FACTORS INFLUENCING THE SUCCESS OF YOUTH ENTREPRENEURSHIP BUSINESS STARTUPS: A CASE OF TECHNOSERVE STRYDE PROGRAM IN NYERI COUNTY BY CAROLYNE W.

Transcription

1 FACTORS INFLUENCING THE SUCCESS OF YOUTH ENTREPRENEURSHIP BUSINESS STARTUPS: A CASE OF TECHNOSERVE STRYDE PROGRAM IN NYERI COUNTY BY CAROLYNE W. MAINA UNITED STATES INTERNATIONAL UNIVERSITY AFRICA SUMMER 2016

2 FACTORS INFLUENCING THE SUCCESS OF YOUTH ENTREPRENEURSHIP BUSINESS STARTUPS: A CASE OF TECHNOSERVE STRYDE PROGRAM IN NYERI COUNTY BY CAROLYNE W. MAINA A Research Project Submitted to the Chandaria School of Business in Partial Fulfilment of the Requirement for the Degree of Masters in Business Administration (MBA) UNITED STATES INTERNATIONAL UNIVERSITY AFRICA SUMMER 2016

3 STUDENT S DECLARATION I, the undersigned, declare that this is my original work and has not been submitted to any other college, institution or university other than the United States International University in Nairobi for academic credit. Signed: Date: Carolyne Maina (ID: ) This research report has been presented for examination with my approval as the appointed supervisor. Signed: Date: Fred Newa Signed: Date: Dean, Chandaria School of Business ii

4 COPYRIGHT Carolyne Wanjiku Maina, 2016 All rights reserved including rights of reproduction in whole or part in any form without the prior permission of the author or United States International University- Africa or Office of the Deputy Vice Chancellor Academic Affairs. iii

5 ABSTRACT The general objective of this study was to determine the factors that influence success of youth business startups. Specific objective for the study were; the extent to entrepreneurship training influence the success of youth business start-ups; How access to finance influence the success of youth business start-ups, and how business development services enhance success of youth business start-ups. This study adopted a descriptive survey research design. The population of the study was composed of 410 youth under TechnoServe s Stryde entrepreneurship training program in phase two, cohort one youth beneficiaries in Nyeri County. Stratified sampling technique was adopted to select a sample size of 196. The study primary data was collected using closed ended structured questionnaires. Data was analyzed for descriptive statistics and inferential statistics using Statistical Package for Social Sciences (SPSS). Findings were presented using tables and figures. The findings on the influence of entrepreneurship training on success of youth business start-ups revealed the existence of a positive relationship between entrepreneurship training and success of youth entrepreneurship. The relationship was statistically significant. The findings on how access to finance influence on success of youth business start-ups revealed the existence of a positive relationship between access to finance and success of youth entrepreneurship. The relationship was statistically significant. The findings on how business development services influence on success of youth business start-ups revealed the existence of a positive relationship between business development services and success of youth entrepreneurship. The relationship was statistically significant. This study has concluded that the existence of a positive relationship between entrepreneurship training and success of youth business start-ups, this study concludes that the relationship between entrepreneurship training and success of youth business start-ups was statistically significant. This study also revealed the existence of a positive relationship between access to finance and success of youth business start-ups, therefore, the study concludes that the relationship between access to finance and success of youth iv

6 business start-ups was statistically significant. Equally, this study has revealed the existence of a positive relationship between business development services and success of youth business start-ups, therefore, this study concludes that the relationship between business development services and success of youth business start-ups was statistically significant. This study recommends that TechnoServe management should expand training modules beyond finance and record keeping to marketing, sales, elevator pitches, and sustainable growth for business start-ups. TechnoServe should also lobby government to ensure that interest on youth loans is minimal and affordable. Youth having increased opportunities to enhance loans will lead to enhanced success of business start-ups. Finally, TechnoServe should develop mechanisms to ensure that business development services such as access to marketing services, access to information technology services, and access to channels of sales and promotion are available to the youth. These services should not be occasional provisions, but rather, they should be accessible all year round. This can be accomplished through collaborations and partnership with the government, donor agencies and other NGOs offering these services. v

7 ACKNOWLEDGEMENT The researcher wishes to express her sincere gratitude to her supervisor, Mr. F.O. Newa for his invaluable input on this project. She would also like to thank TechnoServe Stryde Nyeri Team for making this research project possible. Last but not least she would like to thank her family and friends for their encouragement, constructive criticism and unconditional support on this and every endeavor. And to God, for always breaking the glass, just for me. vi

8 DEDICATION To God. Without Him I can do nothing. vii

9 TABLE OF CONTENTS STUDENT S DECLARATION... ii COPYRIGHT... iii ABSTRACT... iv TABLE OF CONTENTS... viii LIST OF TABLES... x LIST OF FIGURES... xi LIST OF ABBREVIATIONS... xii CHAPTER ONE INTRODUCTION Background of the Study Statement of the Problem General Objective Specific Objectives Significance of the Study Scope of the Study Definition of Terms Chapter Summary CHAPTER TWO LITERATURE REVIEW Introduction Successful Business Start-Ups Influence of Youth Entrepreneurship Training on Business Start-Ups How Access to Finance Affects the Success of Youth Business Start-Ups Business Development Services and Success of Youth Start-Ups Chapter Summary CHAPTER THREE RESEARCH METHODOLOGY viii

10 3.1 Introduction Research Design Population and Sampling Design Data Collection Methods Research Procedures Data Analysis Methods Chapter Summary CHAPTER FOUR RESULTS AND FINDINGS Introduction Demographic Data Entrepreneurship Training and Success of Youth Business Start-Ups Access to Finance and Success of Youth Business Start-Ups Business Development Services and Success of Youth Business Start-Ups Success of Youth Business Start-Ups Correlation Analysis Regression Analysis Chapter Summary CHAPTER FIVE DISCUSSION, CONCLUSSION AND RECOMMENDATIONS Introduction Summary Discussion Conclusion Recommendation REFERENCES APPENDICES APPENDIX I: COVER LETTER APPENDIX I1: RESEARCH QUESTIONNAIRE ix

