. Many other countries have been able to energies and transform their SSEs sub-sector to such a vibrant one that they have been able to reduce to the barest minimum their unemployment and poverty levels because of the immense contribution of the sub-sector to their economic growth and development.

SSEs growth is often closely associated with the firms overall success and survival. Johansson, 1993; Phillips and Kirchhoff (1989) say that growth has been used as a simple measure of success in business (Storey, 1994). Also, as Brush and Vanderwerf (1992) suggest, growth is the most appropriate indicator of the performance for surviving small firms. Moreover, growth is an important precondition for the achievement of other financial goals of business (de Geus, 1997; Storey, 1994; Reynolds, 1993; Day, 1992, Phillips and Kirchhoff, 1989). From the point of view of a SSE, growth is usually a critical prerequisite for its prolonged existence (Storey, 1994). Phillips and Kirchhoff (1989) found that young firms that grow have twice the probability of survival as young non-growing firms. It has been also found that strong growth may reduce the firm’s profitability temporarily, but increase it in the long run (McDougall et al., 1994, MacMillan and Day, 1987). It is expected that the result of this will go a long way in ensuring a turnaround of Kenya’s SSE sub sector. The research would come up with a set of recommendations for various stake holders for implementation with the concerted efforts of all interested parties it is hope that the fortunes of SSEs in Kenya would dramatically improve.

1.2.1 Profile Business of Ongata Rongai

Ongata Rongai is a settlement in Kenya's Province. It is a fast developing mini-city in the outskirts of Nairobi with an estimated population of 200,000+. It is situated 17 km south of Nairobi the capital city of Kenya. Rongai began in the late 1950's as a stone mining township in present day Kware (quarry) area of Rongai and then spread to neighboring areas whereby rapid development has been observed since the early 1990's. It can be classified as a city since its population consists of the low, middle and high classes where the middle class is dominant. It basically consists of four areas i.e. Rongai shopping centre a commercial area to the north, Nkoroi an upper class area to the south, Kandisi a semi-rural area to the east and kware a slum to the west.

The core of Rongai situated right at its centre lies along Magadi road and is unfortunately unplanned having a mixed population except the upper class. Rongai's population is relatively quite affluent by all standards. The area has huge economic potential for example it hosts Tusky's supermarket which is the most profitable Tusky's supermarket chain in Kenya currently. Several banks are in the area including; Co-operative bank, National bank I&M bank, Equity bank, Barclays bank Kenya Commercial bank among other small micro finance institutions. Its micro-economic potential has been stretched to its limits but its macro-economic potential is largely un-tapped. Rongai is quite noticeable for its serious lack of infrastructure, lighting and social amenities compared to the population it holds; as a matter of fact it is one of the few fast growing urban centers in the world without a municipal authority hence its development tends to be haphazard and hence disorderly. It is also notorious for its lack of municipal control since practices such as animal keeping which are not suitable for urban areas are left unchecked; donkeys for example are a constant menace here. Mounds of garbage have become quite common and unplanned informal businesses are mushrooming at an alarming rate.

Traffic jams in Rongai are quite sickening and are caused by lack of a road network such that only one tarmac ked standard road serves the entire population of Rongai. Furthermore existing roads are too narrow to allow any form of traffic to flow and they are also untracked (Retrieved from "http://en.wikipedia.org/wiki/Ongata_Rongai").

1.3 Statement of Problem

The SSE in Kenya has not performed creditably well and hence has not played expected vital and vibrant role in the economic growth and development of Kenya. This situation has been of great concern to the government, citizenry, operator’s practitioners, and the organized private sector groups’ year in year out. The government through its budget allocations, policies and pronouncements have signified interest and acknowledgement of the crucial role of the SSE, sub-sectors of the economy and hence made policies for energizing the same. There also have been fiscal incentives, grants, bilateral and multilateral agencies support and aids as well as specialized institutions all geared towards making SSE sub-sectors vibrant. This sub-sectors needs to be approached and given the seriousness it deserves because it is part and parcel of employment and a great contributor to the economic vibrancy.

Despite the efforts by various stakeholders, the sub-sector still faces challenges because there are no proper policies in place and documented information for those who want to venture into it or find more about it. Perhaps this research seeks to add and enrich the available data and information by investigating the factors leading to growth of small scale enterprise industry. Without proper measure in place realization of the Millennium Development Goals (MDGs) by 2015 may indeed be a mirage unless there is a turnaround of our SSEs fortunes sooner than later. The time is now to do something surgical to the situation of our SSEs given the aggravating level of poverty in Kenya and the need to meet up with the MDGs by 2015 and vision 2030.

1.4 Objectives of the Study

1.4.1 General Objective

The main objective of carrying out this research was to establish factors affecting growth of small scale enterprises in Kenya with specific reference to selected enterprises at Ongata Rongai.

1.4.2 Specific Objectives

The objectives of the study are:- i. To determine the effect of managerial skills on the growth of small scale enterprises in Kenya.

ii. To examine the effect of finance on growth of small scale enterprises in Kenya.

iii. To assess the effect of technology on the growth of small scale enterprises in Kenya.

iv. To establish how government policies affect the growth of small scale enterprises in Kenya.

1.5 Research Questions

The main interest of this research was to answer revolve around finding solutions to the problems militating against the SSEs in Kenya so that they can improve and stabilize their performance and hence fulfill their expected roles in economic development of Kenya. It sought to solve the following questions;

i. To what extent do managerial skills affect the growth of small scale enterprise in Kenya?

ii. How does finance affect the growth of small scale enterprise in Kenya?

iii. In what way does the technology affect the growth of small scale enterprise in Kenya?

iv. What is the effect of government policies on the growth of small scale enterprises in Kenya?

1.6 Significance of the Study

1.6.1 Entrepreneurs

This research will provide better understanding of entrepreneurship as an important movement not only for prosperity of successful entrepreneurs but also in creation of economic development for the country through the following; Enlightening potential entrant on what is expected of them before starting the business. Government policy on SSE can be improved, being used as a basis for research on SSEs by interested people and organizations, giving present managers knowledge and insights on barriers to successful management of SSEs, and it will also contribute towards evolution and formulation of proper government policies in the sub-sector of the economy.

