The perceived relevance of non-financial business development services offered to small and micro-enterprises in the city of Nairobi
This study was conducted with the objective of finding out the entrepreneurs' perceived relevance of business development services received by the small and micro-enterprises (SMEs) operating in Nairobi city. The focus of the study was on all small and micro-enterprises, which operate in Nairobi. The study however, zeroed in on those SMEs operating in the areas of Kibera, Kariobangi, Kangemi, Kawangware, Gikomba and Kamukunji. The problems faced by these SMEs in their operations were the main areas of concern. The study set out to determine if the various non-financial business development services received by these SMEs were tailored to their need for these support services or they received them only because they either they were available or they had some indirect benefits attached to them. The study had two main objectives: - 1) Determining the extent to which non-financial business development services available reached the SMEs operating in the city of Nairobi. 2) Determining the perception of the SMEs owner-manager on the relevance of the nonfinancial business development services offered to them. The study hypotheses were set as: - Ho: The non-financial business development services currently being offered to the SMEs in Nairobi are t~~se that an~perceived to be )fnportant to their development. HI: The non-financial business development services currently being offered to the SMEs in Nairobi are perceived to be unimportant to their development. Earlier studies show thatthe SMEs in the City of Nairobi are not crowded in one region but rather clustered in certain parts of the city. The study therefore used a clustered random sampling method :to choose the SMEs to interview. In each of the regions a simple random sampling method was used to choose the respondents to interview. The researcher approached the welfare associations for the SMEs in these regions and requested for a list of their members. The researcher then selected the names of the VlIl enterprises to be interviewed randomly from the lists provided. The researcher choose to interview only permanent SMEs because business development projects target such SMEs. These types of SMEs are easier to trace, more accessible, reliable and easier to m07 sample of 80 SMEs was finally interviewed. Primary data was collected through personally administered structured questionnaire. The study targeted the owners of these SMEs or the managers or owners' spouses concerned with daily operations of the enterprise. The data obtained in the study was then coded and feed into the computer. An SPSS computer package was used to analyze the coded data. Through this package, the data was tabulated in the form of frequencies and percentages. These descriptive statistics were used to answer the first objective above. The second objective was analyzed through a cross tabulation of the business development services required and received by the recipients (SMEs) of these business development services. Chi-square tests of independence values for each of these cross tabulations was obtained from the computer out-put. These ~hi-square values were then compared to the critical values obtained from the table at 95% degree of confidence. Where the chi-square values exceeded the table critical values, the study concluded that the business development service offered was not relevant to the recipients (SMEs) . needs. t - .; The respondents interviewed. said their businesses were either experiencing moderate or poor business performance due to the various existing business problems. The main problems faced by these SMEs included low demand for their products or services, poor marketing strategies, use of outdated tools and equipment or lack of these tools and equipment all together, lack of skilled personnel, and poor bookkeeping. Most of these :7 • entrepreneurs also complained that they lacked both information and access to government contracts among other lucrative business contracts. Majority of these IX entrepreneurs ranked these problems as very serious in hindering their enterprises' growth and development. The study results showed that business development services requirements far exceed the supply for these services. Most of the SMEs are lacking the relevant business development services they require. Those SMEs owner-managers who received business development services felt they were receiving support services that were not relevant to their needs. When the study explored the type of non-financial services these entrepreneurs considered crucial in their quest for business progress, marketing, business linkages, technical assistance and training on bookkeeping and loan management were the ones ranked as very important by about 20% of the respondents. Over 35% of the respondents however ranked these same support services as important The study showed that the need for relevant business development services as perceived by the SMEs owner-managers in Nairobi is very high. Most (over 60%) of the entrepreneurs are looking for business development services that best suit their needs. Since these SMEs have individual unique business development service needs but the concerned organizations only provide general business development services, they fail to meet the support service requirements of these enterprises. The provision of developments services in the city of Nairobi can be said to be supply-driven rather than demand-driven. This conclusion is supported by the fact that only two of the eight business development seiYice~ studie~ were found t .be relevant to the recipients needs. . .. Further, all the support services studied are experiencing excess demand, Some providers of these services only offer. them to their client (SMEs) because they have either the necessary skills or r-esources required and not because they have carried out a need assessment and discovered the demand potential in the service they are offering. The achievement of proper SME development will best take place if the business development services are demand driven. To achieve this objective, the providers of these support services should carry out research into the real business development service needs of their potential client SMEs and aim to satisfy these requirements effectively and efficient!y.