11 LIST OF TABLES Table 4.1: Reliability Analysis Table 4.2: Entrepreneurship Training Table 4.3: Access to Loans Has Stringent Conditions for Youth Start-Ups Table 4.4: Stringent Loan Hinder the Success of Youth Business Start-Ups Table 4.5: Stringent Loan Conditions Should Be Abolished to Access to Finance Table 4.6: Training Has Enhanced Your Business Experience Table 4.7: Lack of Business Experience Hinders Access to Finance Table 4 8: Lack of Experience Should Not Hinder Access to Finance Table 4.9: Currently Interest Rates for Loans on Youth Start-Ups Are High Table 4.10: High Interest Rates Hinders the Success of Youth Start-Ups Table 4.11: You Have Marketing Services for Your Goods Services Table 4.12: Marketing Support Services is Important to Youth Start-Up Success Table 4.13: Marketing Services Should Be Part of Entrepreneurship Training Table 4.14: Your Business Connections help You Market Your Products Table 4.15: You Have Received Support Services on Use of ICT Table 4.16: ICT Services Enables You to Reach Clients Quickly Table 4.17:ICT Services Are Essential for the Success of Your Start-Ups Table 4.18: Sales and Promotion Support Through TechnoServe Table 4.19: Sales and Promotion Makes your Products Known to Clients Table 4.20: Sales and Promotion is Essential for Success of Your Start-Up Table 4.21: Success of Youth Business Start-Ups Table 4. 22: Correlation Analysis Table 4.23: Multiple Regression factors Table 4.24: ANOVA Table 4.25: Multiple Regression Coefficients x

12 LIST OF FIGURES Figure 4.1: Respondents Gender Figure 4.2: Respondents Age Figure 4.3: Respondents Level of Education Figure 4.4: Respondents Marital Status Figure 4.5: Area of Entrepreneurship Figure 4.6: Initial Start Up Capital Figure 4.7: Hindrances on Access to Capital Figure 4.8: Type of Institutions that Provide Business Development Services Figure 4.9: Challenges Facing Marketing of Youth Start-Up Products xi

13 LIST OF ABBREVIATIONS BDS ILO MCF MFIs MSEs MOYA OECD STRYDE TNS TPB YEDF Business Development Services International Labor Organization MasterCard Foundation Micro Finance Institutions Micro and Small Enterprises Ministry of Youth Affairs Organization for Economic Cooperation and Development Strengthening Rural Youth Development Through Enterprise Program TechnoServe Inc. Theory of Planned Behaviour Youth Enterprise Development Fund xii

14 CHAPTER ONE 1.0 INTRODUCTION 1.1 Background of the Study The global financial crisis that began in 2008, the worst since the great depression has had an adverse long lasting ramifications all over the world; resulting to job losses and rising unemployment. Young people have found themselves in a particularly vulnerable position. The global financial crisis has brought with it measures such as rationalization as a cost cutting measure employed by many corporations to survive tough economic times and remain competitive. This inevitably leads to job losses and young people are the first to go because they tend to be youngest in the organization and the cheapest to layoff. According to the OECD (2015) by 2019, more than 212 million people will be out of work, up from the current 201 million. According to the Commonwealth Secretariat and La Francophonie (2014), young people are more at risk of unemployment than older cohorts. International Labor Organization (2015) statistics puts global youth unemployment rate of almost 13 per cent in 2014 and a further increase expected in coming years, estimating seventy-three million young people to be unemployed. By contrast, older workers have fared relatively well since the start of the global financial crisis in According to OECD (2015) Employment Outlook 2015, the country with the highest youth unemployment is Spain, with over 53% of their labor force aged out of work. Over half of those aged between are also unemployed in South Africa and Greece. The list is dominated by European Union members, which occupy eight of the top 10 spots. Equally, the report indicated that 7.5 million young Europeans are not employed. This has led to many governments across the world to change polices and create enabling environments to enable its citizens start businesses that can create employment for others and themselves. Shimer (2012) argues that the youth make up the bulk of the total number of unemployed in Africa. They represent 60 per cent of total unemployment in the region The ratio youth-to-adult unemployment rates drastically rises in countries such as Tunisia, South Africa and Morocco where young people are nearly three times more likely to be 1

15 unemployed than their adult counterparts. The youth unemployment rate in Africa has been evolving up and down in recent years with a declining trend in sub-saharan Africa and the highest ever in North Africa. (ILO, 2015). The OECD (2012) report emphasized that the incidence of long-term unemployment among youth in sub-saharan Africa reached 48.1 per cent in 2014; consequently, few youths are able to match their aspirations to reality, with limited job opportunities quickly slipping away. Furthermore, more than two-thirds of Africa s population is aged below 25; sub-saharan Africa is the youngest region in the world. The youth population constitutes about 37 per cent of the total labor force, a social category that is projected to expand more rapidly than anywhere else in the world (Naudé, 2011) Despite commendable annual economic growth rates of 5 per cent in recent years and notable progress achieved in the area of education, including higher education, sub- Saharan Africa has been unable to expand employment opportunities for young people, especially the most educated ones (Njonjo, 2010). The mismatch between high rates of economic growth and job creation is widening income inequalities and fueling social tensions. It is therefore imperative to increase the employment intensity of growth through policies that increase the demand for labor while at the same time enhancing the employability or the integration of young women and men into the labor market. According to John, (2012) youth in Africa are not only they are marginalized and often excluded from society as functional and effective agents of change, progress and social dynamism, but they undermined in access to opportunities for economic growth. This has led to a situation where most youth in Africa are idle, while others are involved in crime, thus affecting Africa s socio-political stability. The recent wave of discontent sweeping North Africa is illustrative of the disruptive consequences of youth unemployment in general, and unemployed graduates in particular. The underlying conditions may in various ways be dormant and latent in other parts of the continent. In realizing the demographic dividend, African countries can increase the size and proportion of the working age population and trigger high rates of economic growth. To take care of this problem most nations across the globe are encouraging the youth to venture into entrepreneurship as a way of earning a living and reducing cases of youth unemployment (Gries and Naudé, 2011). However, venturing into entrepreneurship is not 2

16 by itself, a panacea for youth unemployment problems. Youth have to learn how to run successful business entrepreneurship start-ups. Osterwalder and Pigneur (2010) define successful youth business start ups as entrepreneurship ventures that have effectively identified a customer s problem, found a solution, added value, established channels to deliver this solution the customers, and as a result, have obtained customers buy-in and commitment to the product or services in a manner that generated sustainable revenue and profits to the business. Gries and Naudé, (2011) on the other hand argues that successful business start-ups among the youth does not constitute merely the ability to sell a product or service, but rather, ability to establish a need, and provide solutions in an effective and sustainable manner. In terms of seeking solutions of youth unemployment through entrepreneurship start-ups, Kenya has had a share of challenges. According to Njonjo (2010) as at 2009, 78.31% of the Kenyan population is below the age of 35. Of these, age cohort between 18 and 30, who are the focus of this study, constitute 24.59% of the population. This has brought about many organizations training on entrepreneurship to enable youth to start businesses. Like the rest of the world, the Kenyan government has now embraced entrepreneurship development through formulation of policies favorable to development of small enterprises particularly in the recent years. Such policy initiatives include Sessional Paper number 2 of 2005 on development of MSEs for wealth and employment creation (Government of Kenya, 2005); Sessional Paper number 2 of 1992 for small enterprise and jua kali development in Kenya; Sector Plan for labor, youth and human resource development (Republic of Kenya, 2008); Poverty Reduction Strategy Paper and MSE bill 2006 which led to the establishment of a council to facilitate the development of MSEs and creation of MSEs development fund (Government of Kenya, 2006). In addition, the Ministry of Youth Affairs (MoYA) established Youth Enterprise Development Fund (YEDF) in the year 2007 (MoYA, 2008) as a source of capital for registered youth groups in Kenya to start and/or boost their MSEs (Onugu, 2005). Most commercial banks and financial institutions have also developed MSE tailored strategies to give loans to young entrepreneurs in groups or as individuals. Fatoki (2012) content that in all forty-seven counties of Kenya, the problem of youth unemployment is the same. Youth complete their higher and tertiary education without 3

