KENYAN BUSINESS CLIMATE THE POOR BUSINESS CLIMATE ALBEIT DYNAMIC AND IMPROVED LEGAL ENVIRONMENT
KENYAN BUSINESS CLIMATE THE POOR BUSINESS CLIMATE ALBEIT DYNAMIC AND IMPROVED LEGAL ENVIRONMENT
By George Gathu
Prologue
Kenya has persistently faced threats in its endeavor to foster a healthy entrepreneurial climate . As a matter of fact a new survey report by the Kenya National Bureau Of Statistics ( KNBS ) says that in Kenya a whooping 2.2 million Micro Small and Medium Enterprises ( MSMEs ) shut down in the last five years including 2016 .
This happened despite the legislative and administrative advancements , with a new constitution 2010 to boot , in which there are a number of clauses that are actually meant to protect and motivate entrepreneurship and this continuously being propped up with continuous amendments which have seen Kenya become a much improved environment for doing business . Still the factual failures have been rapid and set a worrying trend .
This article endeavors to identify a number of the threats and how the advancement in constitutionalism should ideally try to resolve some of them , albeit with the knowledge that some will require tenacity and awareness by the entrepreneurs themselves in defending their income generators .
The article does not attempt to cover all the threats , but strives to relate the actual threats and happenstance judicially and some dictates of statutes and the law according to the authors layman ’ s views complete with quotes of gazette laws .
Funding
Of the threats identified the main reason has been funding . According to the KNBS report , the cost of operating the failed businesses went higher than the income derived from them and additionally the disposable income available to prospective and prior clients has been highly affected by macroeconomic factors and economic hardships meaning less flow of customers for the products and services .
Diverting the returns to other activities also denied the businesses the plough back boost . This diversion can be termed illegal in some countries like the UK where it is allegedly a fraud to divert your own limited company funds to other uses .
The cost of financing by banks has been prohibitive , bureaucratic and condescending such that few of the startups dare approach the banks for initial or additional capital . For this the Government via laws came to the rescue of businesses by enacting the Banking ( Amendment ) Act , 2016 as enumerated below .
The following law was enacted in favor of borrowers including SME ’ s “ The Amendment of section 33A of Cap . 488 Powers of Central Bank 33B ( 1 ) A bank or a financial Institution to enforce interest ceilings : Institutions shall set ; ( a ) the maximum interest rate chargeable for a credit facility in Kenya at no more than four per cent above the base rate set and published by the Central Bank of Kenya ; and ( b ) the minimum interest rate granted on a deposit held in interest earning in Kenya to at least seventy per cent , the base rate set and published by the Central Bank of Kenya . ( 2 ) A person shall not enter into an agreement or arrangement to borrow or lend directly or indirectly at an interest rate in excess of that prescribed by law .”
Financial Management
Poor financial management has been another reason many startups failed . The owners and founders of startups may have great innovative ideas but
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