Who will help the small business in Kenya?

We will never stop trying to find out about business funding in Kenya. Every owner of a small business in Kenya says this is the biggest problem they face.

This is, more so, true for women entrepreneurs who take a smaller share of all money given to small and medium-sized businesses in the country. Access to funding is related to how innovative businesses become and how much risk they are willing to take.

Otherwise, it’s too much to expect another moon landing from any small business in Kenya.

A key gap that has come to our attention is the early stage of business. Several studies in Kenya, including one done by iHub on the tech ecosystem, conclude that there are hardly any investors in Kenya for this stage of business.

This is despite the known importance of this early phase of business. The Government, itself, knows that close to 60% of all new businesses in Kenya collapse within 2 to 4 years.

For the majority of new entrants to business in Kenya, this is the amount of time they need to reach sustainability and begin focusing on growth. Only few do. At this stage, entrepreneurs are typically focused on achieving working capital consistency. Many of the 40% survivors don’t get a chance to go beyond this emphasis.

What happens when the owner of a small business in Kenya runs out of her cash reserve and loses ability to inject more capital? They cannot go to financial institutions because they typically only come in after revenue – and assets are present for collateral.

We gave crowdfunding a chance. Unfortunately, our conclusion was that it’s still held back by legislation. Our eyes and ears remain alert though.

We also did give Venture Capital in Kenya a chance. We did. Venture Capital is great because it not only comes with money and a set of skills but also its effect on the reputation of an enterprise cannot be understated. Problem is that this type of funding is not accessible to most entrepreneurs in Kenya.

The way it has sprouted in this country, means you have to enjoy advantages such as the right parents, the right schools and perhaps a token white person (colonizer, haha) on board. This whole society thing is meant to operate as a meritocracy so that’s a problem.

Now what?

There is another class of investors for new businesses in Kenya out there. But they are not organized enough to be reached easily. Neither are most entrepreneurs ready for what they bring to the table.

These are angel investors. Let’s not get caught up with how people outside this country define it. What the writer is referencing are the wealthy individuals out here and others with sizable sums looking for investment opportunities but all they ever get told is buy and hold land.

The dream is that they could be pooled into investment vehicles which seek out entrepreneurs. This is not new. We have many savings and investment groups in Kenya categorized by gender, occupation and what not. This is how women responded to financial exclusion. We even had a whole season of a tv show with bits of this dream.

Question is whether such investors will have time and a willingness to tolerate early stage businesses as they put together their product or service. We would hope so. We can grow the concept of rich uncle giving a jobless youth startup money into a part of formal finance. Kenya already pulled off turning chamas into competition for banks on some levels.

Plenty of work to be done falls on the shoulders of  each owner of a small business in Kenya. For one, they too should work together. Individually, they should be ready for investment.

The United States Agency for International Development (USAID), in investigating early stage businesses in East Africa, found that they were missing on some pointers that were of importance to investors. This means that those business owners who have taken advantage of networking opportunities to meet investors (or used the advertising route) have ruined their own chances.

Predictably, the number one area of error is finance. Small business owners are not doing enough in financial analysis to present a clearer picture on business prospects. Analysis of financial records and projecting future cash flow is the end game in investing.

Closely related is the clarity of medium and long term business goals. This presents an image of good understanding of the sector of business, raising an investor’s confidence. It can act as a substitute for revenue performance at the early stage of business. 

Having a good strategy reveals the potential of the business and therefore makes it easy for the goals of entrepreneur and investor to align. It also allows the business owner to be honest about the risks the potential investment will be exposed to and what she intends to do about it.


Adding to the above, it is good form for every small business in Kenya to show they have their skin in the game. This is not only shown through money, as many mistakenly believe. It is also shown by commitment (is this your daily bread or a side business?) and knowledge of the sector (research? network? partners?). This can also be shown by assembling a good team. Even though there is a real fear that talent is expensive since a mentality in Kenya (this is not my invention) is that every job is only being held in anticipation for a better paying one. My invention now,  early in a small business in Kenya, it should turn out that integrity and work ethic are far more important since the entrepreneur is the expert on everything.

It will definitely be some wait before entrepreneurs in Kenya can knock on some angel investment office. But they can improve their attractiveness to potential investors they come across as they enlarge their networks.


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