Survival and Sustainability of Small and Medium Enterprises in Nairobi County Under Corona Virus Disease -19 Pandemic

Abstract

The Small and Medium Enterprises (SMEs) have been known to play a crucial role in the global economy by creating new jobs and expanding existing businesses. The SMEs sector in developing economies plays an essential role in economic development, job creation, and poverty alleviation. The sector faces various challenges, particularly in terms of access to finance, markets, training, and technology. The COVID-19 pandemic was unexpected, and its effects were felt in all sectors of the economy. The SMEs have dealt a significant blow due to the pandemic and many have struggled to survive and continue operating after the pandemic. The purpose of this study was to examine the survival and sustainability of SMEs in Nairobi County under COVID-19 pandemic. The study sought to accomplish this by determining the various challenges SMEs faced during the pandemic and by analyzing two critical factors notably financial sustainability operation practices that entailed financial access, trade credit management and profitability and market access operations that entailed customer focus practices. The anchoring theories of this study were the dynamics capabilities theory, contingency theory, Porter’s five forces model, resource-based theory, and the institutional theory. The descriptive research design was the preferred design that was adopted for this study. The study targeted 341 participants in SMEs in Nairobi city Central Business District (CBD). Out of the targeted, 308 participants sufficiently filled the questionnaire giving a response rate of 90.3 percent. Data was collected using self-administered questionnaires and short structured interviews and was evaluated using descriptive and inferential statistics. The findings from the research revealed that SMEs in Nairobi County were affected by the COVID-19 pandemic to a very great extent. They experienced different challenges the leading ones being reduced sales volume and reduced profit margins as well as increased operating costs. It was observed that 60 percent of SMEs accessed formal credit and 70 percent of SMEs preferred E-lending platforms to access credit or loans as other forms of credit. The study observed that many SMEs used to offer trade credit to their customers before COVID-19 pandemic but during the COVID-19 pandemic, most SMEs did not continue to offer credit to their customers. Majority of SMEs faced a reduction in sales and also faced an increase in operating expenses. With the decreased average profit during the COVID-19 pandemic, most of SMEs did not have available financial resources to grow their businesses. On the relationship between sustainability operational practices and the survival and sustainability of SMEs under the COVID-19 pandemic, profitability was the most important independent variable followed by financial access then trade credit management, respectively.