Factors Influencing Growth of Small and Medium Scale Enterprises Owned and Managed by Youth in Rachuonyo South District, Kenya

Abstract

A preliminary survey of youth in Kenya indicated that harsh labour market had pushed youths into business and that business environment directly affected the growth of their enterprises causing stunted growth. The external conditions surrounding the youth were therefore critical in mobilizing entrepreneurial initiatives and converting them from vicarious entrepreneurs to actual business people. This model proposed the entrepreneurial environment as the independent variable whose various aspects such as management of youth enterprises, entrepreneurship education and training, accessibility to finance, as well as government and private sector policies, among others affected the dependent variable- growth of small scale enterprises, measured by annual turnover (profit level), capital investment (volume of assets), and the number of employees working for the business as well as formation of new enterprises. This study sought to investigate the factors that influenced the growth of small and medium scale enterprises, owned and managed by youth entrepreneurs in Kenya generally and in Rachuonyo South District in particular. The specific objectives were:- To establish the influence of management on growth of youth owned enterprises; to determine the role of education and training on growth of youth owned enterprises in Rachuonyo South District; to investigate the contribution of accessibility to finance on the growth of youth owned enterprises in Rachuonyo South District and to explore administrative strategies that would stimulate growth of youth owned enterprises in Kenya. The study would be useful to the youths in business, to the government and other Policy Institutions and for further research on Youth Entrepreneurship. A descriptive research design was used for the study where the target population was 540 youths, whose businesses were registered by department of social services as at January 2010. Stratified random sampling was used followed by simple random sampling of 30% on each stratum - commercial, manufacturing and service sectors — to get a sample size of 162 youth participants. The study used questionnaire as the data collection tool. A pilot study was conducted to pre - test the strengths and weaknesses of the questionnaire. Data was analyzed using measurers of central tendencies and of dispersions using statistical package for social scientists (SPSS).Frequency tables and percentages were used to present data. The study revealed that the youth engaged in entrepreneurship because they wanted to secure employment. A large proportion was engaged in the service sector 46.9%. Others (11.1%) engaged in business for continuation of family interests. The study also showed that most youth entrepreneurs (32.2%) with SME’s were KCSE drop outs and that a low proportion of youth with SMEs (5.5%) were university graduates. The study further showed that management, education and training, accessibility to finance and entrepreneurial policies had influence on growth of youth SMEs. The study con eluded that strong policies were needed to cushion youth SME’s from punitive regulatory framework conditions to enable them grow their business. The study recommended that the government at national and local levels should introduce tax relief and differentiated tax rates as well as grace periods for youth SME’S to enhance their growth. The study also recommended that the law should clearly define a youth to ensure the correct target group is reached by the youth initiatives and that KEBS should strengthen governing laws and regulations to protect youth entrepreneurs against unscrupulous supplies