1.6.2 Government

The research will be of significance to the government since it tries to explain the role SSEs towards the realization of MDGs by 2015 and vision 2030 through growth and development. This will enable the government to come up with better strategies to facilitate the growth of SSEs o the other hand I will also be of significance to future researchers since it acts as a bench mark to the most critical factors that affect the growth of SSES hence the researcher will find the report at great help when covering other areas, religions etc that were part this study.

1.7 Limitations of the Study

Certain limitations were encountered in the course of this study. Key among these includes;

1.7.1 Data availability

One of the greatest challenges the researchers encountered in this study relate to access and collection of data due to extreme data gaps and scarcity. This compelled the researcher to limit the study to SSEs thus excluding medium enterprises.

1.7.2 Co-operation

The researcher was also limited by reluctance of some of respondent to complete questionnaires promptly and those who even failed them at all. This thus limited the number of respondent involved in the study. However, the researcher made efforts to assure the respondents by explaining the potential benefits of the study to them.

1.7.3 Respondents

Some respondents were not readily available when the researchers went to collect the research instruments. This meant that the researchers had to go time and time again hence this delayed the conclusion of the study in time.

1.8 Scope of the Study

This research was meant to assess the factors affecting the growth of small scale enterprises in Kenya. Although there are various SSEs in Kenya the researcher only concentrated to Ongata Rongai due to lack of sufficient funds and time to carry out the study. However, it is assumed this will give a reflection of what happening to Kenyan small scale enterprises. The study was completed within a period of three months from March to June.

CHAPTER TWO LITERATURE REVIEW

2.1 Introduction

This chapter of research is devoted to addressing the factors affecting the growth of small scale enterprises in Kenya. The main aim of literature review was to give the researcher the background information about the topic under investigation. Past studies on this area were reviewed in order to provide an insight on the topic. Copious literature exists on SSEs written by various authors and in different languages and for various purposes. This fact underscores the essence, importance, and relevance of this sub-sector in the development of any given economy. The experience of developed economies in relations to the roles played by SSEs buttresses the fact that the relevance of SSEs cannot be overemphasized especially among the less developed countries (LDCs).

In order to highlight the significance of SSEs in relation to the growth and development of a given economy SSEs have been variously referred to as the “engine of growth” This stems from the fact that almost all countries that have focused on SSEs and ensures its vibrancy have ended up succeeding in the significant reduction and its attendants enhancement in the quality and standard of living, reduction in crime rate, increase in per capital income as well as rapid growth in GDP among others.

2.2 	Review of Theoretical Literature 
                                                                                                                                                                        

The literature has shown that SSEs growth is often closely associated with the firms overall success and survival (Johansson, 1993; Phillips and Kirchhoff, 1989).Says that growth has been used as a simple measure of success in business (Storey, 1994). Also, as Brush and Vanderwerf (1992) suggest, growth is the most appropriate indicator of the performance for surviving of small firms. Moreover, growth is an important prerequisite for the achievement of other financial goals of business (de Geus, 1997; Storey, 1994; Reynolds, 1993; Day, 1992, Phillips and Kirchhoff, 1989). However it is generally recognized that SSEs face unique problems which affect their growth and profitability hence diminishing their ability to contribute effectively towards sustainable and a vibrant economy. Many problems cited have implication for technology, lack of access to credit facilities inadequate managerial and technical skills low level of education poor market information, inhibitive regulatory environment (Harper, 1974:ILO1989, House et al, 1991). Until the early 1960s many economists viewed the continued of small scale business in less developed countries as justified by the scarcity of capital and management experience. It was often argued that with economic growth, the small traditional business would in one sector after the other be superseded by current form of large scale production in order to ensure an orderly changeover, Small industries were seen to deserve more attention and support but mainly in sectors where modern techniques could be applied (Pitt, 1995).

2.2.1 Managerial Skills

Management refers to the social process of identifying and effectively utilizing organizations recourse for example human capital among others to achieve the stated goals. Many small scale enterprise (SSEs) owners or managers lack managerial training and experience. The typical owner or managers develop their own approaches to management through a process of trial and error. As a result their management style is likely to be more intuitive than analytical, more concerned with day-to-day operations than long-term issues and opportunistic than strategic in its concept, (Hill 1987). Although this attitude is the key strength at the start up of the enterprise because it provides the creativity needed, it may present problems when complex decisions have to be made. A consequence of poor managerial ability is that small scale enterprises owners are not well prepared to face changes in technology, majority of those who run SSEs are ordinary lot whose educational background is lacking. Hence they may not be well equipped to carry out managerial routines for their enterprise (McGrath, 2002).

An entrepreneur is a person or individual who organizes and manages a business undertaking and assumes a risk for the sake of profit maximization. Running of an enterprise needs some special skills to ensure smooth operation in the organization. Few people have all it takes to carry out a business successful. They bridge their limitation areas by hiring of staff or consultants, acquiring knowledge through education or training. For one to start a business he or she needs to have a broad range of managerial skills to succeed in a competitive market environment. They include personal attributes, business skills and management capabilities. Most of the owners or managers lack the required managerial skills hence it becomes difficult to manage the business effectively (Mc Cormirck, 1996).

According to Elmore & Plowiman in Saleemi (1997) view management as a technique by which the purpose and objectives of a particular human group are determined, clarified and affected, however sir Charles on the other hand sees management as a process of getting things done through agency, community with a view to fulfill the purpose for which it exists. He emphasized the accomplishment of the tasks through the efforts of the people, this implies that it is the duty of the manager to guide and coordinate the efforts of towards the realization of the goals. This can only be achieved when the owners or managers have adequate knowledge and skills about management.

According to Orwa (1995) people venture into business without proper planning and sometimes for wrong motives i.e. lure for big money. As much as they anticipate making money, it is good to have objectives in place. This will help the organization to realize its purpose and this will act as a guide line of the firm’s relations to its workers, associates, clients, government, lenders etc. He also added that to be effective the owner or manager needs to have a good understanding of different style of leadership.