17 success in obtaining a paying job, leaving them frustrated thus they abuse alcohol and drugs. Nyeri County has been in the news in the recent past infamous for the drunken path the youth have taken and the gender violence in young families due to one of the spouses abusing drugs or alcohol. Their main economic activity is farming which due to the small parcels of land divided to the population, there s little or no land left to give the youth to farm and earn a daily leaving (Abdullah, 2008). The youth are left with one option of being casual laborers picking tea and coffee in the farms earning a small wage on a daily basis insufficient to care for all their needs. The national government has enabled the YEDF to support local youth in Nyeri with small loans that can help them initiate projects that can help them earn a living. Nongovernmental organizations (NGOs) too have come in to fill the gap; four international NGOs are implementing youth related programs mainly in finance, entrepreneurship and personal effectiveness, health related issues and counselling. According to TechnoServe (2016), TechnoServe Inc. is a non-profit development organization founded in 1968 in Norwalk, United States; currently working in over 33 developing countries and has presence in Africa, Latin America and Asia; and has undertaken economic development work in Kenya since The MasterCard Foundation (2015), in partnership with TechnoServe launched a seven-year program, Strengthening Rural Youth Development through Enterprise (STRYDE) that s seeks to enable a more successful transition of rural youth, aged 18 to 30, to economically independent adulthood, through training, opportunity identification and support. The STRYDE program has facilitated the transition of 6,500 rural youth in Phase 1 to increase their productive economic engagement, increase their contribution to household income, and empowers them to better live independently and are now seeking to empower an additional youth in Phase 2 In over 3 continents in the world, TechnoServe has had firsthand experience working with urban and rural youth mainly on entrepreneurship; focusing on training content, including agribusiness, value chain opportunities, negotiation and cooperative development. When done with training, they offer an after-care component that develops stronger linkages with vocational colleges, agri-businesses, access to finance providers and formal employment opportunities. They include a business plan competition component that will 4

18 deepen participation and enable more young people to implement their business ideas. The TechnoServe youth projects came about after several baseline research studies were done and found the need to address the youth unemployment challenge that was a ticking time bomb in many countries after the financial crisis. 1.2 Statement of the Problem Entrepreneurship is the key driver of the country's economy. It is one of the best means for triggering economic and social development in developing countries like Kenya. It provides employment to huge masses of people and also creates wealth for a nation. Kenya is a nation known for its youth population which is considered as one of its greatest assets, and at the same time, the biggest threat is youth unemployment. Hence, developing entrepreneurial skills among youth is more important for the growth of the Kenyan economy. According to ILO (2010), youth entrepreneurship has helped reduced youth unemployment to half by 2015 is one of the goals that Heads of State of all member countries of the United Nations adopted in the Millennium Declaration which will help end the vicious cycle of poverty and social exclusion of youth. According to Njonjo (2010) as at 2009, 78.31% of the Kenyan population is below the age of 35. Of these, age cohort between 18 and 30, who are the focus of this study, constitute 24.59% of the population. This 24.59% of its citizens need to be economically engaged to help it achieve Kenya s vision There s has been a steady growth of small and micro business in the world with many people opting to start businesses after being retrenched or never getting employed. According to the United States small business administration statistics, only 51% of all small business survives after the first years of operation. These micro and small business startups face a myriad of challenges from the word go; challenges affecting startups are identification of business opportunities and negative view of MSEs (Gries and Naudé, 2011), poor business management due to lack of training (Longenecker, 2006) and financial problems (Naidu & Chand, 2012). There s need to identify strategies that can mitigate this challenges to enable entrepreneurs grow scalable profitable businesses. Barriers related to access to finance have received a lot attention in recent years and numerous interventions have been developed and implemented across the world to deal with youth accessing finance. Government of Kenya has also entered the bandwagon of 5

19 establishing revolving funds like the youth development Fund (YEDF) and the Uwezo Fund. The Government of Kenya conceived the idea of institutional financing to provide young people with access to finance for self-employment activities and entrepreneurial skills development as a way of addressing unemployment and poverty which essentially are youth problems (GoK, 2009). The Youth Enterprise Development Fund concept is based on the premise that encouraging micro, small, and medium enterprise development initiatives is likely to have the biggest impact on job creation (MOYAs, 2010). The Fund has continued to diversify its product base by focusing on interventions that are more responsive to the needs of the youth and are geared towards addressing specific challenges facing young entrepreneurs (MOYAs, 2011). Despite these efforts, majority of the youth aren t still able to access the funds availed by the government hence still not able to start or scale up their businesses. Barriers related to access to identification of business opportunities and negative view of MSEs is another challenge young entrepreneurs face. There s has been a steady growth of small and micro business in the world with many people opting to start businesses after being retrenched or never getting employed. According to the United States small business administration statistics, only 51% of all small business survives after the first years of operation. Questions arise on why the business startups fail within their first years of operation; such as, was the business opportunity good, were there many competitors, was the market ready for the startups business idea, among others. The small enterprises play an important role in the Kenyan Economy. According to the Economic Survey (2006), the sector contributed over 50 percent of new jobs created in the year Despite their significance, past statistics indicate that three out of five businesses fail within the first few months of operation (KIPPRA, 2010). While little evidence exists that these small firms grow into medium-size firms (employing 50 to 100 workers), many of these small firms have the potential to grow and add one to five employees (Fadahunsi, 2012). However, even with these interventions, youth startups mortality rate is on an all-time high. Barriers related to poor business management due to lack of training. Many of the young entrepreneurs get into business due to lack of employment opportunities. Hence they 6

