Factors influencing growth of informal businesses in Kenya : a survey of the metal work businesses in Nairobi

Abstract

The aim of this study was to establish factors influencing the growth of metalwork businesses in Nairobi, Kenya. Data for the study was collected from a sample of214 metalwork artisans from Kamukunji and Kariobangi Jua Kali centers using a structured questionnaire and analyzed mainly using descriptive statistics, correlation analysis, and factor analysis. Increased profits, number of products produced, variety products, number of tools, number of employees and sophisticated tools were used to measure growth. The following were identified as the main drivers of growth in the sector: (1) management skills, (2) marketing strategy, (3) uniqueness of products manufactured, and (4) quality of the products sold. The preceding factors were internal to the firm. Those that were external to the firm and, beyond the control of the business owners, were (l) low product demand, (2) limited marketing information, (3) stiff competition from (cheap) imports, and lack of access to foreign markets. In addition, the study found that majority of the metal work businesses were not formally organized and registered. Consequently their ability to access and leverage opportunities for growth such as debt financing is limited. The main reason for the high number of un¬registered businesses was found to be limited knowledge of the of business owners of the importance of such registration and/or incorporation. The reason for this is, in part, due to the level of formal education of the metal work business owners - majority of them were found to have at most a primary or secondary school level of education with no vocational training. These findings suggest that any policy intervention aimed at improving performance and growth of metal work businesses should include a training component to enhance the skills and knowledge of the Jua Kali artisans. However, such training should take into account the level of education in the sector.