QUESTION

Read the Sessional Papers of 1992 and 2005 on Micro and Small Enterprise and Jua Kali Development in Kenya. Group the promotional into 2 a. Hardware b. Software Evaluate their success against 1. Objectives 2. How far have they attained these objectives 3. Give reasons why they are not attained

DEFINITION OF TERMS:SMEs: - The term SME covers a wide range of definitions and measures, varying from country to country and between the sources reporting SME statistics. Although there is no universally agreed definition of SME some of the commonly used criteria are the number of employees, value of assets, value of sales and size of capital. In Kenya, these are businesses in both formal and informal sector, classified into farm and non-farm categories employing 1-50 workers. Jua Kali: - Small-scale craft or artisanal work, such as making tools or textiles. Promotional Programmes:-

Characteristics of SMEs a. Small units, often rural-based and family-owned. b. Small independent enterprises, standing alone and producing for a well-defined market. c. Specialized firm, producing specialized products, selling to the international and/or local markets. d. Rely on low cost raw materials, low energy costs, low labor costs, low division of labor. e. Flexible and often small production runs. f. Low capital formation g. Largely labor intensive units with low-level technologies; but note the emergence of high skill and technology-intensive SMEs, especially in high technology industries. Benefits of MSEs:a. Employment creation at relatively low capital costs. b. Income generation for the Government in terms of goods and services and the Kenyan citizens in terms of the salaries and wages. c. Poverty reduction d. Development of a pool of skilled and semi-skilled that are the base for industrial expansion. e. Contribution of increased participation of indigenous Kenyans in economic activities of the country. Although the MSE sector has played a major role, it has experienced many constraints thus have not realized their full potential. Some of which are:i. ii. Poor access to markets and financial services Unfavorable policy, legal and regulatory environment.
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iii. iv. v. vi. vii. viii.

Poor implementation among the co-coordinating agencies Gender inequality HIV/Aids Limited access to information Healthy and safety in work places Limited Linkages to large enterprises

The Government has committed itself by putting in place promotional measures geared towards promotional and development of MSE sector. This includes publication of the Sessional paper No. 2 of 1992 on small enterprise and Jua Kali Development in Kenya.

1. Sessional Paper No. 2 of 1992 on Small Enterprise and Jua Kali development in Kenya.
This Sessional paper provides a policy framework for promoting Small scale and Jua kali enterprise development in Kenya based on the work of a special task force established in March 1987 by the Government . The task reviewed policies to promote the sector. The paper is divided into six chapters:a. Chapter one covers the role of the sector in Kenyan economy in relation to the overall development policy and strategy. b. Chapter two highlights policy measures to improve the existing policy and regulatory environment. c. Chapter three focuses on Gender Specific Issues. d. Chapter four discusses policy measures to improve access to credit facilities. e. Chapter five discusses measures to improve provision of non-financial promotional programs. f. Chapters six provides agenda for action within a period of 12-24 months after adoption of the paper. The General approach was to encourage MSEs to be involved in providing for its own needs while the government acts as a facilitator by concentrating on creating infrastructural facilities and economic environment in which entrepreneurs can emerge, develop and grow.

The Promotional Programmes are divided into two broad categories:a. Hardware i. Providing Physical infrastructure and information networks in which small enterprises can operate efficiently. b. Software. ii. Investment Incentives iii. Review of Acts iv. Gender Specific Issues v. Policies that enhance growth of MSEs to be put in place vi. Education vii. Marketing viii. Information Technology. a. Providing Physical infrastructure and information networks in which small enterprises can operate efficiently. This would eventually enhance growth of MSEs. This objective could be achieved by: Encouraging local groups of artisans to form associations so as to benefit from Rural Electrification programme financed by the Government through the Electricity development fund. Provision of Industrial Land for construction of industries and installation of facilities such as machinery. Ensuring that the constructions of sheds for Jua Kali enterprises are undertaken. The Government to assist MSEs in preparation of development plans and projects for improving infrastructural facilities under their jurisdiction. The Government to some extend has attained its objective of providing physical infrastructure and information networks in which small enterprises can operate efficiently .This is reflected by the improved road network in the country, provision of Jua Kali sheds, rural electrification though they have been hindered by corruption i.e. land grabbing and misappropriation of funds whereby the individuals entrusted with funds for the projects use it for their own interests. b. Investment Incentives by: Establishing Rural enterprise fund to finance Jua Kali entrepreneur and construction of the workshops

