Kenya Business Development Service

Providers Landscaping Study

Mapping of the landscape of Business Development Service providers in Kenya.

Terms of Reference

Contents
I. Introduction ......................................................................................................................... 2
II. Kenya mapping exercise ..................................................................................................... 2
A. Size of SME ................................................................................................................. 3
B. Stage of growth............................................................................................................ 3
C. Types of SMEs ............................................................................................................ 3
D. Themes and Sectors .................................................................................................... 4
E. Location ....................................................................................................................... 4
F. Intervention type .......................................................................................................... 4
G. Funding for BDS .......................................................................................................... 4
III. Methodology and Stakeholder Engagement .................................................................... 5
IV. Deliverables .................................................................................................................... 5
V. Timeline .............................................................................................................................. 5
VI. Consultant Requirements ................................................................................................ 6
VII. Proposal requirements .................................................................................................... 6
Annex ........................................................................................................................................ 7

Contact:

Mary Mwangi
Programme Manager, Argidius Foundation,
[email protected]

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 I. Introduction
Founded in 1956, the Argidius Foundation is a Swiss based charitable foundation, which is
part of Porticus, the international organization that advises the philanthropic programmes of
charitable entities established by the Brenninkmeijer family. Argidius has supported
international, market-driven, business development initiatives to alleviate poverty since 1992.
Argidius’ vision is of ‘’sustainable and growing SMEs improving the lives of the poor through
increased income generation and provision of opportunities for a dignified life through work.’’ To
achieve this, Argidius makes grants to organizations which support small businesses in achieving
business growth in its focus countries, and aligned with its strategy:

Argidius focuses on improving the effectiveness and reach of small enterprise business
development services. We do this in three ways:

• Build effective ecosystems of SME support in focus countries (Kenya, Uganda,

Guatemala, Nicaragua & Colombia (new))
• Build the capacity of market-leading BDS providers in focus countries and beyond
• Promote effective learning to advance SME development by increasing the understanding
of what works, and sharing our lessons with others.

Please see Appendix A for Argidius’ Theory of Change.

II. Kenya mapping exercise

At Argidius we are focused on improving the effectiveness of SME support, with the primary
outcomes being growing SME revenue, investment and increased job creation. Argidius has been
supporting Business Development Service(BDS) providers in Kenya since 2015. In the last 5

2 TOR – Kenya SME BDS Landscaping Study

years we have witnessed changes in the BDS landscape. We have observed changes in the
number of BDS providers targeting SMEs in Kenya, changes in the types of services available to
SMEs, changes in the intensity of the interventions on offer and changes in granularity and
differentiation of BDS.

The foundation is commissioning this mapping study to learn about these changes and get a
“snapshot in time” of what the landscape for BDS in Kenya looks like. The foundation
commissioned a landscaping study of BDS in Kenya in 2015. (Find it here.) We are interested in
developing an updated inventory of the BDS providers that target SMEs in Kenya and identifying
trends and gaps. The study should highlight the distribution of BDS providers that work with SMEs
of different sizes, stages of development, types and SMEs in different sectors and located in
different parts of the country and the distribution of different forms of BDS. The study should also
highlight changes in the BDS landscape over time through case studies.

In the introduction, the study should highlight any macro trends that have changed over the last
5 years including but not limited to changes in public policy and investment, changes in regulation
and tax and other changes that have impacted ease of doing business for SMEs.

A. Size of SME
The study should highlight the distribution of BDS providers targeting SMEs of different sizes as
defined by average annual turnover and number of employees. There are a number of
frameworks in use for classifying SMEs. Through a literature review the consultant should identify
the different classifications that are widely used and develop a framework that is applicable and
relevant in the Kenyan context. In addition to studies and reports that have been published on
SMEs in Kenya, some broad parameters for categorizing SMEs by size can be found in the
regulatory framework e.g. the Micro and Small Enterprises Act (2012), Income Tax Act etc.

