Access to finance is one of the major obstacles affecting Micro, Small, and Medium-sized Enterprises (MSMEs) growth in Africa. There are some critical areas that affect MSMEs’ ability to access funding through financial institutions, and one is their entrepreneurial skills. Poor entrepreneurial skills affect the management of micro and small businesses, which limits their ability to get funding. Entrepreneurial skills refer to a wide range of technical, leadership, business management, and creative thinking skills that allow an entrepreneur to run a successful business.

Poor entrepreneurial skills can impact the viability of a business and obstruct it from growing and creating jobs. Entrepreneurs need funding to scale. Funding is accessed mainly through a financial institution in the form of a loan or an investor in the form of equity. Financial institutions evaluate loan applications based on the ability of a business to repay the loans. The business owner’s technical skills have much to do with meeting the bank’s criteria. In addition to the firm’s ability to repay a loan, the loan application process can be burdensome and requires someone with technical knowledge to start and complete the process. 

Small businesses’ success is vital to Africa’s economic development and job creation. According to African Development Bank, 22% of Africa’s working-age population is creating companies, and this is the highest entrepreneurship rate in the world. Africa also has a higher percentage of female entrepreneurs compared to other continents. Twenty-seven percent of the African female adult population is engaged in early-stage entrepreneurial activity. Women in Africa are twice as likely to start a business than women elsewhere. 

If developed well, entrepreneurship skills can help MSMEs create jobs, alleviate poverty, and promote gender equality. Apart from promoting economic development, strong entrepreneurship skills can support innovation and social changes in African countries when adequately harnessed. 

Many impediments affect the ability of small businesses to access finance and be successful. These impediments include financial institutions’ regulations, government policies, poor infrastructure, political factors, and insecurity issues. However, a significant barrier limiting the ability of MSMEs to access finance is their lack of entrepreneurial skills. Aside from access to finance, a lack of business skills is cited as a top obstacle to small business growth. 

Poor entrepreneurial skills affect small businesses by leading to the following:

• Waste Of Resources

Poor entrepreneurial skills usually lead businesses to waste resources. Business owners who need more time, business management, and financial management skills utilize more resources than required. Many entrepreneurs find it challenging to adhere to or create a budget and prevent overspending on irrelevant projects. Not focusing on budget, assets, or cash flow could lead to unnecessary spending, increasing expenses and affecting the business.

• Low Profits

Many small businesses struggle to keep profits up. When a company is not run correctly, it can experience losses, making the entrepreneur think that maybe they have a terrible idea when it is abysmal management. Low profits can be a result of poor entrepreneurship skills in a business. Business managers and entrepreneurs that understand the usefulness of entrepreneurial skills and utilize it will be able to access finance and grow their businesses. The lack of business knowledge needed to operate the business can affect the company’s revenue.

• Increased Employee Turnover

The growth of Micro, Small, and Medium-sized Enterprises is a catalyst for job growth for African youths. High employee turnover can offset MSMEs’ contribution to job creation numbers. Most of the time, increased employee turnover stems from poor entrepreneurial skills on the part of business owners. When entrepreneurs understand the right skills to manage their employees, and positive outcomes are evident, workers will be willing to stay for more extended periods, thus reducing employee turnover, which can impact the progress of the business.

These effects play a role when small business owners attempt to apply for finance. Since banks are continually assessing risks to minimize them, when evaluating small business applications, they generally check the ability of a firm to pay back funds. Financial institutions look at statements like profit and loss, balance sheets, and cash flow, showing gains or losses and how the entrepreneur manages the business resources. Acquiring entrepreneurship skills then is important because they help small businesses learn how to keep financial records and manage finances, which in turn can help them access finance.  

So what entrepreneurial skills are important for small business owners to be successful and improve their access to finance? These skills include, but are not limited to, the following:

• Business Management

Business management skill is one of the most critical entrepreneurial skills business owners should acquire. With business management skills, entrepreneurs can understand how to make the most suitable and healthy decisions for their enterprise. 