2.2.2 Finance

Finance is any money that is used to boost the operation of a business in any sector. According to the Kim Newsletter (November, 2009) despite efforts of various financial institution to bridge the financial gaps among small scale enterprises (SSEs) the sub-sector is still faced with challenges. Some of this include limited capacity in market availability as well as entrepreneurs lack of knowledge on how to run a successful business while maintain low operational cost. In addition it states that most businesses are still one man show and lack of necessary support functions that provide business with the operational depth to grow. Some of this support function includes accounting legal affairs, marketing and IT. Other challenges include lack of clear government policy or legal framework on this sector.

Capital shortage is a major limitation to any business. People who venture into SSE do not have sufficient capital or funds to boost their business. However, lack of access to credit facilities is almost universally indicated as the key problem to SSEs. This affects the technology choice by limiting the number of alternatives that can be considered. Many SSEs may use inappropriate technology because it is the only one they can afford. In some cases even where credit is available the owner or manager may lack freedom of choice because the lending conditions may force the purchase of heavy, immovable equipments that can serve as collateral for the loan. Credits constrains operates in variety of ways in Kenya where undeveloped capital market forces entrepreneurs to rely on self financing or borrowing from friends and relatives. This has caused them to rely on high cost short term finance (Wanjohi & Mugure, 2008).

Access to finance can be a restriction for other businesses though not by choice. The high level of uncertainty typically associated with small and to a lesser extent medium enterprises means it is difficult for lenders to assess the risk of an investment. In combination with the characteristically lower levels of collateral held by these businesses, having little to offer but their hopes and dreams, banks and other parties may be reluctant to lend (Harrison et al., 2004; Rutherford et al., 2001). Thus, for many small enterprises, lack of available cash flow or external finance may result in the firm being unable to adequately fund its operations and pursue market opportunities. This highly affects the growth (Locke, 2004; Carter & Van Auken, 2005).

According to Moore et al (2002) Managers must have accurate, meaningful, and timely information if they are to make good decisions, particularly through, financial information about a firm’s operations. An inadequate accounting system is primary factor in small enterprises failure. Owners or managers of SSEs sometimes believe that they have less need for financial information because of their personal involvement in day-to-day operations, but they are only deceiving themselves. Rarely are SSE owners or manager expert accountants nor should they expect to be or even want to be. But every one of them should know enough about the accounting process including, developing and interpreting financial statements, to recognize which accounting method are the best for their organizations. The importance of evaluating one’s business performance is often underestimated by small enterprise owners. In many cases it is because the owner may not have adequate knowledge base necessary to asses a financial statement. White (1986) points out that many entrepreneurs would prefer to avoid the subject financial statement for instance when the topic is introduced they respond, “I will have an accountant, I don’t need to understand that aspect of business“. This is unfortunate attitude, no matter how the small the business proper financial management is critical to its success. It is essential that the owner or the manager have full understanding of the financial aspect to plan the future of the business. Many SSEs fail because the owner or manager does not have sufficient information about this. This has limited many SSEs from accessing these vital services.

Microcredit operations offer loans that carry higher interest rates than commercial banks lending to prime customers. This reflects the higher costs of administering a portfolio made up of many small loans of small amounts. In addition microcredit customers often pay a number of hidden transactions costs for example attending a series of regular meetings or group training sessions that are conditions for accessing credit often requires borrowers to close their enterprises during these times, forging income and often permanently losing customers to competitors. When documentation requirement are excessive additional transaction costs are imposed on borrowers especially those who do not understand the forms and cannot read the fine prints of a loan contract. Borrowers take it upon themselves to consult local literate scribe to translate these documents Such hidden transactions costs as well as fee paid to local officials to sign off on loan applications, can be higher than the interest paid on the loan.(Murdoch & Rutherford ,2003, Robinson 2001, and Sylvester & Basy 2004,) This may limit SSEs from accessing this vital products. 2.2.3 Technology

Technology choice has important implication for growth and productivity in industry. The use of technology is always tied to an objective. Because of various types of technology can be used to achieve an organization goal or objective, the issue of choice arises. The concept of technology choice assumes access to information on alternative technologies and the ability to evaluate these effectively. According to Moustafa (1990), asserted that effective choice is based on pre-selected criteria for a technology’s meeting specified. Further, it also depends on the ability to identify and recognize opportunities in different technologies. The expected outcome is that the firm will select the most suitable or “appropriate” technology (AT) in its circumstances.

The concept of appropriate technology (AP) has been a subject of debate for many years. Stewart (1987), contrasted two general views, first welfare economic defines AT as a set of techniques for making optimum use of available resources in a given environment. Secondly, social scientists and those working in AT institutions associate, AT with a specific set of characteristics. The characteristic defining AT normally include “more labor using, less capital, less skill using, making more use of local material and recourses, and smaller in scale. It sometimes emphases that AT should not affect the environment negatively and that it should fit in with the social economic structures of the community. The suggested characteristics are numerous, which implies that technology can be appropriate in some ways and inappropriate in others. This becomes a great challenge to SSE in choosing. The literature has also indicated that SSEs face unique constraints that hinder effective choice of technology. Many SSE owners or managers’ lack managerial training and experience. The typical owner or manager of small business develops their own approach to management, through a process of trial and error. As a result their management is likely to be more intuitive than analytical more concerned with day to day activities the long term issues and more opportunistic than strategic in its concept (Hill, 1987). This attitude is a key strength at start up stage of an enterprise because it provides the creativity needed, but it may present problems when complex decisions have to be made .A consequence of poor managerial ability is that SSEs owners are ill prepared to face changes in the business environment and to plan appropriate changes in technology.

According to Harper (1987), technology used by SSEs in developing countries may be inappropriate because their choice is based on insufficient information and ineffective evaluation. Neck and Nelson (1987) suggested that ignorance is key to constraints affecting the choice of technology by SSEs Further; level of education is relevant as it may determine the entrepreneurs’ access to information. Generally, the ability to read and write exposes one to brooder world, and training in the sciences enhances one’s ability to understand, respond use and control technologies (Anderson, 1985).