B. Stage of growth
The study should highlight the distribution of BDS providers targeting SMEs at different stages in
their development. This includes but is not limited to SMEs in the idea stage, early stage, growth
stage and maturity.

C. Types of SMEs
The foundation classifies SMEs by their growth characteristics. The Collaborative for Frontier
Finance 12have expounded on this approach and developed a framework for classifying SMEs
based on the entrepreneurs motivation for starting the businesses, size, age, typical growth paths
of different types of SMEs and the adoption of technology and its impact of how an SME develops
over time.

They have identified 4 main types of SMEs: formalizing businesses, dynamic businesses, niche
ventures and high growth ventures. This study should highlight the distribution of BDS available
to each type of SME in Kenya.

1Dalberg, (2018), Missing Middles, Collaborative for Frontier Finance.

https://static1.squarespace.com/static/59d679428dd0414c16f59855/t/5bd00e22f9619a14c84d2a6c/1540
361837186/Missing_Middles_CFF_Report.pdf

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 D. Themes and Sectors
Provision of BDS in Kenya has been influenced by the emergence of certain themes including:
focus on marginalized groups including women, youth and persons with disabilities, focus on
social and environmental impact including climate action and circular economy. The study should
highlight BDS providers who target SMEs that identify with these themes.

There are some differences in the needs of SMEs operating in different sectors. Consequently,
there are a number of BDS providers in Kenya that specialize in supporting SMEs in certain
sectors including but not limited to agriculture, agro processing, manufacturing, education,
technology, education, construction, real estate, professional services, hospitality, healthcare etc.
This study should identify BDS providers that target SMEs in specific sectors in Kenya.

E. Location
This study should identify the distribution of BDS providers working with SMEs in different parts
of the country. In addition to Nairobi, the Ministry of Devolution has identified 6 Regional
Economic Blocs that have emerged as a result of integration by counties based on economic,
historical and political similarities. These are;

1. Frontier Counties Development Council (FCDC) comprising of seven (7) counties

namely; Garissa, Wajir, Mandera,Isiolo, Marsabit, Tana River and Lamu.
2. North Rift Economic Bloc (NOREB) comprising of seven (8) counties namely Uasin
Gishu, Trans-Nzoia, Nandi, Elgeyo Marakwet, West Pokot, Baringo, Samburu and
Turkana.
3. Lake Region Economic Bloc (LREB) comprising of thirteen (14) counties namely Migori,
Nyamira, Siaya, Vihiga, Bomet, Bungoma, Busia, Homa Bay, Kakamega, Kisii, Kisumu,
Nandi, Trans Nzoia and Kericho.
4. Jumuia ya Kaunti za Pwani comprising of six (6) counties namely, Tana River, Taita
Taveta, Lamu, Kilifi, Kwale and Mombasa
5. South Eastern Kenya Economic Bloc comprising of three (3) counties namely Kitui,
Machakos and Makueni. 3
6. Mt. Kenya and Aberdares Region Economic Bloc Comprising of ten (10) counties
namely Nyeri, Nyandarua, Meru, Tharaka Nithi, Embu, Kirinyaga, Murang’a, Laikipia,
Nakuru and Kiambu.

F. Intervention type
BDS is a combination of many different types of interventions. These include but are not limited
to: incubation, acceleration, training, leadership development, coaching, mentorship,
management consulting, networking, financial modelling, transaction advisory etc. This study
should identify BDS providers in Kenya providing different types of BDS.

G. Funding for BDS

BDS for SMEs in Kenya is funded through various channels. In addition to fees charged to
SMEs or investors, development partners, corporations, private philanthropy and government
play a major role in funding BDS. The study should identify these funders and highlight the
availability and distribution of funding by location, SME type, stage and intervention type.