20 aren t trained on business from scratch and many are the times the young entrepreneurs make decisions on emotional and gut feelings. Other poor management decisions are using tools for existing businesses versus using tools for startups. The Kenyan government has embraced entrepreneurship development through formulation of policies favorable to development of small enterprises particularly in the recent years. Such initiatives, the Ministry of Youth Affairs (MoYA) established Youth Enterprise Development Fund (YEDF) in the year 2007 (MoYA, 2008) as a source of capital for registered youth groups in Kenya to start and/or boost their MSEs (Onugu, 2005). Before youth receive the funds, they undergo through training to assist in group formation and book keeping. Despite the government s interventions, many youth are still unable to make sound decisions for their business startups and some are unable to completely kick off their business idea, however good it may be. There are many barriers to entrepreneurship especially for young people as we have discovered. A number of studies have been done on what makes an entrepreneur, youth entrepreneurship; barriers to entrepreneurship among others have been done in Kenya before. However, none of have measured the intention of youth to start a business after going through entrepreneurship training. This study provides findings in relation to factors attributing to successful youth entrepreneurship businesses startups. 1.3 General Objective The general objective was to determine factors that influenced the success of youth business startups. The case of youth trained by TechnoServe s Stryde Program in Nyeri County, from cohort one of second phase 1.4 Specific Objectives The specific objectives of the study were: The extent to which the Stryde entrepreneurship training influences the success of youth business start-ups How access to finance affects the success of youth business start-ups How Business Development services enhance success of youth business startups. 7

21 1.5 Significance of the Study TechnoServe Management The study can be beneficial to TechnoServe and their donor MasterCard Foundation who are keen in getting to know how to support youth in East Africa start small businesses that support their families and their countries Donors This study is intended to contribute to knowledge in the area of youth entrepreneurship and small and micro businesses for donors to be able to know at which point they can support the youth Youth Beneficiaries This study should enable the youth to know the factors that define a successful business start-up and the different support programs available to the rural youth in Nyeri. Youth beneficiaries also get to know the importance of participating in trainings that benefit their businesses BDS providers This study provides an unbiased view of entrepreneurship and small business research that makes use of appropriate research techniques. Any business development service provider (BDS) in the youth space such as micro finance institutions (MFIs), providers of training and consulting curricula, finance development organizations, non-governmental organizations among other service providers, that help in the development of curricula that is geared towards encouraging an entrepreneurial culture among young people and equipping them to start or run businesses Government This study has provided findings and recommendations that do inform policy making to enable youth get targeted support on areas to grow their businesses. 8

22 1.5.6 Researcher and Academicians Researchers and scholars will benefits from the study because they will use it for future reference and learning material when researching on the topic. For academicians, this research finding will make a contribution towards understanding the underlying youth entrepreneurship business start-ups. 1.6 Scope of the Study This study was limited to factors influencing the success of youth entrepreneurship business start-ups. The study was carried out in period of 3 months (between April 2016 to July 2016) in central Nyeri County. The primary target was youth who have undergone the Stryde training in entrepreneurship between years who are in the TechnoServe s Stryde program. Youth entrepreneurs under this study were also limited to youth under Cohort 1 phase 2 of the Stryde training in entrepreneurship program, and not every youth under the program. To mitigate on the study limitation, youth with diverse business start-ups were considered, to ensure they are representative all training programs under Techno Serve s Stryde program. 1.7 Definition of Terms Entrepreneurship Training According to Munoz (2010), the entrepreneur is the creator, a person who builds and rebuilds a venture, a person with a vision, who sees an opportunity and acts on it. Further defines the entrepreneur founder as a Spartan, a person with willingness to practice selfdisciple and who becomes a technician for the dream. For this study, entrepreneurship training was defined as imparting enterprising skills to the entrepreneur founder to enable them achieve the dream Access to Finance Renko, Kroeck and Bullough (2012) define access to finance as the channels and mechanisms available to the youth to gain capital funding for their business ventures, either through low interest bank loans, low interest government loans, youth enterprise funds, donor grants, government grants, and private sector grants. 9

23 1.7.3 Business Development Services (BDS) According to committee of Donor Agencies for Small Enterprise Development, (2001) business development service are services designed to serve individual businesses that improve the performance of the enterprise, its access to markets and its ability to compete. This includes an array of business services such as training, consultancy, marketing, information, business linkage promotion and technology development and transfer. BDS encompasses both strategic medium to long term issues that improve performance and operational day-to-day issues Opportunity versus Necessity Entrepreneurship According to Simpson and Christensen (2009), opportunity entrepreneurship occurs when entrepreneurs start new ventures to seize opportunities in the environment. It is common in economies with high economic growth rates and relatively higher levels of education; whereas necessity entrepreneurship comes about due to lack of adequate wageemployment in the market. The entrepreneur is driven to entrepreneurship not by choice but as a last resort Successful Youth Business Start-Ups Osterwalder and Pigneur (2010) define successful youth business start ups as entrepreneurship ventures that have effectively identified a customer s problem, found a solution, added value, established channels to deliver this solution the customers, and as a result, have obtained customers buy-in and commitment to the product or services in a manner that generated sustainable revenue and profits to the business. Gries and Naudé, (2011) on the other hand argues that successful business start-ups among the youth does not constitute merely the ability to sell a product or service, but rather, ability to establish a need, and provide solutions in an effective and sustainable manner. 1.8 Chapter Summary This chapter highlights the purpose of the study as - to determine factors that influence the success of youth entrepreneurship business startups, of youth who have been trained by Techno Serve s Stryde Program specifically in Nyeri County. The specific objectives discussed in this chapter are, establish the extent youth entrepreneurship training 10

24 influences business start-ups; the social factors that affect youth business start-ups; and the economic factors facing youth business start-ups. Lastly this chapter discusses the importance of the study to TechnoServe, MasterCard Foundation, the youth, the government for policy changes and other stakeholder within the youth space. This chapter also gives specific issues in the three specific objectives: establish the extent youth entrepreneurship training influences business start-ups; the social factors that affect youth business start-ups; and the economic factors facing youth business start-ups. The third chapter presents the research methodology adopted for the study. Chapter four provided results and findings based on research objectives. Finally, chapter five provides the conclusion and recommendations of this study. 11

25 CHAPTER TWO 2.0 LITERATURE REVIEW 2.1 Introduction This chapter captures the review of related literature based on specific objectives of the study. The specific objectives one on the extent to which youth entrepreneurship training influences business start-ups is presented first, followed by specific objective two on how access to finance affects the success of youth business start-ups, and finally, the study look at how business development services affects the success of youth business start-ups. 2.2 Successful Business Start-Ups The essence of having successful business start-ups among the youth is to ensure that youth are not only employed, but have sufficient income to sustain their livelihoods, and also contribute to economic development of their nation (Simpson & Christensen, 2009). Fostering youth entrepreneurship is key policy option for most developing countries. Globally, youth between 15 and 24 years make up 17% of the world population (OECD, 2014). In Africa, youth within the same age bracket of 15 to 24 comprise 20% of the population. Equally, in Sub-Saharan Africa, youth are facing unemployment challenges compared to their adult counterparts. Globally, since the 2008 financial crisis, the number of unemployed youth reached an estimated 73.4 million, which constitutes 12.6% of the total youth population. This is an increase of 3.5 million between 2007 and Therefore, the efforts by government of Kenya through YEDF and NGOs to fund youth start-ups is a quest to ensure that more youth are employed, and equally contributing to national socio-economic development (Wanjohi & Mugure, 2008). A study carried out by Brian and Cant (2010) in South Africa on success of youth start-ups revealed that record keeping training have a strong positive relationship with success of youth business startups, r (0.766); p In this study, respondents were also asked to indicate whether access to finance by youth entrepreneurs contributed to the success of youth start-ups. A majority (82%) of respondents agreed. Equally, the study established the existence of a strong relationship between youth entrepreneurs access to finance, and the success of their business start-ups, r (0.786); 0.001, meaning the relationship was significant. 12