According to the government of Kenya (1989), The government policy on the use of technology in production of goods and services is to encourage, “the application of technology that minimize wastes and exhibits recycling possibilities, the use of local and renewable material, the use of local inventions”. Although the policy objective appears explicit, it is not clear which policy measures or government interventions have intended to affect the process of technology choice by SSEs.

2.4.4 Government Policies

According to Groebner (2008) an enabling environment is an opportunity that should be utilized by all business operators in Kenya. With changing governments, which come with promises of a better tomorrow and definition of new business policies, reconstruction of the economy, improvement of the infrastructures and security, small business are expected to do well. Sometimes changes in political environment, often lead to changes in legal environment and the manner in which current laws are enforced. It is hard for business operators to know all the relevant laws but it is of essence that they do so because the legal environment sets basics rules on how business should operate. The legal environment may severely limit some choices when the law changes.

According to McGrath (2002), the legal and economic framework in which enterprises operate is crucial to their performance. In the literature on enterprise development it has been argued that the legal framework of many countries serve as a barrier against enterprise. In many cases across Africa, the reduction of open hostility has been more important for small scale enterprises than any positive program of engagement from the state.

McCarthy (1994) says that business managers are both subject to criminal laws and civil laws. Penalties for breaking civil laws are limited to blocking or forcing certain action with fines. According to Washington Gikunju Business Daily (2008), government rules and regulation force harsh economic disincentives on public products and service consumption through high tax, court fines, and jail, this forces a portion of the population to trade in down from legitimate products to cheaper alternatives through smuggling and other forms of tax evasion. This highly affects their growth. Armstrong (1997) well conceived regulations can encourage competition and ensure fair market for goods and services. Thus, the government should develop public policies to guide SSE, set up laws and regulations that limit them from exploiting the society. When the government ensures that all the regulations and policies are in operation SSE will engage in useful activities for example product safety, pricing, environmental protection. Hence this will ensure that they are not found on the wrong hand of the laws.

According to Henk et al (1991), national policy and regulatory environment has an important impact on technology decisions at the enterprise level. The structural adjustment program (SAP) currently implemented in many African countries are aimed at removing heavy policy distortion, which have been viewed as detrimental to the growth of private sector. However, much of these policies may in principle favor SSE growth in the long run, concern has been shown about the ability of SSE sub-sector to increase production and create more jobs.

On the other hand, USAID (1991) argues that SAPs tend to severely affect vulnerable groups in the short run and have been associated with the worsening living conditions around African countries. Furthermore, serve cutback in government services such as health and education, force many SSE owners to draw more money from their business to meet these needs, thus hindering investment for business expansion or growth. In addition, the resulting reduction in employment and real wages leave many potential customers without the ability to buy thus reducing demand. The Kenyan government should put mechanisms in place to save its SSEs, because they highly contribute to the vibrancy of the economy. The crucial focus of government policy should be an enabling environment at the enterprise level. There is need to go beyond statement of policy objectives and to take specific and consistent measures to ensure that the policy objectives will be achieved. There is need to address the overall policy framework to ensure that the policy instrument are consistence with the key objectives. In some cases there appears to be an obvious contradiction between policy and implementation.

2.3 Review of Critical Review

According to king and McGrath (2002), the consequences of poor managerial ability is that small scale enterprise (SSEs) owners are not well prepared to face changes that occurs in technology. The duo left out other factors for example, finance, and government policy among others, and only touched on how managerial ability affects technology. The issue of sufficient finance remains a key ingredient in boosting the overall growth of SSEs but not much has been done and documented about it, thus future researchers should channel more efforts on this. Orwa (1995) argues that people go into business without proper training and sometimes for wrong reasons for example lure huge amounts of money. The researcher views that, if a person go into the business for seek of getting some money then he or she could have achieved his or her objective. Not all people go to business for the growth purposes. Mustafa (1990) assorted that effective choice of technology is based on selected criteria for a technology meeting specified needs however, the question of how remains unanswered. He fails to explain clear procedures through which the management can take to improve their ability to define how appropriate technology can be put in place.

Harper (1989) clearly outlines that technologies used by SSEs in developing countries may be inappropriate because their choice is based on insufficient information and ineffective evaluation. Nick & Nelson (1987), cites that ignorance is a key constants affecting the choice of technology by this enterprises. However they fail to give an alternative way on what should be in such a situation. Armstrong (1997) noted that well conceived regulation can encourage competition and ensure fair market. He further added that the government should develop public policies to guide this sub-sector, set laws and regulations that limit them from exploiting the society. Competition is necessary in business but sometimes it may be unfair. It is of importance that all the stakeholders are given full information about what is expected of them, than coming up with policies that cannot be implemented.

2.4 Summary

This literature review has indicated that small scale enterprises (SSEs) play a critical role in economic vibrancy but they still face various challenges for example lack of sufficient information, poor infrastructure among others. The review has also shown that these challenges have direct implication on their growth for economic development. It has further shown that managerial skill lack of funds choice of technology and government policies are key aspects that influence growth of SSE. Therefore all the entrepreneurs must have full information about these factors. However, the researcher has noted that there is very little literature available on Kenya’s SSE to evaluate and review the influence on economic vibrancy. It is because of this very reason that the research seeks to bridge the information gap that exist in regard to this topic.

2.5 Conceptual Framework

The conception framework indicates the relationship between the independent variable and dependent variables that represent the factors affecting the growth of small scale enterprise in Kenya.

Figure 2.1 Conceptual Framework Independent Variables Dependent Variable

Source (Author, 2011)

2.5.1 Managerial Skills

Managerial skills and knowhow are relevant for the operations and well being of an enterprise. In this context small scale enterprise, just like any other entity, lack of training and adequate skills on efficient managerial principle affected by the business management effectively.

2.5.2 Finance

Finance is any amount that is used to boost the running of any business in any sectors. Some of individuals who engage in small scale enterprise do not have sufficient investment and working capital fund is caused by the stringent collateral requirements low liquidity level of banks and the high cost of lending to small enterprises thus they do not have a chance to access this vital service to enhance growth.

