Small and micro enterprises (SMEs) play an important role in Kenya’s economy, as it is the case in most economies within sub-Saharan Africa. The sector is a major contributor to economic growth and job creation particularly for the rural economies. However, the sector receives limited attention from relevant policy makers to address the challenges that hinder the potential of the sector to contribute to economic development. PanAAC collaborates with different local and international partners through different interventions to promote the significance of this sector to the economy.
PanAAC has been involved in implementing a number of programmes that focus at strengthening the capacities of SMEs in a number of countries in the region. Through the interventions, PanAAC has:
- Created linkages for the SMEs to the other sectors of the economy;
- Built the capacity of several enterprises through trainings and technical support;
- Promoted innovation and value addition; and
- Created platform for the SMEs to dialogue and negotiate with other stakeholders in the economy.
1.2 Role of PanAAC PanAAC recognises that providing adequate financial and technical support to SMEs will play a critical role in enhancing economic growth and employment creation particularly for the low-income population in rural areas. We believe that appropriate support for the sector will enhance income generation, improve productivity, enhance efficiency in resource allocation, and promote better marketing of the products of the SMEs. However, without the necessary support, the enterprises will continue to rely on traditional practices that limit the potential generate income and create more employment opportunities. PanAAC works with different partners to:
- Increase investments in the sector;
- Encourage innovation and better technology;
- Improve business and financial management; and
- Promote networking with other sectors of the economy.
1.3 Partnerships PanAAC is involved in promoting activities of SMEs in different countries in Africa with the objective of developing a vibrant and sustainable sector. In order to offer its services efficiently, PanAAC has developed a diversified network of partners and pool experts stationed in different countries to support the organisation in implementing the activities at the grassroots. As partners, PanAAC targets organisations or individuals with strong understanding of the local SME sectors in the different countries. The organisation leverages the knowledge, expertise, and diversity of its partners to implement the various activities cost effectively. Through these partnerships, the organisation monitors sector development in different countries in order to develop interventions that are more effective. Currently the organisation has identified focal points in different countries to represent its interests on the ground. PanAAC offers the partners the necessary support to ensure proper implementation of the intended interventions.
2.0 Our Approach in SME Development Although all interventions that PanAAC implements differ in nature, the organisation has developed an approach that leverages its long experience in the regional SME sector, and the ability of its partners to implement activities cost effectively. PanAAC’s experience in the sector SMEs has given it great perspective on what it takes to be a successful enterprise and the issues that prevent SMEs from becoming successful enterprises. The organisation also leverages its access to information to develop strategies that support capabilities of the target SMEs to compete effectively in the market.
2.1 Diagnose SME Challenges Different interventions implemented by the organisation seek to address different challenges that private sector SMEs face that reduce their potential to contribute to economic growth and job creation with particular focus on rural economies. Guided by each programme objectives, PanAAC starts its interventions by identifying and profiling SMEs with the right capacity to contribute positively to the objectives of the intended interventions. Using internally developed tools, PanAAC diagnoses the needs and perceptions of the entrepreneurs to understand the current potential of their enterprises as well as identify the challenges the enterprises encounter during operations that reduce their potential to contribute to economic development. The diagnosis involves meetings with the entrepreneurs, and a review of relevant documentations to understand industry trends. Through the process, PanAAC identifies existing gaps that require intervention, and designs appropriate solutions to address those gaps. PanAAC appreciates the need to select the right enterprises for each intervention in order to achieve the desired impact. The organisation works closely with its partners at the grassroots to select viable enterprises guided by the objectives of each intervention. PanAAC has developed an internal assessment tool used to assess the potential of the enterprise, effectiveness of the product offering, and the level of investments in various resources including property and equipment and human resource. PanAAC has also developed a framework used to support enterprises enhance productivity and efficiency as well as monitor performance during the intervention period
2.2 Design Solutions Guided by the results of the diagnosis, PanAAC designs solutions that have high potential to address challenges and gaps identified. Solutions offered by PanAAC include facilitating customised training on specified issues, linking enterprises to innovations and better technology, enhancing business and financial management, and facilitating development of business plans among others.
