An exploratory study on venture capital growth and regulation in Kenya

Abstract

The dissertation is a qualitative exploratory study that looked at Venture Capital growth and regulation in Kenya. Inspite of the significant role played by Venture Capital (VC) in financing entrepreneurial ventures in the West the same level of VC funding uptake does not seem to have taken root in Kenya. Three main objectives therefore formed the basis of this study. First to find out what form of regulation was needed for VC to grow in Kenya, secondly to identify what criteria various institutions, which are not licensed by the Capital Markets Authority were using in advancing VC Funds and lastly find out what factors accounted for the slow pace/ growth of the VC industry in Kenya. The research study used a semi structured in depth face to face interviews with industry players, the Capital Markets Authority, the Africa Venture Capital Association and the Nairobi Securities Exchange The results reveal three main issues. Firstly, the industry in Kenya was young and regulation needed to be considered in this light. Secondly, the type of regulation needed was a facilitative one that would allow the industry to grow. Finally, the VC Industry was also affected to a great extent by government policies especially taxation and legislation. The study concludes by making recommendations on what needs to be in place to encourage VC set up and growth in Kenya. This includes having the government stimulating entrepreneurship, reconsidering the taxation regime, developing a legal framework for the industry. The Capital Market Authority playing a facilitating role and the Securities Exchange increasing the depth of its offerings. It also requires the industry to organise itself so that it can effectively be able to lobby various constituents on matters affecting the VC industry.