2.5.3 Technology

Technology may be defined as the usage and knowledge of tool, techniques crafts systems in an organization for economic development. Technology choice has important implication for growth and productivity in industries. In many organizations the use of computers is most current technology applied.

2.5.4 Government Policies

A policy may be defined as a procedure to action that assumes consistency in way of doing things, are rules or regulations that express the limit within which actions should occur. It should be noted that for the smooth running of SSEs, the government regulations and measures should be put in place and adhered to failure to which may result to termination of your business. Through these policies the government ensures that the citizens are not exploited.

CHAPTER THREE RESEARCH DESIGN AND METHODOLOGY

3.1 Introduction

This chapter presents the methodology that was employed by the researcher to carry out the survey. It describes the type and source of data, the target population, sampling method and techniques that was used to select the sample size. Furthermore it describes how data was collected and analyzed.

3.2 Study Design

A descriptive design was employed to collect data from the target population. This design was used because it helped the researcher to obtain information concerning the current status of the phenomena. “Descriptive research portrays an accurate profile of persons, events or situations” (Robson, 2002). A descriptive study tries to discover answers to who, what, where, how much and how many type of questions (Cooper & Schindler, 2003). It also attempts to capture attitude of past behavior. Survey studies asses the characteristics of whole population. In this case information was needed to describe the factors affecting the growth of small scale enterprises.

3.3 Target Population

According to Berg & Crall (1959), a target population as a set of the study of all members of a real hypothetical set of people, events or objects to which a researcher wishes to generate the results. The study targeted 120 small scale enterprises. The target population of the study is presented as below;

Category	Target Population	Percentage
Partnership	40	33
Sole Proprietorship	50	42
Family Owned	20	17
Others	10	8
Total	120	100

Source (Author, 2011)

3.4 Sampling Design and Procedure

According to Kuul (1984), sampling design is a process by a relatively small number of individuals, objects or events are selected and analyzed in order to find out something about the entire population from which it was selected. A sample size is a small proportion of the target population selected in a systematic form. A stratified sampling technique was used to ensure that certain sub-groups in the population are well represented in the sample population to their numbers. The population was divided into homogenous sub-groups known as strata; from each stratum a random sample is selected. Strata samples are then combined to represent the population as shown in table (3.2 sampling design). A stratified random sampling of 60 enterprises was selected based on 50% of the target population as shown in Table 3.2 below.

Table 3.2 Study Sample

Category	Target Population	Sample Size	Percentage
Partnership	40	20	30
Sole Proprietorship	50	25	40
Family Owned	20	10	20
Others	10	5	10
Total	120	60	100

Source (Author, 2011)

3.5 Data Collection Instruments and Procedure

The researcher collected data using non experimental methods i.e. descriptive method and they included questionnaires and personal interview. A questionnaire is a concise pre-planned set of questions designed to yield specific information to meet a particular need for research information. A careful crafted but wide ranging questionnaire aimed at eliciting right responses was constructed and piloted in order to detect any ambiguities or inherent problem. From the comments and remarks from the pilot questionnaire respondents, the entire questionnaire was revamped and improved on. This ensured reliability of the data. To ensure validity of the data expert views from the supervisor were incorporated which aimed at capturing specific information from the respondents. Some questions were open-ended, and a few in a “Yes” or “No” answer format. In order to compliment the responses from the respondents to the questionnaire, the researcher also conducted face-to-face interview with some of them. The interview basically focused on the reasons why the Kenyan SSEs have performed below expectations hence failed to contribute the countries economic growth and development.

3.6 Data Analysis and Presentation

The data collected was analyzed using descriptive statistics. This was represented in percentages, tables, chart and graphs. The data was first edited to get relevant data to address the research questions under the study. The data was presented through report writing, graphs, tables and pie-charts. The data was analyzed both quantitatively and qualitatively.

CHAPTER FOUR DATA ANALYSIS, PRESENTATION AND INTERPRETATION OF FINDINGS

4.1 Introduction

This chapter presents results of the research findings. It presents the findings and gives an analysis of the data collected from various respondents who filled the questionnaires that were distributed. Both qualitative and quantitative analysis was used. Several descriptive analyses were made to achieve the objective of the study which was: to establish and sustain the vibrancy for Kenyan SSEs so that they can play the expected role of growth.

4.2 Presentation of Findings

4.2.1 Response Rate

The response rate was as shown in the table below:-

Table 4.1 Response Rate

Category	Frequency	Percentage
Example	Example	Example
Example	Example	Example

Received & Analyzed 46 77 Received But Rejected 5 8 Not Returned 9 15 Total 60 100 Source: Author (2011)

Figure 4.1 Response Rate

Source: Author (2011)

As it can be observed form Table 4.1 and Figure 4.1 above, the researcher had issued 60 questionnaires. Out of the total 60 questionnaire, 46 respondents answered the questions to the researchers expectations, 5 respondents did not answer the questions to the researchers expectations therefore were rejected and 9 respondents never returned the questionnaire. This translated the response rate of 77%, 8. %, and 15% respectively Therefore, the data analysis is based on 46 respondents, which is represented by 77% response rate. This indicates that a good number responded to the questionnaire.

4.2.2 Nature of Enterprise Table 4.2 Nature of Enterprise Category Frequency Percentage Partnership 14 30 Sole Proprietorship 21 46 Family Owned 6 13 Other 5 11 Total 46 100 Source: Author (2011)

Figure 4.2 Nature of Enterprise

Source: Author (2011)

Table 4.2 and Figure 4.2 above shows nature of enterprises operated by the respondents and as it can be seen observed, 46% of the total respondents engage themselves in sole proprietorship, and 30% are in partnerships. These two types accounted for almost 76% of the 46 participants. The data further indicates that 13% of the respondents engage in family owned businesses, while the remaining 11% engaged in other businesses than the one’s listed. From the study it can be concluded that sole proprietorship dominated the industry.