 Investment allowances for establishing new factories outside Nairobi and Mombasa. Exemption from import duties on capital machinery for small enterprises located in rural areas as long as the cost of machine doesnt exceed Kshs. 20M. How far they attained:This has been attained because all the entrepreneurs even in the rural areas are enjoying the funding through the Governments Youth and Women Enterprise funds and Financial Institutions such as Kenya Women Financial trust and Faulu Kenya. Banks branches have been opened up such as Equity Bank which offers loans to the people who want to start their business and have no enough capital. c. Review of Acts; by relevant ministries in consultation with AGs Chambers e.g. the Ministry of Trade, Ministry of Planning and National development. These acts are the Employment Act, which restricts access by women in certain industries except for medical and environmental reasons. Review of pertinent Acts which have either direct or indirect impact. Review of Licensing, agreements and building codes that hinder MSEs businesses. How far they attained:d. Gender Specific Issues Female entrepreneurs operating small businesses face a number of constraints which cal l for urgent remedial action. Some of which are: Small Scale Enterprises development institutions need to adjust operations to take note of womens needs. Most Financial institutions are in urban areas and there is need to provide smaller institutions in rural areas for revolving funds and mobile funds. Appropriate technology to diversify women entrepreneurial activities should be put in place. Women to be organized into groups so that they can support each other and benefit for development from development initiatives. Women should be educated on their rights, on inheritance and how to form and get into groups through legal awareness seminars.

How far they attained:The objectives have been achieved and more opportunities for entrepreneurial women have been put in place. This is through the Maendeleo Ya Wanawake initiatives, the Women Enterprise Fund, Kenya Women Finance Trust among others. More women are now empowered through education which is done through seminars and the media. e. Policies that enhance growth of MSEs should be put in place; These are: Enhancing import restrictions in favor of tariffs Formulating a national export policy for SEE products and services. The government to see public procurement procedures and regulations to support MSEs find markets for products in the public. How far they attained:This has somehow succeeded as Licensing of SMEs has been simplified and licenses can be attained at the District levels. Employment policies have been changed to accommodate women. Also women now can access bank loans as compared to the past where the spouse had to sign for them. f. Education This is the training on specific business topics by providing a new venue through which large firms can provide training and credit to the small enterprise with whom they deal with. How far they attained:It has succeeded because so many Institutions have been opened that offer courses on specifically on entrepreneurship education. g. Marketing Marketing is done through: Linkages between large and small enterprises Exploitation of export market opportunities Entry of small scale enterprises into the service sector.

How far they attained:They have not succeeded because we are still importing products from other countries such as cotton wool and phones from China which have flooded our market.
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h. Information Technology Market related information will be widely disseminated by District Industrial Development officers (DID) in a manner that ensures that the target groups are reached. Ministry of Industry to undertake studies on the implementation modalities of subcontracting between large and small enterprise. How far they attained:They have succeeded because the price of computers have been reduced as well as tax

2. Sessional Paper No. 2 of 2005 on Development of Micro and Small Enterprises for Wealth and Employment Creation for Poverty Reduction.

This paper is divided into four chapters:1. Chapter 1: Introduction, an executive summary to the paper which gives the thrust of the policy framework. 2. Chapter 2: Profile of Micro and Small Enterprise in Kenya 3. Chapter 3:Challenges to the Development of Micro and Small Enterprise Sector 4. Chapter 4: Policy for Development of Micro and Small Enterprise.

The promotional Programmes are categorized as below:A. Hardware i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. Infrastructure Development Facilitating Business Registration through reduction of Cost and Time Local Government Reforms Review of Land Laws Review of Labor Laws Arbitration and Dispute Resolution MSE Act Markets and marketing Business Linkages Policy framework for development of Skills and Technology Ensuring Gender Equity Business management and Entrepreneurial Skill Acquisition
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B. Software

xiii. xiv. xv. xvi.

Information Management and Dissemination Tax regime Formal and Informal Entry Barriers HIV/AIDS

1. Facilitating Business Registration through reduction of Cost and Time The Government will decentralize registration of businesses starting from the provincial levels then at the District levels. The Government will also undertake to computerize the process and network activities in all relevant offices. How far they attained:-

2. Local Government Reforms Amendment of Local Authority Act (Cap. 265) to reflect limited and essential regulatory powers by Local Authorities. Urban and town councils in collaboration with traders and relevant stake holders will be required to develop clear guidelines for enforcement of the measures. Local Authority by-laws will be reviewed and standardized to make them supportive to promotion of business. How far they attained:-

3. Review of Land Laws The review will continue for simplification and harmonization with the relevant pieces of legislation. Physical planning Act, 1996, will be affected to encourage Local Authorities to earmark land for MSE development. How far they attained:-

4. Review of Labor Laws The review will continue to make them more dynamic, supportive and responsive to the needs of both employers and employees i.e. Employment Act (Cap. 226) and the Regulation of Wages and Conditions of Employment Act. (Cap.229),
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How far they attained:-

5. Arbitration and Dispute Resolution MSE court will be established to dispense justice, and deal with small but nontrivial claims emanation from the sector. How far they attained:-

6. MSE Act The Government will formulate and enact an MSE specific legislation, the Micro and small Enterprises act to give the sector legislative recognition and provide an appropriate legal framework supportive to its growth. How far they attained:-