26 Similarly, a study conducted by ILO (2010) revealed the existence of a relationship between Business Development Support services and the success of youth business startups for OECD countries, r (0.820); p Further, this study revealed that youth entrepreneurs who are engaging in business start-ups do need marketing services and sales support services for the success of their business start-ups. Equally, Fumo and Jabbour (2011), argue that BDS services help youth entrepreneurs target of their services to the right clients, and right market, thus enhancing the chance of turning profitable. Equally, they argue that youth start-ups in in Mozambique that had access to BDS services increased revenue and profitability by 60% compared to those start-ups that did not. 2.3 Influence of Youth Entrepreneurship Training on Business Start-Ups Entrepreneurship Education Osterwalder and Pigneur (2010) define successful youth business start ups as entrepreneurship ventures that have effectively identified a customer s problem, found a solution, added value, established channels to deliver this solution the customers, and as a result, have obtained customers buy-in and commitment to the product or services in a manner that generated sustainable revenue and profits to the business. As such, entrepreneurship education is important in enhancing the success of youth business startups (Adams, 2011). A study conducted by Murimi (2015) on success factors for youth business start-ups in Nairobi county indicated that 63% of respondents indicated that entrepreneurship education contributed to the success of youth business start-ups. Similarly, a study conducted by Onugu (2015) in Nigeria on factors contributing to the success of youth business start-ups revealed that quality of entrepreneurship training offered by NGOs, the government, and development partner agencies strongly contributed to success of youth business start-ups, r (0.788); p The factors explored by the study included quality of youth entrepreneurship training, the training program, and experience of the trainers, which were all significant. A study by Kimando (2012) on factors that influence the success of youth business startups under Youth Entrepreneurship Development fund indicate that 76% of the study respondents believed that entrepreneurship training was essential to the success of youth business start-ups in Muranga County. Equally, 99% of the study respondents indicated 13

27 that entrepreneurship training has greatly improved the success of youth business startups under the YEDF in Muranga. Entrepreneurship education has recently emerged among donor organizations, nongovernmental organizations (NGOs) and governments as one solution to address the interrelated development challenges of unemployment and poverty in sub-saharan Africa. With every other body getting into entrepreneurship training, it draws attention to the importance of developing the social supports and capabilities that can enable individuals living in poverty to pursue entrepreneurship as a valued choice rather than a necessity in the absence of alternative earning opportunities (Gries and Naudé, 2011). Although entrepreneurship education programmes increasingly target poor youth, little distinction is made between approaches designed to spur economic development through job creation and those designed to reduce poverty and provide livelihood opportunities (Adams, 2011). The goals of economic and business development are often conflated with poverty alleviation and programme components may not sufficiently address conditions that constrain entrepreneurship, particularly among marginalized youth. Entrepreneurship education arose as a response to failures of school-to-work and technical and vocational education and training(tvet) programmes in securing employment for those who graduate (Magnus, 2005). Adams (2011) contend that human capital approaches to formal education do place emphasize the development of knowledge and skills for employment, focusing on educational inputs, whereas recent research and policy has shifted the attention to the creation of jobs to address a persistently high rate of educated but unemployed youth (Heyneman, 2003; Psacharopolous, 1991). In reframing education for employment, entrepreneurship education initiatives emphasize basic knowledge and technical skills, entrepreneurial knowledge and skills, and access to microfinance with the desired outcome of business and job creation, which are all essential to the success of youth business start-ups (James-Wilson, 2008). While entrepreneurship education is broadly directed at job creation, two distinct approaches that guide policies and programs include opportunity entrepreneurship, which is education for business development, and necessity entrepreneurship, which is training for the creation of micro-enterprises and livelihood that is aimed at aimed at getting the 14

28 entrepreneurs out of poverty. These terms are often used in entrepreneurship educational training to distinguish between those who pursue self-employment by choice and those who pursue it for lack of other desirable options (Naudé, 2012). According to Cole (1997), training is a leaning activity, which is directed towards acquisition of specific knowledge & skills for the purpose of an occupation. It focuses on the job task. The training can be both formal and informal and is usually carried out to assist a person understand and perform his/her job better. On the other hand, he defines development, as a learning activity, which is more devoted towards future, needs, rather than present needs of the organization and is concerned with career growth and immediate performance (Cole 1997). Armstrong (1999) concurs with Cole that training is a systematic modification of behaviour through learning, which occurs as a result of education and instruction. Today s business environment can be characterized as changing. The accelerated pace of advances in technology, increasing foreign competition, widespread and growing unemployment creating serious adjustment problems, and diminishing resource supplies have affected the way business is conducted (Mbonyane & Ladzani, 2011) Record Keeping Training Schleberger (2013) defines records keeping as the first accounting step in entrepreneurship or business that provides information to the business owner in terms of financial transaction within the enterprise. Recording keeping therefore helps youth entrepreneurs gain an understanding on inventory keeping, cash flows management, suppliers and buyers records, and even schedule of important payables or receivables (UNOWA, 2010). Equally, records keeping help youth entrepreneurs understand the importance of financial performance measurements to their enterprises. It is essential as a business person to understand whether you have a going concern or not; whether the enterprise is profitable or not. to any business entity cannot be over-emphasized. To this end, Shimer (2012) argues that record keeping must capture and report all the relevant accounting information within a business enterprise. Equally, Abov and Quartey (2010) contend that record keeping is essential in helping youth entrepreneurship understand the importance of how economic decisions are derived from financial reports, and as a result this understanding, enhance the success of youth 15

