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SMEs In Kenya- The Double Solution

Anslem Murimi by Anslem Murimi
February 13, 2023
in News
Reading Time: 2 mins read
SMEs

[Photo/ Courtesy]

In order for Kenya’s economy to grow, there needs to be a feedback loop dependent on two goals.

One, we need to reduce unemployment, thereby increasing income and therefore demand for goods. This increase in demand for goods should be met by increased production of goods and services, which is the definition of economic growth.

Small and Medium Enterprises are an efficient way to achieve both goals simultaneously, as they require little direct governmental input, only support.

An ideal way to reduce unemployment is to increase the ability of citizens to hire themselves and each other. By providing support in the form of ease of access to credit, and ease of doing business including minimizing license fees, more SMEs can be created hence more jobs are created.

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This is attributed to SMEs, in general, focusing on labor-intensive businesses in a bid to minimize costs, relative to larger capital-intensive businesses that tend to be fewer in number and create less jobs on aggregate. Therefore, by providing optimal conditions for the formation and operation of Small and Medium Enterprises, we can increase the income for Kenyans by ensuring that more Kenyans have jobs.

Secondly, SMEs are a direct solution for an increase in demand as they grow faster than large companies, allowing easy management of increments in consumer demand as increased production can be facilitated faster due to quicker growth.

Read: How SMEs Contribute To Economic Growth

SMEs can also be started with less capital, meaning that should existing firms be unable to fill the demand gap in the face of increased incomes, new firms can come in, providing not only goods and services demanded by an increased workforce but also creating new jobs, completing the feedback loop.

In addition to this, SMEs innovate faster due to their nimble structures and flexibility, are more capable of exploiting market niches, and provide a larger tax base, all aspects that contribute to their status as fuel for economic growth.

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