An Exploratory study of the constraints to growth of micro and small retail pharmaceutical enterprises in Nairobi, Kenya

Abstract

There is increasing recognition of the role MSE play in socio-economic development in Kenya. Research in Kenya has shown that the informal sector provides more employment than the formal sector. The government has recognised that SME is the panacea to reduction of poverty levels, hence initiated projects such as the Youth Enterprise Development Fund to provide loans for investment in the micro, small and medium enterprises (MSME). It is on record that SMEs contributed more than 18% of the national GDP. Yet there has been a major concern on the high failure rates and lack of growth of the MSE into medium enterprises or even large formal organisations. This study aimed at establishing the constraints to growth of micro and small retail pharmaceutical enterprises in Nairobi. The objectives of the study were to: identify the key characteristics of the retail pharmacy entrepreneurs, highlight the specific characteristics of these enterprises and to investigate the factors which influence the growth and lack of which may lead to stagnation of retail pharmacy MSE5. To achieve this, the study employed a cross-sectional research design. Stratified proportional sampling was used to select samples. Primary data was collected using semi structured questionnaires. Descriptive statistics were used to analyse the data. Linear regression analysis was used to test the relationship between the dependent and the independent variables and X2 test was done to confirm the existence of significant differences.The study established that majority of the respondents used own savings to finance business start-ups and expansion. There was positive relationship between growth and the mode of financing, location of the business, ownership, age of the proprietor, size at inception and ICT utilization whereas there was a negative correlation between growth and business training. Our findings that micro and small enterprises grew at low rates has implications for research and policy formulation on small businesses.