KCA UNIVERSITYNAIROBI TOWN CAMPUSBACHELOR OF COMMERCE FINANCE

KCA UNIVERSITY

NAIROBI TOWN CAMPUS

BACHELOR OF COMMERCE FINANCE OPTION

MOHAMUD ABDULLAHI AHMED REG:11/01643

ASSIGNMENT

PROJECT PROPOSAL

FACTORS AFFECTING SMEs ACTIVITIES AND PERFORMANCE IN EASTLEIGH BUSINESS AREA OF KAMUKUNJI SUBCOUNTY OF NAIROBI.

Statement of the problem

Eastleigh Business District of Nairobi and in particular the market for many Somali ethnic community traders and their merchandise in Kenya is one of the most important and promising commercial hubs in east African. According to a report carried in the Life & Peace articles in their webpage, the area is nicknamed ‘Small Mogadishu’ according to the webpage by virtue of the unique merchandise for sale and majority Somali community doing business in the area.

considerable research studies on all the issues affecting and important for business growth, performance and the ideal conditions on better business environment, among the small and medium enterprises has been discussed enumerated. There exists many more that needs to be studied or researched following recommendations put forward on some areas already considered in exiting studies.

Putting into perspective to particular and some unique business elements as shown in the literature review. Much of the areas researched demonstrate partiality to financial factors and products for growth and have forwarded limited interest in other majority factors in the scopes of like human skills and past experience, business ownership and governance in particular to the following: selective enforcement of laws, hawkers menace, congestions of markets, police harassment, corruption and extortion by security agencies and council askaris. These realities further require documentation and further study in other nonfinancial factors is also standard recommendation in the past studies.

Accordingly, to existing knowledge on the business activities concerned with financial products provided and state regulations, the real issues beyond these two aspects are not explored. Some other factors for business growths include and have not established their significance to SMEs growth and in the contexts of Kamukunji area of Eastleigh.

According to Hilder (2010) more studies need to be done to determine why moderate stakeholder patronage exists when partnerships and investment promotion rapidly improves performance in the area and more studies be done on how to improve patronage. She also stresses on micro enterprises sensitization through the assistance of banks in drawing deeds at the start-up level to promote partnership business and trustworthy among the would-be partners. This area is of interest to this proposal as unique and no literature exist so far. Of interest to this proposal and lack of knowledge is Huldah recommendation of further studies to determine why moderate stakeholder patronage exists when partnerships and investment promotion rapidly improves performance and provide framework on how to improve stakeholder patronage index capable of moving int 21st Century. Equally important and interesting is of the recommendation of David M. Kamau (2014) findings on lack of unity on how SMEs operation and performance is affected by creditors and labour market. David study further points out what solution exist or is planned by policy makers as entrepreneur’s adaptation strategies to challenges observed in his studies.

Literature review

According to a study by Bisha A. Kanyara (2018), inadequate finances, a lack of financial administration abilities, and lack of markets for products is a hindrance to Islamic SMEs growth and development in the area. The finding further noted all of the noninterest faith-based products are been unutilized because of the limited experience by the bank personnel like it is the practice within other Muslim countries in middle east and Asia.

Similarly, a study conducted by Betty C. Koech (2011) identified financial constraints hindering growth of SMEs in Kamukunji District. She noted that many entrepreneurs have limited ways to grow their business into large enterprises. Her study singles out of the need to have all entrepreneur to fully understand all financial constraints. The findings identified cost, capital market and capital access as the highest contributing factors to constraining SMEs growth into large business enterprises.

Similarly, a study by David M. Kamau (2014) determining environmental changes faced by small and medium sized enterprises in Eastleigh business district and response strategies employed by small and medium sized enterprises in Eastleigh business district to the changing environment observed challenges of inadequate resources, fast changes in technology and access to finance. The study further noted bigger challenges of insecurity from terror attacks as having caused decline in customers who fear for their life, poor waste management, pollution, bad roads and cut throat competition (pg2 para1). Other challenges in the finding included competition, political and economic challenges, threat of substitute goods and services. The study results also revealed that SMEs had adopted various response strategies to cope with the challenges. The study stressed economic and political changes as major challenge to SMEs operations in Eastleigh. Either, high interest rates, inflation, diminishing purchase volume against high cost of import complicates their business prospects. Safe for competitive rivalry as a result of similarity of goods for sale making competition intense, the rest of the challenges were however ranked moderate challenges in this study. The results of the study also established that under the operating environment competitive position, customer profiles and market changes and supplier relationship affected SMEs but at a moderate extent. There was lack of unanimity in regards to the extent the other two factors namely creditors and labor market affected operations. Recommends similar studies be conducted to find solutions by policy makers and entrepreneurs adaptation strategies to mentioned issues.

Moreover, a study by Huldah Kimunto (2010) in her PHD thesis on factors influencing growth of SMEs manufacturing metallic products in Kamukunji observed that micro-enterprises are largely proprietorships with few partnerships. Lack of trust according to Huldah, encourages proprietorships and partnerships is only available business owned by couples and relatives. She recommends micro-enterprises to be sensitized and assisted by banks in drawing deeds at the start-up to make partnership a trustworthy and rosy affair according to her. She further noted the micro-enterprises in the area are owner-managers having deficiencies in human soft skills which, according to her, are important to reduce backward and forward linkages in customer services and increase developing business relationship. She further observes a large proportion of entrepreneurs not transferring experiences like “transferable sales and technical expertise, transferable networks, transferable primary skills, transferable external capital, transferable human capital, and transferable support skills which they have acquired somewhere else into the micro-enterprises” they operate. She also observed that a sizable proportion of micro-enterprises do not have steady collaboration with stakeholder patronage such as debtors, professional advisors, employees and partners, bank managers, friends, suppliers, and family and associates to what she calls ‘deficiency in networking skills reducing stakeholder leverage’.

Reference

Huldah Kemunto Oroko (2010); Factors influencing growth of micro-enterprises manufacturing metallic products at Kamukunji in Nairobi, Kenya.

Betty C. Koech (2011): A survey of the financial constraints hindering growth of SME’s in Kenya: The case of Kamukunji district in Nairobi county.

Bishar Ahmed Kanyara (2018): Factors affecting the performance of small and medium sized enterprises in Eastleigh business district in Nairobi County

David m. Kamau 2014: Response strategies to environmental changes by small and medium sized enterprises in Eastleigh business district, Nairobi county, Kenya.