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 III. Methodology and Stakeholder Engagement
This study will involve a rigorous review of available literature, primary data collection and
validation of findings with key stakeholders including government and representative groups
including but not limited to: The Aspen Network of Development Entrepreneurs (ANDE), East
African Venture Capital Association(EAVCA), Association of SME and Start up Enablers of Kenya
(ASSEK), Association of Country Wide Innovation Hubs and the Kenya Private Sector Alliance-
SME sector.

IV. Deliverables
The desired outcome of the study is the creation of a shared understanding of the BDS landscape
in Kenya and an appreciation of the gaps therein. The findings of this study will inform the
foundation’s planning and will be shared with other actors in the space including other grant
makers, BDS providers, investors and government.

As a follow-up to this exercise, the Foundation is considering commissioning a 2nd phase to take
the outputs of this exercise and develop resources for entrepreneurs in Kenya. These resources
will be designed to help entrepreneurs understand BDS and navigate the BDS landscape in
Kenya effectively.

The desired outputs of this study are:

i. A report outlining the findings of the study on the availability of BDS for different types of
SMEs in different parts of the country. The report should highlight any trends and gaps
identified.
ii. An inventory of BDS providers in Kenya that details what services they provide and what
types of SMEs they target.
iii. Illustrations highlighting the distribution of BDS providers targeting SMEs in the different
categories highlighted in section II.
iv. Case studies illustrating changes in the BDS landscape over the past 5 years.
v. A slide deck that summarizes the findings of the study
vi. A one-page concept note outlining the consultant’s proposed approach to developing
resources to help entrepreneurs in Kenya navigate the BDS landscape.

V. Timeline
The main activities and timetable for this consultancy is proposed below. The consultant should
propose an alternative timeline if this does not work.

Evaluation Process Deadline Responsibility

To reach Argidius by
Proposal Consultant team
15th July 2021
Selection and contracting of consultancy By 23rd July 2021 Argidius
Consultant team and
Mid-project progress review 30th August 2021
Argidius
Draft deliverables 8th October 2021 Consultant Team
Final deliverables complete 29 October 2021 th
Consultant Team
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 VI. Consultant Requirements
The selected consultant team will require the following:

• Working knowledge of small enterprise development programing in Kenya.

• Demonstrated experience conducting primary research on SMEs in Kenya.
• A good network and relationships in the SME development sector in Kenya including BDS
providers, relevant aggregators, County and National governments.
• Excellent written presentation and report writing.

VII. Proposal requirements

1. Research Methodology: Describe your overall approach and research methodology.

2. Specific eexpertise of the research team members. Include CVs (no more than three pages
each and attached as annexes).
3. Should contain an itemized budget in USD inclusive of all applicable taxes not exceeding
$50,000.
4. Include a brief work plan (Gantt chart format).
5. Proposals should be concise and not exceed 4 pages (excluding annexed CVs).

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Annex 1: Theory of Change Diagram

Page | 23
Argidius segmentation of SMEs into Venture, Dynamic, and Formalizing
Businesses larger than SME are not of interest to Argidius (SME defined as <$15m revenue, <300 employees (World Bank), and seeking <$2m investment (Aspen Network))

Example partners working with

‘’Ventures’ Unreasonable, YSB, I&P,
GrowthAfrica, Intellecap , Agora Example partners
working with
VENTURE ‘Dynamics’ and
- Planning for/ actively DYNAMIC ‘Formalizing’
seeking equity/ impact - Incremental growth trajectory PUM
investors - Formalized
$ Revenue - High growth trajectory - Typically financed internally or
- Scalable business model debt finance through financial WWB
- Typically participate in institutions
high-touch programmers , - Require a range of services
Technoserve

Action 4
Enterprise

Bpeace

BPN
c. $ 50k
Alterna

FORMALIZING
- Growth trajectory Fundap
- Typically sub $50k
- Opportunity driven rather than subsistence Youth Business
- In the process of formalizing processes, accounts, sales
- Financed through savings/ friends/ family/ upper end of microfinance
Subsistence businesses not on a growth trajectory to consider formalizing are not of interest to Argidius

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Time