The impact of mobile telephone on Kenya's informal SME sector: a comparative study of Nairobi and Rachuonyo districts

Abstract

Performance of small and medium enterprises (SMEs) is affected by such factors as weak infrastructure network, limited capacity to identify, seek and use appropriate technology; and weak institutional arrangements for providing access to technology and their imperatives. Urban locations, therefore, may have a positive effect on enterprise performance because of the more developed infrastructure. Enterprises located in urban areas, therefore, may have greater access to business, services and enjoy larger local demands than those located elsewhere, and therefore, perform better purely on this account. It is argued that in remote areas, including in Kenya, the disadvantages that arise from isolation can be significantly lessened through access to rapid and inexpensive communication and mobile telephones have been touted as the "leapfrogging alternatives" that can close or at least narrow the "digital divide" between rural and urban SMEs, and consequently between developing world and developing nations. There are views that assume that the digital divide will increase because of infrastructural disparities and, therefore, SMEs, especially in rural areas will face even greater disadvantages relative to their competitors in the urban areas, thus widening the digital divide. However, mobile telephony is touted to be one of the most rapidly growing information communication technologies (leTs) in Africa and may even offer greatest benefits to rural and urban SMEs where the majority of the world's poor reside. - .' The study seeks to establish the impact of mobile telephon enhancing performance of SMEs in Rachuonyo District, Nyanza Province compared to those in Nairobi given the infrastructural problems that are caused by inadequacy of their fixed-line equivalent. In particular, the study reviews: • The role mobiles telephones play in the operation of SMEs in urban and rural areas • The extent that SMEs have accessed the mobile telephony • The determinants to accessing mobile telephones • Factors that influence ownership, use and non-use of mobiles • The impact of ownership and use of mobile telephones on business (turnover, profits, number of employees, capital investment) • The prevailing policy framework on the adoption of mobile telephony To achieve the objectives, the study employs the following methodology: • Literature review - desk study to gather secondary material that may be relevant to mobile telephony • Administration of semi-structured questionnaire to entrepreneurs • Telephone interviews to gather information from various reT operators The sample size consists of 100 respondents from Oyugis and Kendu Bay divisions of Rachuonyo District SME clusters; and the Kariobangi North, Kariobangi South and Kamukunji clusters of Nairobi area. The cluster sampling method is used to identify the four SME clusters, followed by random sampling to select 50 respondents from Nairobi (25 from Kamukunji and 25 from Kariobangi North and South); and 50 respondents from Rachuonyo District (25 from Oyugis Division and 25 from Kendu Bay Division). Large SME clusters are found in areas such as the Kariobangi light industries and Kamukunji area in Nairobi and in Oyugis and Kendu Bay shopping centres in Rachuonyo District. It is for this reason that the cluster sample method is used. Data is processed and analyzed using Excel and Ms Word software. The results suggest that mobile phones have brought considerable benefits to small businesses in rural and urban areas. People at all income levels are able to access mobile services by owning a phone, using a relatives or friends or using other channels including cyber cafes and simu ya jamii booths. Gender, age and education do not seem to constitute barriers to access. While income certainly explains the low level of usage, for example, it does not prevent mobile telephone use. Even the absence of electricity does not present an insurmountable barrier. There is every reason to believe that economic and social returns to mobile phones will be highest to rural areas, which are consistently less well provided for with telecommunications and other infrastructure including roads. Mobile phones substitute for fixed lines in rural economies, but complement fixed lines in urban economies, implying that they have a stronger growth impact in rural areas. The study recommends that the government takes regulatory measures to provide universal access and rural communications development funds to bridge the true access gap that cannot be covered on a commercial basis, even if the regulatory framework and conditions are supportive to operations in rural and low-income areas