29 business start-ups. Additionally, Bartóková and Ďurčová (2013) note that record keeping training ensures that accounting information that is important for a successful management of any business entity is passed on to youth entrepreneurs. Maseko and Manyani (2011) posit that youth enterprise record keeping is usually the backbone of th business. In as much as record keeping might seem like a laborious task to many youth entrepreneurs, it will make or break a business enterprise. Thus, the training on record keeping is actually what creates a profitable business that makes youth financially independent, with viable sustainable viable ventures. According to Howard (2009) most youth enterprises do fail for lack of proper recording keeping skills. Most youth in business start-ups usually consider record keeping as a chore that should be avoided. As such, record keeping of stock, inventory, sales, and cash flows is only done for purposes of getting some cash at the end of the period, and not as a vital component of entrepreneurship start-ups. No wonder most youth start-ups fail less than a year after start up. According to Zhou (2010), more than half of all youth start-ups fail less than one year after commencement. Brian and Cant (2010) conducted a study in South Africa among youth start-ups to determine the impact of record keeping training and success of the business enterprises. The study revealed the existence of a positive relationship between record keeping and success of youth business start-ups in South Africa, r (0.766); p In this study, finance record keeping, inventory record keeping, stock record keeping, were all statistically significant. Brooks, Zorya, and Gautam (2012) equally note that record keeping helps increase the chances of business survival for youth enterprise start-ups. In essence, record keeping training is to show youth entrepreneurs how to personally get involved in day to day management of business enterprise. To this end, Philip (2010) posit that good record keeping is not only essential for success in business, but also for transferring life skills that affect other spheres of life Finance Management Training Financial management is one of the training in one of the essential trainings that youth in entrepreneurship start-ups should engage. Fatoki (2012) defines of financial management 16

30 as the planning for financial cash flows of a business enterprise, so as to manage its operations for the future. On the other hand, Osotimehin, Jegede, Akinlabi and Olajide, (2012) defines financial management training as those activities in business that are concerned with the acquisition of financial resources, allocation of those resources, and managing utilization of the financial resource to ensure efficiency and effective use. In youth entrepreneurship, financial management training involves planning of financial resources which includes business cash flows, organizing payables and receivables in a manner that enables the business to function, directing and controlling not only the cash flows, but also but also all the financial activities of the enterprise (Radam, Abu, & Abdullah (2008). For youth start-ups to be successful, concepts of effective financial management must be understood by the youth. Osotimehin et al., (2012) argue that youth entrepreneurs who have an early understanding of the importance of financial management have a better chance of developing successful start-ups that those who don t. Equally, Brooks et al., (2012) contends that in most youth start-ups in Africa do no emphasize on continuous financial training for youth start-ups. In most cases, Non- Governmental organizations (NGOs) are the once who offer these trainings to the youth, but since they depend on donor funding, the trainings are sometimes in consistent, or not scheduled in time periods when these trainings might be of significance to the youth. Having good financial training in time enables youth start-ups to engage the right trajectory in planning and expectation, and hence, the youth are fully aware of how to utilize their resources, what to do with profit gains, while at the same time limit and limit the losses, so as to allow the business to grow (Davis, Dunn, & Boswell 2009). In a study conducted by Al-Mamun, Abdul and Malarvizhi (2010) in Malaysia among youth entrepreneurs who were engage in business startups noted that there exists a relationship between financial training and success of youth business start-ups, r (582); p The study looked at procurement, cash flow management, and sales. This means that youth who receive financial training before venturing into entrepreneurship have a higher chance of succeeding, compared to those who don t. It is therefore imperative that financial training curriculums be made consistent and thorough, and frequent (Fatoki, 2012). 17

31 2.3 How Access to Finance Affects the Success of Youth Business Start-Ups Renko, Kroeck and Bullough (2012) define access to finance as the channels and mechanisms available to the youth to gain capital funding for their business ventures, either through low interest bank loans, low interest government loans, youth enterprise funds, donor grants, government grants, and private sector grants. Al-Mamun et al., (2010) argues that access to finance has a significant relationship with the success of youth business start-ups. His study on youth start ups in Malaysia revealed a strong relationship between access to finance, and success of youth entrepreneurship start-ups, r (0.684); p.001, meaning the relationship was significant. He concluded that mechanisms for access to finance by the youth venturing in business start-ups should be easily accessible, not only as a motivational factor of venturing in business start-up, but also as a mechanism of ensuring that the start-up will be successful. Access to finance for business has been and still is a major challenge for many business start-ups globally. Solomon (2014) notes that every business enterprise commences as an entrepreneurship start-up. World renown ventures like Nike, Microsoft, IMB all started and entrepreneurship start-ups. One of the major components that enables start-ups to bloom into full profitable business ventures. Renko, Kroeck and Bullough (2012) posit that most youth start-ups usually face distinctive challenges particularly in trying to access business capital, or operational finances. Youth, as it were, venture into entrepreneurship with an idea or set of ideas. The ideas might be viable venture or not viable, but the only way to know whether this ventures will turn profitable is by launching their concepts as business start-ups (Al-Mamun et al., 2010) Wanjohi and Mugure (2008) argue that most youth start-ups in Kenya lack access to finance for entrepreneurship. However, they note that lack of access to youth start up finance, is not unique to Kenya. Globally, lack of access to entrepreneurship finance is a major challenge youth business start-up. Equally, Renko et al., (2012) argue that the success of youth business start-ups in in the ability of the youth entrepreneurs to access financing that will enable them to sustain testing of their business prototype models, and concepts till they have a working combination that is a viable, profitable business. The purpose of access to finances in business start-ups is to give the entrepreneurs the leeway to test their innovative ideas and initiatives that can bring new products and services to the market place, and thus, enhancing sustainable development. 18

32 The financial crisis that hit America and most European countries in 2008, caused financial institutions globally to be more cautious in advancing credit to businesses and individuals (Ostry, Berg & Tsangarides, 2014). As such, access to finances through business loans has become more stringent, locking out most youth who are in need of credit for entrepreneurial start-ups. Most youth in Africa do not own land, or other factors of production, and usually do not have access to collateral for accessing loans, thus making access to financing difficult (Brian, 2011). Most banks and financial institutions regard youth business start-ups as high rick ventures, and therefore, decline to invest in this ventures. Other major challenges faving youth access to start-up financing are discussed below: Stringent Loan Conditions One of the challenges that youth entrepreneurs face in their quest to access business startup financing is stringent loan conditions. Ostry et al., (2014) argues youth entrepreneurs rarely get favorable terms in accessing loans. Most of the times, financial institutions do treat youth entrepreneurs same as adult entrepreneurs who have been in the business for years. This happens mostly in regards to condition on has to fulfil to be eligible for business loans such as having adequate collateral, having friends or family who can cosign the loan, and act as a guarantor among others. According to Al-Mamun et al., (2010), stringent loan access conditions are a major deterrent to youth who desire to venture into entrepreneurship. Naidu and Chand (2012) equally argue that the inability for youth entrepreneurs to access external and internal financing from banks and other financial institutions contributes to the high failure rates of business start-ups. To enhance the success of youth business startups, it is essential that conditions for loans should be within reach and affordability of youth entrepreneurs. This assertion is collaborated by Ostry et al., (2014) study in Sub Saharan Africa that revealed that more than 70% of youth start-ups fail in the first year due to poor financing mechanism or lack of financing all together from the financial institutions. The study further argues that most African youth lack collateral that is usually required by the financial institutions to be able to approve any loan offers. 19

