Why It May Be Difficult For Small Companies To Raise Debt Finance In Kenya (Say Jua Kali Companies)

  • Lack of security
  • Ignorance of finances available
  • Most of them are risky businesses as there are no feasibility studies done (chances of failure have been put to 80%).
  • Their size being small tends to make them UNKNOWN i.e. they are not a significant competitor to the big companies.
  • Cost of finance may be high – their market share may not allow them to secure debt.
  • Small loans are expensive to extend by bank i.e. administration costs are very high.
  • Lack of business principles that are sound and difficult in evaluating their performance.

Solutions to the Above Problems

  • There should be diversification of securities e.g. to accept guarantees.
  • Education of such businessmen on sound business principles.
  • The government should set up a special fund to assist the jua kali businessmen.
  • Encourage formation of co-operative societies.
  • To request bankers to follow up the use of these loans.

Difficulties For Small Companies To Raise Debt Finance In Kenya

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