The state of social enterprise in Kenya

By ygap Kenya Program Manager Carol Kimari.

The genesis of the social enterprise movement in Kenya can be traced back to the 1980s when the country began to experience significant economic restructuring. This is what was popularly known as the structural adjustment programs (SAPs). With reduced government expenditure in areas considered as essential social services, many non-state actors came up to plug into the gap created by these policy changes. 

According to a study by the British Council conducted 2016 “State of Social Enterprise in Kenya,” at the time, there were over 44,000 social enterprises in Kenya. Since then, the growth has been significant, and the number could have doubled by now. The social enterprise ecosystem in Kenya is driven by young people under 35 years attributed to the high literacy levels and lack of employment opportunities.  

Take an example of the last cohort of ygap 2020 accelerator; more than half of the entrepreneurs were people under 35 years. The primary objectives of these social enterprises are to respond to the needs in their communities; create employment, increasing financial inclusion, enabling small businesses create value, helping parents access better pre & post-natal care, addressing literacy levels especially in marginalized groups and communities, helping farmers access better markets and farm inputs, and helping young women access employable skill among others.

The greatest barrier to early-stage social enterprises in Kenya continues to be lack of access to capital. In Kenya, many financial institutions are reluctant to give financing to these enterprises. Most financial institutions feel that these enterprises are high risk owing to the fact that they don’t have assets they can attach to the loans. This has slowed down the growth of many enterprises. ygap Kenya, as an early startup accelerator tries to validate their impact and business models to make them more investable and attractive to financing entities. We do this by giving grants to test ideas/ products and overcome early stage growth barriers and connect them to growth funders.

However, although funding is one of the biggest barriers, the lack of government policy or legislation specifically aimed at social enterprises in Kenya is also a big challenge. There are small steps being made like changing the age of directorship in companies from 21 years to 18 years. This means younger people can own businesses without age limitation. This has led to more people registering businesses and according to the same report, State of Social Enterprise in Kenya, more women are running social enterprises. Such policy changes have seen almost half (44%) of the enterprises in Kenya are being run by women most of them under the age of 35 years.

Carol at the recent ygap Kenya Program

The rapid growth in the sector has seen the need to build apex bodies/ organizations that seek to support the sector players better realize their respective social missions in supporting social enterprises. These organizations support their members by organizing seminars where people can learn new ways of doing business, networking event and policy lobbying. Among them are Aspen Network of Development Entrepreneurs (ANDE), Project, East Africa Social Enterprise Network (EASEN) and the Social Enterprise Society of Kenya (SOSEK). All these have been instrumental in creating a more organized ecosystem. Member organizations like the Business Network International which is a business referral organization that sees only one organization working within a specific field being admitted to a certain chapter. This greatly favors social enterprises because of referrals from other members and reduced competition. Sankalp Africa summit is a global forum that has created an ecosystem of entrepreneurs, investors, corporations, multilaterals and policy makers who are committed to furthering the cause of development through entrepreneurship and innovation, and brings them together to initiate dialog and enable action through innovation and entrepreneurship at the base of the pyramid across five high impact sectors: Agriculture, Food & Rural Businesses, Education, Clean Energy, Health, Water & Sanitation, and Technology for Development. This year’s summit in Nairobi saw Ygap Kenya’s four entrepreneurs exhibit their work. This exposure is a follow up to the capacity building programs that Ygap takes the entrepreneurs through to make them investment ready.

As the Kenyan social enterprise space continues growing, it has attracted a host of social enterprises support mechanisms like; incubators, accelerators etc. Kenya Climate Innovation Centre, LakeHub (which was part of ygap 2020 accelerator), Intellecap are among the leading incubators in Kenya. We have also seen the emergence of new concepts like impact investing which is still gaining traction in the country. There are also plenty of co-workspaces in Kenya like the Kijiji that encourage social enterprises to thrive by offering affordable co-working spaces. 

Finally, the emergence of social media as a marketing and communication tool has been a revelation for most of social enterprises. It is now the norm to see a social enterprise set up social media pages to share information and market their products either through Facebook or Instagram. For one of the enterprises we support, Soi Designs, the primary marketing tool is social media. This is great because most of them cannot afford traditionally mainstream marketing platform like newspapers, and magazines.

Social enterprises are rapidly growing in Kenya and these enterprises span out in almost all sectors of the economy- giving investors a cocktail of options to venture in. Adequate funding in social enterprises would provide the necessary leverage as most of them are at a tipping point. 

Entrepreneurs from the ygap Kenya Program 2020