33 Wanjohi and Mugure (2008) note that in Kenya, some banks do require movable assets that can act as collateral in cases where the youth do not have land tittle deeds, car log books, or major equipment or property. However, this conditions are still considered ad stringent according to youth entrepreneurs. In most cases, youth entrepreneurs venture into business as a way of escaping poverty, and thus, do not have any moveable assets to speak off that can be handed over to financial institutions as collateral. Similarly, lack of substantive credit history by the youth locks them from accessing funding since their credit worth cannot be determine, or if determined, their credit is not bankable (Ostry et al., 2014). Mbonyane and Ladzani, (2011) note that another challenge facing youth start-ups access to finance is managing sales and debtors. Sales determine the cash flows the business should be expecting over a given period of time. However, in most instances, during startups, goods and services are sold on credit as a way of promoting the goods and services to the market. As a result, most youth start-ups run the risk of failing to manage sales and debtors, and as such, fail to manage their cash flows effectively. This leads to situations where the start-ups cannot run effectively due to liquidity challenges (Renko et al., 2012). According to Ejembi and Ogiji (2007), youth start-ups find it problematic to run their ventures are not able to access financing either through financial systems or through sale of their goods and services. To address this problem, in 2009, the government of Kenya established the Youth Entrepreneurship Development Fund (YEDPF), and the Uwezo Fund as a way of enhancing youth access to business financing, grants and low interest loans. By the year 2010, YEDF kitty had sufficient funds to the tune of Kshs 23 billion. The main objective of YEDF was to enhance youth access to business financing and as a result, increase the number of successful start-ups in youth entrepreneurship (Renko et al., 2012). The other objective of the YEDF was to help reduce youth unemployment by creating approximately 200,000 new jobs (GoK, 2010). However, Solomon (2014) notes that stringent rules that were set to manage the fund were counterproductive in youth accessing the fuds. For instance, just like in the private sector financial systems that required collateral and guarantors to access loan facilities, the YEDF also required 20

34 collateral and guarantors for the youth to access the fund. Challenge has been that these government s funds also request for collateral from the youth or ask them to get guarantors equivalent to the amounts they would wish to access (Fatoki, 2012). As such, youth entrepreneurs who were able to meet the government regulations for access to YEDF, got funding, but, another challenge emerged; the YEDF had an initial ceiling of Ksh. 50, 000/- which were very minimal for serious youth start-ups to conduct market surveys, do feasibility study, product testing and prototyping. In the end, most the Ksh. 50, 000 advanced to the youth as YEDF soft loan, did not accomplish the intended objectives. Equally, the fund attracted opportunity youth entrepreneurs instead of real entrepreneurs, leading to enhanced cases of start-ups trial and error. Other major challenge in access to financing by the YEDF is the fact that the youth business start-up has to have been registered and in operations six month prior to loan application. In this regard, most youth do abandon their ventures by the third to fifth months, before they even fulfil the initial basic requirement by YEDF (Solomon, 2014). In other instances, NGOs in Kenya do offer youth programs with funding, however, NGOs depend on donor funding to be able to facilitate youth start-ups. The sense of accountability for donor funds mean that NGOs cannot give funding to youth start-ups until they have proven that the start-up is a viable venture (Ostry et al., 2014). The irony inherent in this model is that NGOs and government keep encouraging the youth to engage in entrepreneurship start-ups, yet they do not provide conducive environment for access to finances that is critical to success of youth entrepreneurship (UNOWA, 2010) Lack of Experience in Managing Business According to Fumo and Jabbour (2011), youth start-ups entrepreneurs often lack experience and training in management that is required for successful youth business start-ups. As such, they do not attract successful venture capitalists and financial institutions to invest in their ideas for their businesses. A study by Wawire and Nafukho (2010) shows that poor start-ups management is the second most cause of youth entrepreneurship failure in accessing external funding. Most external financiers usually would want to look at the business management profile of the entrepreneurs to be sure that they are able, and skilled enough to manage the financial resources that could be advanced through their business venture. However, in most instances, as alluded to by Brooks et al., (2012), in Africa, most youth entrepreneurs are just young people with 21

35 burning ideas ready to test them to see whether they will succeed. Therefore, requiring that they should have prior management skills for them to access external funding, is an over stretch that majority youth entrepreneurs would not be able to fulfil, however, enhancing youth business skills through training is a sure was of guaranteeing successful business start-ups that are also competitive and sustainable in the end High Interest Rates According to Kinyanjui (2010), there exists a strong relationship between high interest rates and success of youth business start-ups, (0.724); p In a study he conducted in Kenya among the youth entrepreneurs, his findings indicated that 70% of youth startups that had tried to access funding when the interest rates were above 18%, did not succeed. As such, he concluded that the issue of high interest rates charged loans for youth entrepreneurs had made it difficult youth entrepreneurs to access financing, as and as a result, more than 60% of youth start-ups in Kenya fail within six month of inception. A study done by Kenya Institute for Public Policy Research and Analysis KIPRA (2006) equally noted that high interest rates are not conducive for youth trying to access financing for start-ups. The study highlighted the fact that when interest rates are high, the cost of financing the loan is high for most youth start-ups to service the loans. In this regard, if youth do not get other channels of accessing finances other than bank loans, their business fold just few months after they start. Kinyanjui (2010) argues that to encourage entrepreneurs, and to enhance the success rate of youth entrepreneurship startups, it is important that the Kenyan government should develop new mechanism through which YEDF can be delivered to the youth at low interest rates, and minimal regulations. 2.4 How Business Development Services Enhance Success of Youth Start-Ups. According to Hamadi (2010) business Development Services (BDS) are defined as the supporting services to a given business that are not core, but enables the business to thrive and achieve its objectives. Business Development Services include marketing, training, information communication technology (ICT), sales and promotion and access to market According to IFC and World Bank (2011) report, business development services are usually offered by the governmental and non-governmental organizations. The services 22

