How small businesses hit by pandemic found profits online

When Covid-19 struck most businesses were caught off-guard owing to their poor online presence.

For some visionary entrepreneurs like Lorna Mukasa who had digitised their businesses prior, things were a bit more seamless.

Lorna (pictured) is the proprietor of Tunga Tunga hand-crafts, a social enterprise that focuses on designing and promoting African produced fashion, home décor and crafts products made by women from underprivileged backgrounds.

The business, which she took online in 2019, has since evolved into an e-commerce site that gives a big number of entrepreneurs a platform to showcase their craft.

“I decided to go digital when I learned that websites were making a lot of money from my products, so I decided to use my savings to launch a website that would serve the same purpose,” she told Enterprise.

She points out that shortly after launching the website, the pandemic struck and attracting new vendors to sell through her website wasn’t easy.

“It was challenging because a lot of people do not trust online businesses, and also, running e-commerce is very expensive.”

However, things picked up and even started attracting global clients.

The funding challenge

The next challenge was sourcing funding to scale her business.

“Banks were not giving loans at the time, and if any, the rates were too high,” she explained.

This is when she came across the Kenya Private Sector Alliance (Kepsa) who vetted her business and offered her a loan.

This helped Lorna hire new talent, buy machines and she is planning to accommodate more vendors.

Lorna not only gives space to digital entrepreneurs but also, physical space in her shop in Lavington.

Some of the challenges in digitizing her business include having a software developer on standby. “In case of errors, developers take at least three hours to solve it. However, it is a work in progress; we are not where we were in 2019.”

Micro, Small and Medium Enterprises (MSMEs) such as Lorna’s have been the worst hit during the pandemic.

According to Kepsa, attempts to cushion them from the Covid-19 effects have been put in place, however, slow business recovery has been witnessed in 2021. 

In a bid to cushion the effect of the pandemic on MSMEs, Kepsa, in its Business Recovery and Resilience Programme gave out interest free short term business support loans of about 42 million to over 100 MSMEs.

The pandemic also meant no physical interaction giving e-commerce a boost.

E-commerce to boost and diversify revenue streams

Kepsa Projects Manager Harrison Ngatia says that 1,605 businesses were on boarded onto various e-commerce marketplaces to boost their revenue streams during the pandemic.

The Kepsa recovery project also saw MSMEs access finance, capacity building, training and mentorship.

“Access to market is the main challenge facing SMEs others include reliance on informal financing sources, knowledge gaps, inability to manage finances, poor work-life balance and managing employees and suppliers,” he said, as he also urged small businesses to learn about laws affecting them.

“While giving the loans, we learned that most SMEs do not have capacity to prepare documentation required by financiers. We developed a coaching program to help them prepare necessary documentation. Some SMEs did not know how to market on e-commerce.”

Ngatia noted that MSMEs, which are the biggest employers, suffered more than established businesses. 

“Our own survey at Kepsa in September 2020 showed that 14.7 per cent of businesses closed their operations when Covid-19 pandemic hit the country. Also, 3.3 per cent of operational businesses indicated they will close their businesses if Covid-19 restrictions are not eased,” he said.

Poor savings culture among SMEs

Ngatia added that despite some businesses being wiped out of the market because of lack of supplies and hiked prices of commodities, there are those who survived the blow of the crippled business environment.

“We were only able to fund 15 per cent of the applicants, the demand was too high. SMEs are structured in a way that they are not able to save because they are surviving, their saving culture is poor.”

He added that businesses in the healthcare sector had outperformed their peers in other sectors. 

“Businesses in the healthcare sector have performed relatively better compared to other sectors. The survival of other sectors depended on various factors including nature of the business, business location, marketing strategy, accessibility by customers and digital adaptability.”

Ngatia also added that upon training, SMEs digitised faster. “They are very flexible; they move where opportunities are. Most of the down-scaled their employees when the pandemic came, some moved to low rent and digital marketing.”

He further added that a notable scale of mergers was witnessed among SMEs as a way of reinvention.  

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