ENTREPRENEURIAL ECOSYSTEM MAPPING IN MATHARE: SYNTHESIS REPORT NAIROBI, KENYA December 2018 SITE Enterprise Promotion (SITE) Center for International Private Enterprise (CIPE) Anne Kamau (DrPH) Email: [email protected] 1 Table of Contents EXECUTIVE SUMMARY ........................................................................................................ iii INTRODUCTION .................................................................................................................... 1 KEY DOMAINS AND ISSUES ................................................................................................ 2 1. Entrepreneurship .......................................................................................................... 2 2. Policy and Regulations ................................................................................................. 2 3. Finance........................................................................................................................... 3 4. Support .......................................................................................................................... 4 5. Culture ........................................................................................................................... 5 6. Infrastructure ................................................................................................................ 6 7. Security .......................................................................................................................... 7 8. Information and Communication ................................................................................ 8 OPPORTUNITIES AND OBSTACLES ................................................................................... 9 Opportunities ..................................................................................................................... 9 Obstacles ............................................................................................................................. 9 KEY CONCLUSIONS AND RECOMMENDATIONS......................................................... 10 Conclusions ...................................................................................................................... 10 Recommendations ............................................................................................................ 10 ii EXECUTIVE SUMMARY This report is a synthesis of the findings of an enterprise ecosystem mapping conducted in Mathare in Nairobi between April and May 2018 by SITE Enterprise Promotion (SITE) in collaboration with the Center for International Private Enterprise (CIPE). The mapping exercise used the Organisation for Economic Cooperation and Development (OECD) Entrepreneurship Measurement Framework applied in the context of Mathare informal settlements. Researchers obtained information through a desk review and fieldwork conducted among ninety-eight respondents in two Mathare wards – Kiamaiko and Mlango Kubwa. The information focused on enterprise ecosystems, existing domains (issues) in the ecosystem, and how they interact with each other. The domains focused on security, access to working spaces and utilities, access to affordable finance and credit, business support services and skills, access to ICT and business information, and the business environment. Gaps in the domains were identified as well as existing opportunities that could be used to harness business growth. The main identified gaps were lack of working spaces, inadequate financing, insecurity, and lack of banking services. The opportunities included good entrepreneurial spirit and positive attitudes towards entrepreneurship among existing and potential entrepreneurs for whom entrepreneurship is a real, exciting, respected, and financially rewarding occupation. There are existing factors supporting the entrepreneurship ecosystem: ready markets for goods and services due to high and increasing population, availability of electricity and transport services, high telephone and internet connection, and the presence of several community and development organisations. Existing opportunities can be tapped to stimulate business growth and start-ups in Mathare to take advantage of the growing population. Domain gaps can be addressed through advocacy and economic empowerment programmes, in partnership with the community, national and county governments, development partners, and other organisations to improve the enterprise ecosystem in Mathare. iii INTRODUCTION SITE Enterprise Promotion (SITE) – a Kenyan development organisation – in partnership with the Center for International Private Enterprise (CIPE), implemented a ten-month project in Mathare informal settlement in Nairobi. The project focused on building the capacity of the informal private sector in Mathare to engage in collective action in order to enhance business growth and the overall business enabling environment. Started in 1963, Mathare informal settlement is one of the oldest in Nairobi as well as one of the biggest in Africa and around the world. Mathare is comprised of four wards: Kiamaiko, Mlango Kubwa, Mabatini, and hospital wards. The settlement lies between Thika road and Juja road. According to the 2009 census, Mathare’s population is estimated to be more than 124,401 people, 65% of whom are youth. Mathare is among the areas in Nairobi that experienced the worst forms of election violence, which affects business operations and led to the disruption and closure of many businesses. The SITE and CIPE Mathare entrepreneurial ecosystem mapping gathered information about entrepreneurship domains and how they interact with each other. The mapping, conducted between April and May 2018, assessed the business environment in which the entrepreneurs operated. It also analyzed entrepreneurial gaps in the domains and opportunities for engaging with duty bearers to influence policies that affect businesses. Further, the mapping generated information on possible actions and interventions for addressing the gaps in order to promote business start-up and growth in Mathare. The mixed-method1 mapping exercise targeted potential and active entrepreneurs in two wards in Mathare: Kiamaiko and Mlango Kubwa. To begin with, a desk review was undertaken to inform the issues to be covered in the study and data collection tools were designed, including the entrepreneurs’ questionnaire, focus group discussion (FGD) guide, and key informant interview guide. Interviews were conducted among ninety-eight existing and potential entrepreneurs, along with in- depth interviews with 13 organisations in Mathare, and five key informant interviews (KIIs). Four FGDs were also held – two in each ward – with 36 FGD participants (60% of whom were women), and one case study was developed. Direct observations were made on the nature of enterprises and how they operate. Quantitative data from entrepreneurs’ interviews were analysed using CSPro version 7.1, while qualitative data from FGDs, KIIs, and the case study were analysed using thematic analysis2. Observation data was used to supplement information from other sources. Most entrepreneurs (68% – 67 out of 98)) were female and (32% – 33 out of 98) male. More than half (52%) were over 36 years old. Most of the entrepreneurs (83%) operate within Mathare. The service sector was dominant, accounting for 50% of entrepreneurs participating in the desk review, and included hair salons and car wash 1 businesses. Retail trade accounted for 43%, and included businesses that sell foodstuffs, vegetables, fruits, and other groceries. The production sector accounted for 7%, and included soap-making, tailoring, and bakeries. Forty-two organisations in Mathare that focused on entrepreneurship development, health, training, childcare support, and sports were also identified. KEY DOMAINS AND ISSUES Below is a summary of key findings on domains (issues) assessed in the entrepreneurship ecosystem mapping. The findings are summarised into eight domains that were the focus of the mapping exercise. 1. Entrepreneurship Entrepreneurial spirit and risk-taking are key ingredients for business start-up, growth, and survival. Businesses start, grow, and survive if the owners are committed and willing to take risks. In Mathare, the willingness to start businesses is high, even though most businesses start small and are largely owner operated. Many (60%) have operated for over three years, however the turnover remains low with sales averaging between KSh 200 – 500 per day, affecting business growth. Nonetheless, the communities in Mathare value their businesses and perceive them as legitimate and real jobs from which they earn their livelihoods. Business start-up is largely necessity- driven, primarily to meet basic needs of food, clothing, rent, school fees, and medical costs. Therefore, making profits and business expansion is not the main drive for starting businesses; rather, starting a business is a means of survival3. 2. Policy and Regulations Permits, licensing and business formalisation For businesses to be recognised, they need to register with the relevant county authorities. About 41% of the respondents experienced no challenge in accessing business licenses and permits, while 19% had minor obstacles. They therefore have been able to access county government services to pay for permits or fees. About 30% of the respondents experienced moderate, major, or severe obstacles in accessing business licenses and permits. Even though most respondents