4.2.3 Kind of Enterprise

Table 4.3 Kind of Enterprise

Category Frequency Percentage Service 10 22 Constriction 12 26 Trading 16 35 Agro-allied 6 13 Others 2 4 Total 46 100 Source: Author (2011)

Figure 4.3 Kind of Enterprise

Source: Author (2011)

Table 4.3 and figure 4.3 above shows the response rate according to kind of enterprises the respondents engaged in. It can be concluded that the respondents were fairly spread across a variety of different kinds of businesses as trading 22% of the respondents were engaged in service, 26% in construction, 35% in trading while 13% and 4% were engaged in agro-allied and others businesses respectively.

4.2.4 Duration Enterprise has been in Operation

Table 4.4 Duration Enterprise has been in Operation

Category Frequency Percentage Less than 6 Months 4 9 6 Months - 1Year 14 30 2 - 5 Years 26 57 6 Years & Above 2 4 Total 46 100 Source: Author (2011)

Figure 4.4 Duration Enterprise has been in Operation

Source: Author (2011)

Table 4.4 and figure 4.4 shows the duration that the enterprises have been in operation. Based on the analysis, 57% of the total respondents indicated that they have been in operation between two to five years, 30% stated that they have been in operation between six months to one year, 9% less than six months, while the remaining 4% stated they have been in existence for less than six years. From the study it can be concluded that industry has less organizations in operation longer than six months.

4.2.5 Number of Meetings Held

Table 4.5 Number of Meetings Held Category Frequency Percentage Very often 2 4 Often 1 2 Sometimes 5 11 Rarely 8 17 Never 30 65 Total 46 100 Source: Author (2011)

Figure 4.5 Number of Meetings Held

Source: Author (2011) Table 4.5 and figure 4.5 above indicate how often the enterprises hold meetings. The research findings show that 65% of the total participants indicated that they never conducted enterprises meetings, 17% rarely conduct, 11% sometimes hold, 4% hold the meetings very often while 2.17% hold the meeting often. From the study it can be noted that majority of the enterprises had never conducted any meetings. 4.2.6 Annual Budget

Table 4.6 Annual Budgets Category Frequency Percentage Yes 14 30 No 32 70 Total 46 100 Source: Author (2011)

Figure 4.6 Annual Budgets

Source: Author (2011) Table 4.6 and figure 4.6 illustrate the rating of annual budget. Majority of the respondents (70%) said that they do not do annual budget while 30% agreed that they do budget every year. From the study it implies that a larger number of the respondents do not do annual budgets in their organizations.

4.2.7 Extent to Which Managerial Skill Affect the Profitability

Table 4.7 Extent to Which Managerial Skills Affect Profitability

Category Frequency Percentage Very High 30 65 Large 8 17 Low Extend 2 4 Very Low 6 13 Total 46 100 Source: Author (2011)

Figure 4.7 Extents to Which Managerial Skills Affect Profitability

Source: Author (2011)

According to the findings of the study as depicted in Table 4.7 and Figure 4.7 above, shows the views of the respondents on the extent to which managerial skills affect the profitability of their businesses. Based on the study 65% indicated that effect was very high, 17% the effect was large, 13% show that the extent was very low while 4% were of the view that the extent was low. This suggested that majority of the respondents agreed that profitability is highly affected.

4.2.8 Borrowing from Commercial Banks Table 4.8 Borrowing from Commercial Banks Category Frequency Percentage Yes 11 24 No 35 76 Total 46 100 Source: Author (2011) Figure 4.8 Borrowing from Commercial Banks

Source: Author (2011) Table 4.8 and figure 4.8 shows the rating of enterprises borrowing of funds from banks. Based on the research findings 76% of the total respondents indicated that they have never applied for a loan from any financial institution while the remaining 24% stated that they have applied for funds. From the study it can be concluded that a bigger number of the respondents to not seek financial support.

4.2.9 Effect of Financing on Growth of Business

Table 4.9 Effect of Financing on Growth of Business Category Frequency Percentage Yes 39 85 No 7 15 Total 46 100 Source: Author (2011)

Figure 4.9 Effect of Financing on Growth of Business

Source: Author (2011) The findings of the study as posed in table 4.9 and figure 4.9 above, shows the views of the respondents on whether financing of activities in the organization is a setback. Based on the study majority of respondents 85% agreed that financing was a big hindrance. On the other hand 15% stated that it was not a big problem. From the above finding it can be concluded that financing is still a big issue.

4.2.10 Source of Finance

Table 4.10 Source of Finance Category Frequency Percentage Personal Savings 25 54 Bank Loan 6 13 Family Funds 9 20 Friends Support 6 13 Total 46 100 Source: Author (2011)

Figure 4.10 Source of Finance

Source: Author (2011) Table 4.10 and Figure 4.10 above show the rating on how the enterprises have been financing their activities. According to the research findings 54% of the total respondents depend on personal savings to finance their businesses, 20% depend on family contributions, while 13% of the respondents depend on friends support and bank loans respectively. From this it can be noted that majority depend on personal savings in ensuring that their businesses are in operation.

4.2.11 Effects of Technology on Growth

Table 4.11 Weather Technology Affect Operations in an Organization Category Frequency Percentage Yes 30 65 No 16 35 Total 46 100 Source: Author (2011)

Figure 4.11 Weather Technology Affect Operations in an Organization

Source: Author (2011)

The results of the study as indicated in Table 4.11 and Figure 4.11 above shows that 65% of the total respondents agreed that technology affected their operations and on the other hand 35% stated that technology did not affect their commerce. From the study it can be concluded that technology is very essential to growth of the enterprises.

4.2.12 Extent to Which Technology Affects Growth

Table 4.12 Extent to Which Technology Affects Operations Category Frequency Percentage High 28 61 Moderate 6 13 Low 2 4 Very Low 10 22 Total 46 100 Source: Author (2011)

Figure 4.12 12 Extents to Which Technology Affects Operations

Source: Author (2011)

Table 4.12 and Figure 4.12 above shows the views of the respondents on the extent to which technology affects operations in the organization and it can be observed that good percentage of 61% of the respondents were of the view that the effect was high, 22% of the respondents indicated that the level of effect was very low, 13% stated that the effect was moderate while the remaining 4% were of the view that the effect as low. From the above analysis it can be concluded that the level of effect of technology on operations is high.