Business management skill also encompasses the ability to introduce new products and services at the most suitable time. Management skills can significantly assist African entrepreneurs in gaining better control of their businesses and making higher profits.

• Financial Management

Financial skills are critical in accessing and managing finance. To qualify for financing, a small business must show that it is financially sound. African micro and small businesses need to understand the importance of having financial skills. For example, many micro and small business owners do not understand the importance of basic financial management. Many mix their personal finances with business finances which alters their creditworthiness and limits their access to finance.  

In addition, many MSME owners do not keep records or receipts of the business’s daily or monthly financial activities. Lack of financial knowledge is one of the top five reasons many micro and small enterprises crash within the first few years. Proper control of finances can assist a company in reaching its peak and achieving greater productivity.

• Marketing 

In the world of business, branding and marketing skills are profoundly essential to the success of any organization. Research conducted by Louise Van Scheers shows that Small and Medium-sized Enterprises lack of marketing skills contributes to the high business failure rate in South Africa. In South Africa and other African nations, branding and marketing remain a significant part of the reasons businesses collapse. 

Branding is essential because it deals with creating and implementing identifiable characteristics for the business. With the aid of excellent branding, a firm can increase the recognizability of its products and services amongst consumers giving them a competitive edge within the market which can, in turn, increase the business revenue. Both marketing and branding skills are beneficial for micro and small business owners.

• Personal Initiative

Personal initiative skills are designed to build self-starting and persistent behavior. According to the World Bank, studies show that traditional business training does not often increase the profit of small businesses in developing countries, particularly those owned by women. Personal initiative training can help by teaching entrepreneurs and small business owners how to create an entrepreneurial mindset. Research shows that entrepreneurs who took the personal initiative training saw their profits rise by an average of 30%. 

• Time Management

Time management is another core entrepreneurial skill that business owners must acquire. By implementing critical time management skills, entrepreneurs can quickly achieve more and manage their businesses better. For women entrepreneurs who have to manage their homes and business, understanding effective time management can aid significantly in increasing efficiency in both areas. Time management skills can be developed by breaking down activities into manageable to-do lists and creating deadlines and achievable objectives. With strong time management skills, entrepreneurs can get more productive, prioritize the right activities, and boost goal orientation.

Methods to Boost Skills

It is important that small business owners, entrepreneurs, and stakeholders in the MSMEs ecosystem understand the importance of promoting entrepreneurship skills. Also, MSMEs and entrepreneurs need to acquire and utilize these skills in operating their enterprises.  

One method to help small business owners improve their entrepreneurial skills is the provision of experienced mentors. At Kilsah Consulting, for example, small businesses and entrepreneurs can access mentors to help train and answer their questions about different areas of their firm’s operations. 

Another option is the provision of regular entrepreneurial workshops. Business workshops featuring experienced entrepreneurs or mentors as speakers could also help MSMEs acquire entrepreneurial skills.

Participating in these workshops will help entrepreneurs fill their knowledge gap and gain valuable insights into running their businesses successfully, enabling them to increase their chances of accessing finance. Additionally, such workshops are perfect for building networks and learning from industry leaders.

Conclusion

Many entrepreneurs possess talents but still need practical skills to run their enterprises. For example, while an entrepreneur may be a good baker, running a bakery requires more than just baking sweet cakes. It involves managing finances, managing employees, marketing, and leadership abilities. Entrepreneurial skills help small business owners manage their businesses well, enabling them to access finance to scale. 

Entrepreneurship skills are essential when it comes to building a successful business. Business management, time management, financial skill, branding and marketing, and customer management are some of the most important entrepreneurial skills that business owners should possess. 

Small businesses and entrepreneurs are the backbones of the African economy and are vital in alleviating poverty, promoting economic development, and promoting gender equality. Entrepreneurship activities such as producing new products and services stimulate new employment, which helps promote economic growth. However, an increase in the number of highly skilled entrepreneurs will further improve Africa’s economic development rate. Micro, Small, and Medium-sized Enterprises and entrepreneurs can improve their business skills and chances of accessing finance by taking advantage of opportunities that will enhance their entrepreneurial skills.