Nairobi — About 46 per cent of Small Medium Enterprises in Kenya close within a year of founding, and another 15 per cent in the year after that.
This is according to Central Bank of Kenya (CBK) Governor Patrick Njoroge who says part of the issue is that these SMEs do not solve big enough problems.
Speaking while opening SME Financing Africa Forum 2017 Njoroge says this is the time to invest more in research.
"SMEs fail for not solving for a large enough need in their market anchored on a not deep enough understanding of their customer needs. Time to invest more in research and entrepreneurship driven by needs resolution," he said.
According to latest statistics from the International Finance Corporation, there is a $331 billion new funding demand for SMEs in Sub Saharan Africa.
In sub-Saharan Africa, there are at least 44 million formal Micro and Small and Medium Enterprises SMEs, 51 per cent of which require more finance than they can access to grow their businesses.
"No matter what their size, SMEs all have one major challenge: Access to capital. This is one of the key areas we are working on at IFC," Head of IFC's Financial Institutions Group for Africa Aliou Maiga said.
SME's contribution to Kenya's economy has risen from 13 per cent in 1993 to nearly 30 per cent in 2016.
Africa's working age population will increase by 1.7 million people a month until 2030, and the urban population is expected to double over the next 25 years.
"We are seeing significant improvements in access to finance in Africa, creating opportunities for small and medium enterprises that create jobs and reduce poverty. We should celebrate the gains while recognizing we have much more to do. Digital finance is the future so we must expand and tailor products and services to meet the growing needs of a dynamic continent," said Karin Finkelston, Vice President of Partnerships, Communication, and Outreach at IFC.
The SME Finance Forum works to expand access to finance for small and medium businesses.
The Forum operates a global membership network that brings together financial institutions, technology companies, and development finance institutions to share knowledge, spur innovation, and promote the growth of SMEs.