4.2.13 Rating on the Use of Technology by Small Scale Enterprises

Table 4.13 Rating on the Use of Technology by Small Scale Enterprises Category Frequency Percentage High 7 15 Moderate 10 22 Low 25 54 Very low 4 9 Total 46 100 Source: Author (2011) Figure 4.13 Rating on the Use of Technology by Small Scale Enterprises

Source: Author (2011)

Table 4.13 and figure 4.13 above shows the rating on the use of technology in executing of activities. Based on the research findings 54% of the total respondents rated the use of technology as low, 22% rated it as moderate, on the other hand 15% rated it as high while the remaining percentage of 9% rated it as very low. From the study it can be concluded that majority of the respondents were of the view that the use of technology in the selected enterprises is low.

4.2.14 Effect of Government Policies on to the Growth of SSEs

Table 4.14 Effect of Government Policies on to the Growth of SSEs Category Frequency Percentage Yes 38 82.61 No 8 17.39 Total 46 100

Source: Author (2011) Figure 4.14 Effects of Government Policies on to the Growth of SSEs

Source (Author, 2011) Table 4.14 and figure 4.14 above illustrates the rating on whether Government policies are a challenge on growth of SSEs. According to the findings, 83% of the total respondents answered in affirmative while the remaining 17% were on contrary opinion answering by indicating otherwise. From the above analysis a larger number of the respondents were of the view that Government policies have impact on the overall growth of small scale enterprises.

4.2.15 Extent to Which Government Policies Affects Business Growth

Table 4.15 Extent to Which Government Policies Affect Business Growth Category Frequency Percentage High 29 63 Moderate 9 20 Low 4 9 Very low 4 9 Total 40 100 Source (Author, 2011) Figure 4.15 Extents to Which Government Policies Affect Business Growth

Source (Author, 2011) The findings of the study as depicted in Table 4.15 and Figure 4.15 above shows the response of the respondents on the extent to which government policies affect the business. Based on the study findings 63% of the total respondents were of the view that Government policies affect business to a high extent, 20% were of the view that it affects business to a moderate level, 9% were of the opinion that it affects the business to low and very low extent respectively. From the above analysis it can be noted that government policies affect business operation to a high extent. 4.3 Summary of Data Analysis

4.3.1 General Findings

The study focused on the small scale enterprises where a sample of 60 was taken. Out of the 60 questionnaires given out, 77% were received back and analyzed. On other hand, 8% were received but rejected because they were not meeting the researchers’ set standards while 15% of the total questionnaires were not returned. On the basis of nature of enterprise the findings show that majority of the respondents were in sole proprietorship represented by 46%, followed by partnership with 30%. The findings also indicate that 13% of the total respondents engaged in family business and lastly 11% of the respondents were in other types of businesses not categorized. The highest respondents were in trading kind of business at 35%. This indicates that industry has more enterprises participating in trading. The rest were represented as follows; service 22%, construction 27%, agro-allied 13%, and 4% for other kinds of business.

4.3.2 Managerial Skills

Majority of the respondents indicated that managerial skill is a key to growth of any organization as indicated by 65% of the respondents who were of the view that managerial skills affects the growth of an organization to a great extent because it is the backbone of all activities but they lack adequate expertise in executing their duties. This research further revealed that managerial problems that manifested in several ways including lack of capacity, lack of clear vision, lack of basic skills, lack of transparency, lack of adequate control, lack of business plan and business strategy, lack of accountability, lack of proper record keeping, among others represent are the greatest challenge against SSEs in Kenya. The findings also indicate that majority of the respondents (65%) had never conducted a meeting with stakeholder to assess their progress. Some of the reasons to why they did not carry out business meetings include; time, resources, space and others said their businesses were on small scale so their was need among others. A budget is a financial plan on how an individual or an enterprise intends to spend their resources and it normally assists in planning for the future. From the findings, a bulk of the respondents (70%) indicated that do not make a budget for their businesses. The minority who come up with financial plans still faced with two main challenges these are; expenses involved and unpredictable changes in prices of their goods and services. This finding is opposed to the generally perceived idea that access to finance embodies the main setback of SSEs in Kenya.

4.3.3 Finance

According to a majority of the respondents (85%) finance still remains an issue in ensuring that all the activities are in operation. Still majority with approximately 76% of the 46 respondents have fear borrow due to high rates and at times lack of collateral. If the challenge is not addressed they continue depending on personal savings.

4.3.4 Technology

According to the research findings, a majority of the respondents (65%) indicated that technology affected their operations. Some of the barriers cited by the respondents include modern technology is expensive and only left for large scale enterprises .Maintenance of the machines is an added cost hence it eats in their profits. Those interviewed said that technology exposes their secrets to their competitors and also it exposes their sales hence taxed highly. Technologies play an important role of proving information through use of the internet and also play a critical in marketing. SSEs use social network in marketing their goods and services for example Facebook, Twitter, MySpace and Diaspora among others. On the other hand, also a bulk of the respondents approximately 67% of the total participants indicated that the degree of effect is high however technologies use in Kenyan SSE still remains below average; low 54%, and very low 9% respectively together account for almost sixty three percent (63%) of the 46 respondents.

4.3.5 Government Policies'

Government policies are among the factors affecting growth of small scale enterprises in the Kenyan economy. It is clear from the research analysis; a majority of the participants (85%) indicated that indeed it was a challenge on how they operate their businesses. The respondents attributed that the government was not committed to ensure that there is fair competition in the market, infrastructure that is, roads, electricity tax and high lending rates among others.

CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

The purpose of this study was to establish factors affecting growth of small scale enterprise. Therefore this chapter presents a summary of the findings, conclusions, recommendations and suggestion for further studies.