7. Markets and marketing The Government will allocate 25% of its procurement requirement to the SME sector so as to encourage growth. The Government through public-private sector partnership and in consultation with MSE operators and stakeholders will encourage subcontracting arrangements between large and medium firms and the MSEs through provision of incentives such as tax rebates and duty waivers to encourage the large firms to participate in the arrangement. Government will restrict dumping of Goods into the country and within the framework of Economic Recovery Strategy will increase the per capita of the citizenry that are the ultimate source of increased aggregate demand. Government will facilitate marketing of MSE products in both local and International market through Export Promotion Council and Kenya Missions abroad. Local Authorities to continue to implement creative approaches aimed at promoting marketing of MSE products e.g through marketing in public parks on specific days. How far have they been attained:-

8. Business Linkages The Government will provide incentives to the private sector to invest in areas that enhance development of business linkages between MSEs and large enterprises. The Ministry of Finance will work out modalities for providing appropriate fiscal incentives to both large and small firms to encourage market/supply linkages to MSEs. To encourage linkages between the MSEs and large enterprises, the Government will identify suitable zones with basic infrastructure, which will serve as incubators to improve the image of MSEs and their visibility. The Government will put in place mechanisms that will promote linkages between MSEs and Agricultural sector to increase rural incomes and reduce poverty How far they attained:-

9. Policy framework for development of Skills and Technology

The policy framework will seek to enhance their ability to adopt and adapt new technology, improve the capacity of institutions that support technology development, increase overall access to information on available technology and acquisition of technological skills. How far they attained:-

10. Ensuring Gender Equity The policy framework will galvanize the creative and productive potential of women. Government will pursue gender responsive policies that increase equal access to financial services for both men and women. Government will build institutional capacity of ministries, parastatals and Government departments for gender integration and promote greater access to education, entrepreneurship and technological development.
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The Government will pursue policies to empower women, increase their access to credit and build institutional capacity of support organization for gender mainstreaming. 11. Business management and Entrepreneurial Skill Acquisition The Government will encourage Universities, Polytechnics, technical institutions and other MSE support organizations to develop certified demand driven courses for entrepreneurship and business management.

Government will introduce entrepreneurial development programmes in schools and other training institutions in order to develop a widespread entrepreneurship culture.

A new policy framework to promote cost- effective Business Development Services (BDS) programmes that are tailor made to specific range of needs of a range of MSE entrepreneurs and business sectors. How far they attained:-

12. Information Management and Dissemination The government will encourage private sector investment in information centers for MSEs and support stakeholders initiatives targeting dissemination of information generated within the sector.

The Government will support periodic baseline of the sector. Measures will be put in place to strengthen existing institutions and documentation centers that specialize in MSE related information. The Government will encourage and provide incentive on private sector initiative towards establishment of an information clearing house that will ensure that relevant information about MSEs sector is collected, organized, processed and disseminated according to the needs of different stake holders. How far they attained:-

13. Tax regime Government will continue will Tax reform aimed at improving transparency and efficiency of taxation, strengthening tax collection and harmonizing the tax system. Mechanism will be put in place to ensure that the MSE can pay tax that allows them to fulfill their tax obligation and thrive at the same time.
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How far they attained:-

14. Formal and Informal Entry Barriers The Government will work closely with the private sector to and other stake holders to ensure promotion of good governance, ethical trading and rule of law thus the capacity of the MSE associations will be strengthened to be able to play a self-regulatory role more effectively. How far they attained:-

15. HIV/AIDS MSEs will be facilitated to take advantage of the all prevention, care and control programmes under the National Aids Control Council (NACC) strategic plan. MSEs will be encouraged to participate fully in HIV/AIDS activity es at constituency AIDS Committee levels in their respective localities. Measures will be put in place to encourage insurance companies to schemes for MSEs e.g. health insurance. MSEs will be encouraged to insure their properties. How far they attained:develop

16. Infrastructure Development The Government in collaboration with relevant stakeholders will encourage more private sector participation and management of market stalls and worksites for MSEs through leasing of land to developers at concessionary rates and granting tax incentives to such developers. Government will introduce measures to privatize existing sheds in order to facilitate their efficient management and utilization. The Central Government in collaboration with the local Authorities will promote the issuance of Temporary Occupation Licenses for a longer period of time to overcome insecurity of tenure of land allocated to MSEs.
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Issuing of short- term leases to the individual MSE entrepreneurs. MSE associations will be encouraged to adopt a Community infrastructure development within MSE sites. How far they attained:Land Trust arrangement for the benefit of the members so as to promote investment and

Conclusion In conclusion, although much has been done by the Kenyan Government to promote SMEs, achievements have been minimal and many SMEs have collapsed. This is due to the rampant corruption and lack of proper training of the entrepreneurs in the Country. The Government should introduce courses which mould students right from primary school to the Tertiary level so that they learn to be self reliant and do not depend on white collar jobs only.

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