One of the key reasons why banks are challenged in serving SMEs appropriately, is that they lack an understanding of the evolving needs of fast growing SMEs. In part this is due to the fact that SME growth stories are extremely diverse. In addition, SME success is not always directly measurable in a single company’s financial statements.
To help contribute to a better understanding of the relationships between finance, entrepreneurship and growth in the SME segment in Kenya, FSD Kenya undertook an in-depth qualitative case-study based piece of research, with a sample of 18 growing SMEs based in Nairobi. The research illustrates the heterogeneous nature of entrepreneurship, the varying growth journeys experienced by these 18 entrepreneurs and the complexity of the financial decisions they had during their growth journeys.
In a number of the cases, banks had played an important role in enabling the entrepreneur to achieve business success. Nevertheless, many of those interviewed experienced moments in their development journey where the banks were unable to provide them with the necessary finance, requiring them to look elsewhere for funds and support. The entrepreneurs felt that the banks needed to make changes to improve financing for SMEs. These suggestions are summarised , together with additional recommendations that the researchers felt came out of the study.
FSD Kenya. (2016). Understanding how Kenyan entrepreneurs grow and finance their businesses. Nairobi, Kenya: FSD Kenya.