Influence of Licensing on Investor Behavior Amongst the Micro, Small and Medium Enterprises in Nairobi City County

Abstract

Government regulations in Kenya have been identified as major impediments in doing business, among other factors, making Kenya a low investments country internationally. Licensing has been identified as one of the major government regulations that businesses must comply with. The study investigates the influence of licenses on investor behavior. It highlights the exact problems encountered by business people when acquiring licenses. The methodology used to perform this research is the collection of data from a random sample of the MSMEs within the Nairobi CBD. Questionnaires have been used as the main instruments that enable the collection of data from the respondents. The issues highlighted by the research are costs of licenses, time consumed in acquiring licenses, efforts made in acquiring licenses, corruption issues and number of licenses required. The findings of the research show that cost of licenses, time spent to obtain licenses, efforts made in acquiring licenses, informal payments made by the investors while obtaining licenses and the number of licenses required affect the investor behavior. The findings show that many MSMEs prefer to make informal payments such as bribes so as to obtain their licenses quickly and to evade the penalties charged by the government. The conclusion of the research shows that a lot is yet to be done by the government in terms of reforming the licensing procedures. The reforms that have been made are not enough to encourage investors to make investment decisions. There are still many aspects of licenses that negatively affect investor behavior. The recommendations made in this research paper include reviewing the cost of obtaining licenses so as to reduce the costs if possible; reducing the number of licensing procedures so as to reduce time spent in obtaining licenses; reducing the number of licenses required; instilling ethics so as to prevent corruption; and adopting electronic methods of issuing licenses so as to reduce the efforts required in obtaining licenses.