Income-generating micro and small enterprises (MSEs) are one of the main instruments of economic empowerment for millions of young entrepreneurs in Africa. Micro-enterprises also provide employment opportunities to millions of youth across the continent.
In Kenya for example, the informal sector is dominated by micro and small enterprises. The sector has grown so rapidly over the past two decades that in 2006 it contributed 18 per cent of Kenya’s GDP. According to the 2009 Kenya Economic Survey, in 2008 the MSEs in the informal sector created 433,500 jobs, which constituted 93 per cent of jobs created in the economy that year.
However, a large proportion of these MSEs lack access to formal financial services, which impedes economic growth and development. Lack of enough funds has contributed significantly to the MSEs failure.
Funding for MSEs is poor which leads to poor financial base. Majority of MSEs do not borrow from banks at all due to lack of collateral, high interest rate, and general fear of getting a loan.