Factors affecting provision of non-financial business development services by non-governmental organizations' to micro and small enterprises in Nairobi

Abstract

This study was conducted with the objective of finding out the factors that affect provision of business development services by Non Governmental Organizations to micro and small enterprises (MSES) in Nairobi. MSEs playa significant role in employment creation and economic growth in Kenya. However, their growth is hampered by a myriad of problems. To promote their development and growth, the government has enacted policies. Numerous projects - offering business development services have been initiated in collaboration with donors and other non-governmental organisations to address the constraints facing the MSEs. The focus of the study was on all NGOs that offer business development services in Nairobi. However, two private companies offering business development services were . included in the study because of their semi-NGO stetus. The study had two main objectives: - (i) To establish the strategies used by NGOs offering business development services (BDS) (ii) To document the factors that affect provision of BDS by NGOs to MSEs Earlier studies have shown that only a small percentage of MSEs have had access to any business development services. Even though the amount of donor and government funds being channeled into the sector has continued to -grow, the number of MSEs having~ access to these services remains small. Additionally. an earlier study found that the business development services offered by NGOs are not perceived to be relevant by MSEs operating in Nairobi City. The study therefore sought to find out the factors that affect provision of business development services by NGOs to MSEs in Nairobi. This is because NGOs are the dominant players and they have the longest experience in MSE development in Kenya. A census was carried out of all NGOs offering business development services in Nairobi. Primary data was collected through personally administered structured questionnaires. The study targeted respondents were drawn from the management ranks of these organizations, ranking from business development managers and above. The data obtained in the study was then coded and fed into the computer. An SPSS computer package was then used to analyse the coded data. Through this package, the data was tabulated in the form of frequencies and percentages. These descriptive statistics were used to analyse the first objective above. The second objective was analysed using a factor analysis model. Using the model, a priority list was derived of the factors affecting provision of business development services. The study results showed that NGOs have developed various strategies to address issues of sustainability. Most of them rely on more than two sources for their funding requirements to hedge against risk of closure in case one source dries up. Budgetary controls are observed and they maintain lean staff structures. Most of them maintain links with associates drawn from both the public and the private sector. who are called upon to perform specific duties whenever need anses. Other measures include introduction of cost sharing. recovery of all costs from services offered. operation of production units and other income generating activities to supplement donor funding. However, the study found there are many challenges facing these NGOs in their efforts. These include:- resistance to change by MSEs who havegot used to getting free services funded by donors; inability to attract and retain highly qualified staff due to financial constraints: low education levels of MS:::s operators causes communication problems as they are not able to articulate their needs; and access to MSEs who are located in remote and sometimes insecure places while others have no fixed abode. Additionally, the delivery of business development services by these NGOs is severely affected by a combination of factors. These include: general economic trends, legal trends, political trends, technological trends, influence of funding agency, recovery of costs, demand by MSE operators and strategic positioning in that order. The fact that demand by MSEs ranks a poor seventh was perceived to contribute partially to. the. findings of the earlier . study that had found that MSEs do not perceive business development services offered in Nairobi to be relevant. The study concluded there is need to build the capacity of. the NGOs to address the factors affecting delivery of business development services so that they can be demand driven