Small and medium enterprises (SMEs) are an important pillar of Kenya’s economy, creating millions of jobs and driving innovation in key sectors of the economy. Apart from propelling economic growth and development, SMEs also underpin the social transformation of communities through livelihood opportunities and poverty reduction.
However, the current economic landscape dominated by high interest rates, fuel price hikes, rising taxation, decline in disposable incomes and reduced consumer spending is threatening viability and survival of many small businesses.
Hence, the need for sustainable growth strategies to enhance the resilience of small enterprises to such disruptive shocks, while boosting their ability to thrive into the future.
This entails nurturing ‘future-ready SMEs’ that exhibit a strong capacity to overcome prevailing macroeconomic challenges while generating long-term financial, economic and social value.
The term ‘future-ready’ is said to have been coined by researchers at Aston University in the UK to refer to “a set of capabilities and orientations that enable companies to thrive in the future”. So, how can SMEs in Kenya navigate the tough times and become future-ready?
First, they need to invest in income and revenue streams that enable them to achieve sustained growth. This includes product diversification and geographical expansion to capture a wider market.
One of the factors hindering SME growth is focusing only on one product or market. This is of course not a walk in the park with the deteriorating consumer spending.
Second, SMEs must re-evaluate their true purpose in society. Successful businesses are those that address and solve a real problem facing human society. In the process, they build a loyal base of customers.
Third, they need to come up with clear strategies to enable them to adapt to the changing business environment. One such strategy is innovation.
In addition to adapting to dynamic market realities, SMEs need to build resilience to secure business continuity. This entails building a reservoir to act as a buffer for tough times. This way, the business is still able to meet its obligations to customers, creditors, suppliers and regulators, thus minimising the risk of severe liquidity challenges.
Mr Ouma is the acting chief executive officer of Faulu Microfinance Bank. [email protected]
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