2.2.1 Facilitate Training Based on its understanding of the sector and the realities facing SMEs, PanAAC has developed internal training resources used to facilitate a number of trainings targeting SMEs. The resources include training materials, participant handouts, and training guides. In the past PanAAC has facilitated practical trainings for the SMEs to address various needs that include business and financial management, bookkeeping, marketing and market linkages, quality management, and loan management and repayment among others. PanAAC conducts its trainings from hotels to enable easy dissemination of the course materials. On average, each training session take about 2 days with each programme/intervention meeting the costs for meals and accommodation of the participants.
2.2.2 Facilitate Linkage to Innovation and Better Technologys PanAAC believes that innovation and value addition will help SMEs to adapt to the changing market environment as a means surviving and growing sustainably within the relatively competitive market. In addition, the organisation also believes that by adopting viable and sustainable innovations, SMEs will remain relevant in addressing their customer needs, confronting challenges facing the sector, and exploiting new opportunities that might arise in the market. PanAAC encourages SMEs invest in market research to understand customer needs and market dynamics, product development using locally available resources to satisfy unmet needs, and improving delivery channels to ensure effective delivery of products to the target customers. In the past, the organisation has supported several enterprises to adopt viable and sustainable innovations that have increased their potential to generate income. The organisation also works with the enterprises to create structures and systems intended to minimise risks such as failure to meet product specifications required by the customers, damage on reputation resulting from substandard products, and any issues that might arise from the market.
2.2.3 Strengthen Business and Financial Management PanAAC believes that good business and financial management is essential in order for enterprises to contribute positively to economic development of any country. With the support of its partners, PanAAC works closely with the SMEs to assist them build basic capacities required in adopting better business and financial management practices. In addition, the organisation facilitates training on business and financial management that enables SMEs to appreciate the need for better business and financial management. The organisation has developed internal training materials used to facilitate the training. Issues covered in the training materials include accounting policies and procedures, recordkeeping, liquidity management, working capital management, budgeting, and product pricing among others.
2.2.4 Business Planning PanAAC believes that a business plan is an essential document that supports an enterprise to plan growth, seek funding, and monitor performance over a period of time. However, most of the enterprises the organisation works with did not have business plans before joining the programmes. The organisation has assisted several enterprises to prepare bankable business plans with some using the documents to approach bank for financing. In addition the organisation has assisted the enterprises in prepare budgeting, and liquidity management frameworks.
2.3 Develop Business Linkages One of the key challenges facing the enterprises PanAAC works with is limited access to markets and market information. PanAAC is actively involved in creating commercial linkages for these SMEs through such approaches as forming clusters and collaborative production networks. PanAAC works closely with the enterprises to identify potential markets for their products and has already linked several producer groups such as those engaged in sorghums farming to potential buyers such as local breweries. PanAAC is also actively involved in negotiating for better prices for the enterprises. With the support from its partners at the grassroots, the organisation has encouraged enterprises to adopt better technologies in order to enhance production and quality. PanAAC also supports producer groups to open aggregation centres for bulking farm produce.
2.4 Develop Linkages to Financing Access to finance is necessary to create an economic environment that enables SMEs to grow and prosper. Increased access to finance for SMEs can improve economic conditions in developing countries by fostering innovation, macro-economic resilience, and GDP growth. However, access to financing is one of the factors identified that limit the growth of SMEs in most economies in Africa. SMEs are particularly constrained by existing gaps in the financial system such as high administrative costs, high collateral requirements, and lack of experience within financial intermediaries. This forces most financial institutions considering SMEs riskier PanAAC links SMEs to potential sources of finance and works with selected financial institutions to develop sustainable strategies and products to support lending to SMEs.