5.2 Summary of Findings

5.2.1 To what extent do managerial skills affect the growth of small scale enterprises?

Lack of adequate managerial skills affect growth of small scale enterprises to a greater extent; especially in Kenya as Country thus profitability is affected. Participants who said that the effect on profitability was very high, 65% and those to a larger extent were 17%. This two accounted for majority of about 83% of the 46 participants. The remaining together accounted for almost 17% of the 46 respondents. The research found out that managerial skills are very important in organizations and lack of adequate contributes to failure of SSEs. The findings points out that most enterprises do not conduct meetings on there progress. This has largely impacted on their growth. Very few people have accounting skills and also sometimes outsourcing their services may be expensive this limits most SSEs from making financial plans or budget. About 70% of the respondents said that they do not make annual budget due to the above mentioned challenge.

5.2.2 How does finance affect growth of small scale enterprises?

The findings from this research have found out that finance still remains a huge setback facilitation of enterprises to expansion. Majority of the respondents with roughly 85% said that they still find it difficult to finance their projects even though some of the participants said they had tried to borrow cash from the financial institutions. Still majority with approximately 76% of the 46 respondents have fear borrow due to high rates and at times lack of collateral. If the challenge is not addressed they continue depending on personal savings.

5.2.3 In what way does technology affect the growth enterprises?

The majority of the respondents with roughly 65% of the 46 respondents said that technology affect their operations. From the interviews carried out several views were given on how technology has impacted on the growth. For instance some participants said that lack current information on how to expand their enterprises still remains a big problem, lack of modern processing facilities it reduces efficiency in their operations, modern technologies are expensive and makes the SSEs unable to acquire them since most of them depend on personal finance among others. On the other hand also a bulk of the respondents approximately 67% of the total participants indicated that the degree of effect is high however technologies use in Kenyan SSE still remains below average; low 54%, and very low 9% respectively together account for almost 63% of the total respondents.

5.2.4 What is the effect of government policies on the growth of small scale enterprises?

The findings apparently show that majority of the respondent approximately 83% believe that government policies are good however they impact on their business. On the other hand a majority of respondents with approximately; high extent 63% and 20% for moderate extent respectively together account for roughly 84% of the total contributors. Those interviewed gave several effects they face and some includes; policy inconsistency, smuggling multiple taxes and levies among others.

5.3 Conclusions

Opposite to the generally believed notion, this research found out that access to finance is not the greatest problem facing SSEs in Kenya. The greatest problem affecting SSEs in Kenya is managerial capacity. Access to finance is necessary but not sufficient condition for successful commercial development. If one has the entire money in the world and does not have the capacity to manage that fund and does not have the necessary information as to what he/she should do, the money would go down.

The key problem areas facing SSEs generally in Kenya in include management problems, access to finance, government policy inconsistency and access/choice to modern technology, unfair competition, infrastructure, and business opportunities among others. Most of SSEs in Kenya fail within their first two years of existence. The reasons for failure include the following among others: Many potential entrepreneurs do not have a clear vision of what they intend to do, many of the SSEs are not business specific and hence have no focus and are easily blown away by the wind.

Some enterprises have failed to honor their obligations for example paying back their debt in a reasonable time, poor and low consumer purchasing power, poor linkages among vibrant SSEs, large-scale enterprises and the rest of the domestic sector of the economy generally, policy incentives are tilted in favor of large scale industries, poor access to information and to markets for SSE products and services, poor access to current technology, over-dependence on imported raw materials and industrial inputs, poor implementation or non-existence of either strategic plans or business plans and some tend to copy other successful SSEs without any proper planning of their own. Majority of this problems can be reduces through the below recommendations.

5.4 Recommendations

On the basis of the findings, the following represent key recommendations for making SSEs in Kenya vibrant through the creation of an enabling environment for optimum performance.

5.4.1 Managerial Skills

To ensure that Kenyan economy becomes vibrant business owners or managers need to be trained so that they are well equipped to run spear head their respective enterprises to a higher level. SSEs should instill the habit of training and developing their management and workforce in order to build capacity for meeting the challenges ahead. The government should come up with training centers for training managerial and technical courses for the small enterprises entrepreneurs. Equally, there should be business information centers. This will ensure a continuous flow of information.

5.4.2 Finance

From the research findings two issues come out clearly on how to boost finance in an organization and this include; one it can be boosted through seeking professional advice from financial experts. This will ensure that one invests in a better project in order to maximize profits and also finance can be boosted by securing financial support from bank or individuals who are willing to support you, others includes forming partnerships self financing for example through sale of share. There should also be proper keeping of financial books. Funding or access to money does not stand for the most critical aspect for establishing and running a thriving business enterprise generally and an SSE in particular. Funding remains an essential but not an adequate condition for a viable SSE growth. Since majority of small enterprises lack finance, government should establish friendly small loaning system. This would include low interests rates to ensure the continuity of these businesses. SSEs have the potentiality of transforming the economy of a crippling nation. As such, every effort should be made to boost their growth. SSEs should honour payment obligations to banks, government or other grant/loan agencies for continuous support.

5.4.3 Technology The results also points out that technologies use in SSEs can be improved through the government by providing subsidies on technological services and financial assistance for those who want to acquire modern technology.

5.4.4 Government Policies

Those interviewed were of the view that should implement those policies. In order to ensure vibrancy of this sub-sector of the economy the government should focus on the following it should increase tariffs on import product this will reduce dumping of products, some were of the opinion that they are taxed heavily and sometimes they are not notified promptly. The government should improve the living standards of the Kenyan citizens through education and this will reduce unplanned SSEs.

5.5 Suggestions for further Research

This study concentrated on selected SSEs in Ongata Rongai. Additional studies should be carried out to establish how Kenyan SSEs are fearing own and the challenges they are facing. More emphasis should be put on the following factors: Infrastructure, environment related problems, diversity of taxes and levies, unfair competition and dumping, marketing related issues, non availability of raw materials and business opportunities and diversification. More should also be done on medium scale enterprise

REFERENCES

KASNEB (2007) “Creating Business Opportunities”, KASNEB Journa,l October-December, P 3.

London, UK.

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