Nairobi Securities exchange must play a bigger role in adoption of corporate governance by SMEs

I was privileged to be invited to a colloquium aimed at establishing Framework for the development of The African Union Guidance Note on Corporate Governance organized by The African Peer Review Mechanism (APRM) voluntary governance ”self assessment” by African countries agreed upon by African Union and adopted in 2003.

My submission gravitated on SMEs and Startups as follows: First Startups tend to adopt corporate governance best practice due to push effect by Investors.

Second, Kenyan SMEs practice some aspects of corporate governance albeit informally. This is based on our study of The State of Coaching and Mentorship on SMEs in Kenya where entrepreneurs were leveraging on coaches and mentors in the form of family-friends, chama groups and associations among others to offer checks and balances among other benefits.

Finally application of corporate governance principle to SMEs in Africa must be approached gradually in terms of adoption of an agreed upon code.

In my opinion as an entrepreneurs as well as an expert corporate governance is the least of the worries to a Kenyan entrepreneur hence for them to adopt corporate governance best is dependent on clear communication of value which must be linked to alleviating the chronic challenges they face, top of the list being access to finance.

For example: Financial institutions can ask SMEs to adopt code of conduct in order to access loans

But more broadly the ultimate goal of any business is to grow big enough to list at the securities exchange given that funds raised from listing is ; cheaper than debt, less risky and is unlimited for lack of a better word. On the flip side the Nairobi Security exchange has been experiencing listing drought for the past 5 Years majorly due the strict corporate governance terms and resources needed to list at the GEMS segment which targets SMEs.

NSE may need to lead a broader and inclusive campaign that involves all financing stakeholders from financial institutions, angel networks; Venture capitalist and Private Equity among other players to ensure that corporate governance practices are adopted by SMEs from the get go by developing a model that recognizes partial adoption based on the business stage from micro to medium.

Viffa has a developed a similar model that seeks to ensure best practice are adopted for instance a shop keeper starting off may adopt the following; register the business as a sole proprietor, record financial transactions in a book, ensure transactions go through bank or Mpesa personal number of till number, have one page agreements with suppliers, advisor among others. The net effect is that the shop keeper will have paper trial to enable them access loans for starters but begins the journey of compliance and adoption of corporate governance best practice with the hope that one day the business will be listed at the Nairobi Securities exchange

https://viffaconsult.co.ke/nairobi-securities-exchange-must-play-a-bigger-role-in-adoption-of-corporate-governance-by-smes/