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Home Technology

Diversifying SMEs Financial Options Through Digitization

Dennis Otsieno by Dennis Otsieno
February 24, 2023
in Technology
Reading Time: 2 mins read
SMEs

[Photo/ Courtesy]

Small and medium-sized enterprises (SMEs) are critical to Kenya’s economic growth.

According to the Central Bank of Kenya‘s recent National Economic Survey report, SMEs account for 98 percent of all businesses in Kenya, create 30 percent of jobs annually and contribute three percent of GDP.

Aside from employing people, SMEs provide goods and services and serve as an important link in the manufacturing value chain, generating economic activity along the way. Many manufactured products reach consumers via SMEs, typically through a network of small independent retail stores such as dukas and kiosks.

Despite the important role that SMEs play in the Kenyan economy, there are several obstacles to their survival and success. In fact, despite having the highest entrepreneurship rate in the world, research shows that up to 80 percent of African SMEs fail within the first five years.

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Access to infrastructure and connectivity, business enablement tools, finance, and digital skills are all potential roadblocks for SMEs. The most significant barrier that SMEs face is obtaining financing and affordable lending.

Read: SMEs In Kenya- The Double Solution

These businesses frequently lack appropriate information such as credit history, financial statements, and other required data, while traditional credit-scoring models used by many financial institutions discriminate against SMEs. Without access to capital, SMEs are unable to invest in and grow their businesses.

There is need to enable tools that SMEs can use to collect and manage transactional data that can be used to provide valuable insights to guide SME decision-making and can be leveraged to create financial reports.

Digitization can assist businesses in developing a financial and transactional history that will allow them to obtain loans, thus diversifying their financial options.

Email your news TIPS to editor@thesharpdaily.com

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Dennis Otsieno

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