Growth Oriented SMEs Understanding their needs and risks

Growth Oriented SME’s: Understanding their needs and risks Dinah Bennett www. consult-ice. com

Research Objectives To understand the dynamics of growth among Kenyan SMEs. • formal and informal financial practices through the firms’ life-cycles, • the critical incidents that have changed the firms’ growth trajectories • the characteristics and risk propensity of entrepreneurs

METHODOLOGY Twelve month qualitative study Sample of 28 dynamic Nairobi based businesses Using an in-depth case study approach mapping history of developmentchallenges sinception.

Some highlights. . • Commitment to customers and staff – training and rewards • Owners Innovative and entrepreneurial • Honesty in business key factor • Shun corruption • Multi- banked • Previous business experience • Great relationship builders and networkers • Aversion to debt • Self finance/informal finance/Investment in business

Entrepreneur characteristics • Risk taking propensity - calculated • Resilient • Enterprising • People first • Customer focus

Different types of entrepreneurs use different forms of financing: • Portfolio entrepreneurs - spread risk • Serial entrepreneurs ‘bootstrapping’ • Single-business entrepreneurs tend to rely more on formal credit markets (banks)

Financial instruments change across time and among different types of entrepreneurs. Evolution from informal sources (chama, family, savings from previous jobs), to trade credit within the supply-chain and bank credit as the business grows.

Case study Peter Burugu Gachugu CEO World Plastics 8

Multibanking The reasoning behind the use of multiple banks usually grounded in the activity of the company. Other reasons cited included Types of account –forex Relationship manager Network coverage –security for cash based business Turnaround times Flexibility – payment holidays when needed 9

Entrepreneurs’ experience and perception of banks • Need to understand the small business reality • Need for better segmentation • Need to understand how small businesses grow • Impact of safe lending practices • Need faster reaction times and swift and appropriate feedback • Improve continuity of the bank-business relationship

Case Study George Wachiuri CEO Optiven 12

Discussion