Most small business owners did not go past high school

Majority of the micro, small and medium sized enterprises (MSMEs), are operated by individuals whose highest level of education is secondary school, fresh data on this important sector of the economy shows.

The recently released Economics Survey 2017 shows that about one third of owners of licensed MSMEs completed their secondary school, while 23.3 per cent of them have KCPE certificates. In contrast, just 9.8 per cent of small business are university degree holders.

The narrative is similar in the unlicensed SMEs segment where 39.7 per cent of the business owners polled said they had attained primary education while 31.4 per cent did not go to school at all.

Despite not having advanced to university or colleges, these individuals are running a sector which accounts for 84 per cent of national employment and contributes 18 per cent to the gross domestic product.

The report also showed most small businesses were started with less than Sh50,000 capital.

Additionally, only 1.2 per cent of unlicensed MSMEs and 9.8 per cent of the licensed ones are owned by university graduates. Unlicensed businesses are less likely to take up credit, more likely to operate in residential areas and less likely to have a permanent address.

Overall MSMEs remain credit shy, mostly due to high cost of loans, with only 5.6 per cent licensed and 0.8 per cent of unlicensed businesses seeking startup capital from banks.

Ironically, shortage of funds was the main reason 46.3 per cent of MSMEs cited for shutting down within their first year of operation.