Constraints Affecting Performance of Micro and Small Enterprises in the Export Market: a Case of Selected MSEs in Nairobi
Ng'ang'a, Teresia Wanjiku
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MSEs are rising as a critical sector in the world economies, contributing an estimated 64% of Gross Domestic Product (GDP) although with variations in different countries (OECD, 2002). In Kenya, MSEs account for 18.4% GDP (GoK Sessional paper no 2, 2005) signifying their importance. However, compared with other developed countries, the contribution ofMSEs to the economy is still low. Findings from earlier studies have concluded that the MSEs in the export sector must enhance their competitiveness in order to be successful. The purpose of this study was to establish constraints affecting micro and small enterprises performance in the export market. The following key thematic areas were considered, namely; technology, legal/regulatory environment, competition, quality/standards, transport, and marketing strategies. The study was conducted in Nairobi Central District and its environs. The study area was found to be more convenient because majority of the MSEs are within Nairobi and the population in Nairobi is diverse. Descriptive research design describing the ways MSEs are and how they cope with the constraining factors was used. The methodology helped the researcher get the opinions of the respondents and how the constraints affect the performance of their businesses. Survey research design was used to collect the data through self-administered questionnaire and face-to-face interviews where applicable. From the population of 1000 MSEs, a sample of 15% was taken. A sample size of 150 respondents was selected through stratified sampling method. The strata were as follows, leather products 300, curios 400, food and food products 200, wood and wood products 100. The data from the field were cleaned for errors and omissions, and then coded; entered and analyzed using SPSS vide Chi-square, cross tabulations, frequency distributions and percentages. The study revealed that although the MSEs are competing, it is not at the same level as their counterparts in the rest of World. However, this varies from sector to sector; for example, the curio dealers were found to be more constrained in terms of production and materials as compared to food sector. The study found that while there are incentives like reduced number of business licenses, import and export procedures remain as cumbersome as they are bureaucratic. The MSEs have embraced ICT technology although at low level. In addition, the study found that product standards are rated as key to effective export market, with cost of production and materials rated as the major factors affecting the quality of export products. Air transport was found to be the efficient mode of transport, although expensive. MSE have tried to cope for instance by employing cash payment as a way of minimizing risk. Based on the findings, the study concluded that the ability of the MSEs to compete in the international market is still constrained. The MSEs have not moved away from the traditional method of carrying out business. The study recommends that MSEs have to move to another level by being more innovative, adopt new technology where the government should come in and create a more conducive business environment.