36 are offered in form of business support centers, business incubation hubs, ICT centers and community development initiatives. In a study conducted by ILO (2010) revealed the existence of a relationship between BDS the success of youth business start-ups for OECD countries, r (0.820); p The study further revealed that marketing services and sales services ranked the most significant for the success of youth start-ups. Equally, Fumo and Jabbour (2011), argue that BDS services help youth entrepreneurs target of their services to the right clients, and right market, thus enhancing the chance of turning profitable. Equally, they argue that youth start-ups in in Mozambique that had access to BDS services increased revenue and profitability by 60% compared to those start-ups that did not. However, Hamadi (2010) argues that BDS services are only as helpful to the success of youth entrepreneurs, depending on the dedication, commitment and knowledge of youth on the ventures they are engaging in. Further, he argues that when youth entrepreneurs engage in start-ups they have not modeled well, or conducted market survey to assured of market need, no amount of BDS can save the enterprise. Fatoki (2012) notes that most youth start-ups fail to succeed because they substitute BDSs for viable entrepreneurship concepts. Further, he adds that for any youth start up to succeed, the emphasis should not be placed on marketing, or sales, or ICT channels for the product, but rather, on developing a viable concept that solves a current problem in the market place. To this end, Brooks et al., (2012) note that the major challenges facing youth entrepreneurship start-ups is lack of proper problem articulation in developing viable start-ups and as such, attempts to do aggressive marketing or other forms of BDS fails to rescue a start-up that is already on a failing trajectory. According to John (2012), BDS can be classified based on objective of the service that the BDS intents to achieve. For instance, if the purpose of a youth start-up is to enhance access to new markets, then marketing BDS will be targeted. If the objective is to enhance sales, then sales BDS will be targeted. However, if the objective is to enhance online presence of start-up services, the ICT BDS will be targeted. Similarly, Ostry et al., (2014) note that the purpose of BDS is to transform viable entrepreneurship concepts into winning sustainable business through enhanced awareness of the business services, and as such, ensure the success of youth business start-ups. 23

37 2.4.1 Marketing Support Services Marketing services are important component towards the success of youth entrepreneurship start-ups (Gaddefors & Anderson, 2008). According to Njoroge and Gathungu (2013) marketing in entrepreneurship involves segmentation, targeting and positioning of business products and services to an appropriate buyer. It is important that youth entrepreneurs identify and understand specific group of customers that are critical to the success of youth business start-ups (Al-Mamun et al., 2010). Marketing support services helps youth entrepreneurs to be able to not only segment customers critical to the success of their business start-up, but also, but also collect feedback from this set of customers to further enhance product and service development. Equally, John (2012) note that one of the major challenges with youth start-ups is lack of proper segmentation of proper type and kind of customers who are essential to their survival. As such, most youth entrepreneurs expend their time and resources marketing to everyone who would care to listen to them concerning their ventures. However, the problem inherent in this marketing strategy is that vital resources are expended on people who are users, and not customers. Osterwalder and Pigneur (2010) define a product user, as a consumer of a product or service because it was available, while a customer as individuals who have a total buy-inn into a product and services, and become converted regular consumers of the product. According to Rahmati (2010) youth entrepreneurship start-ups need marketing support survives either from governmental departments, non-governmental institutions, and donor agencies. Non-governmental organizations are essential in connecting your entrepreneurs to marketing training and expertise that make youth products and services attractive, and available to the right markets. However, Osterwalder and Pigneur (2010) posit that most governmental departments and non-governmental organizations that help youth entrepreneurs do not sufficient understanding who the customers youth entrepreneurs are trying to target. Failure to understand this critical information, usually leads in situations where NGOs provide marketing support services, but targeting the wrong customers. Any time there is lack of clarity on who true customers are, there is a high chance that marketing and targeting will be focused on wrong clients. 24

38 When marketing supposed services is done right, targeting right clients, youth start-ups tend to grow and succeed (OECD, 2012). Similarly, Gaddefors and Anderson (2008) contend that when market support services for youth entrepreneurs is done right, market profile segmentation on demographic, psychological, and even buyer behavior is known, and documented for targeted marketing. In market support services, marketing helps youth entrepreneurs identify and evaluate the attractiveness of each customer segment in line with their desire and willingness to buy start-up goods and services (Rahmati, 2010). Marketing support services also help youth entrepreneurs to also help youth entrepreneurs understand how to four P s (Price, Place, Promotion, and product) of marketing work (Berger & Udell, 2011). Gaddefors and Anderson (2008) argue that if entrepreneurs do not understand how to price their products that are entering into the market, they run the risk of overpricing or underpricing which eventually hurts the business. Equally, Renko et al., (2012) content that lack of proper pricing mechanism significantly contributes to lack of success for youth business start-ups. The essence of marketing support services is to ensure that youth entrepreneurs have adequate information about the market, the pricing, and the customer behaviors. Youth entrepreneurs who master the right balance for price, place, promotion, and product, have a 70% chance of succeed, all other factors constant, compared to those who do not (Gries & Naudé, 2011) Information Communication and Technology Services Information Communication and Technology services are essential component for enhancing the success of youth business start-ups. A study conducted by Okten and Okonkwo (2011) in Indonesia revealed the existence of a relationship between ICT and success of youth entrepreneurship start-ups, r (0.564); p The study examined how youth entrepreneurs utilized information technologies to conduct product awareness, and even to do online sales. Social media platforms like facebook was contributed significantly in spreading information concerning the entrepreneurship product and services to friends, who shared with other friends within their circle, thus, enhancing product promotion at minimal cost. Similarly, the study found that youth entrepreneurs who had received training on how to use social media ICT platforms were 68% successful 25

39 compared to youth who had not received training on how to use social media ICT to enhance product and service awareness. According to Renko et al., (2012) and Ejembi and Ogiji (2007), NGOs place a critical role in training youth start-ups on the importance of ICT platforms. Trainings on website development, or how to conduct online sales or advertising is very important to the success of youth entrepreneurship start-ups. Websites for instance help provide information concerning the products and services that the entrepreneurs are offering. In most instances, when a website had a well-managed and optimized content through search engines, it receives more traffic to the site, which in turn can translate in increased interest in the products and services entrepreneurs are offering through the site (Gries & Naudé, 2011). It is therefore important that youth entrepreneurs understand the significance of ICT in enhancing success of their enterprises (Renko et al., 2012) Sales and Promotion Services According to Nieman and Neuwenhuizen (2010) the success of entrepreneurship ventures is significantly dependent on the ability to sale the products and services. to concentrate. Berger and Udell (2011) define sales in entrepreneurship as the act of exchanging entrepreneurship products and services for revenue, while promotion is the act of creating awareness about a given product or services in the market. Increase in sales enhances financial position of an entrepreneurship venture, while promotion creates awareness concerning the use, and usefulness of the products and services. According to Rita & Fernald (2012) it is incumbent upon youth entrepreneurs to ensure that they have done sufficient market survey for their products and services, to be able to know who to target for sales, and who to conduct promotions, or give offers to. In entrepreneurship start-ups, the success of the venture is sometime predicated upon a wellcoordinated sales and promotion strategy. Gries and Naudé (2011) argue that the success of youth business start-ups sometimes depends on effective sales and promotions, including giving out free products and services as a way of creating awareness. However, giving free services as a way of introducing a product is not in itself a guarantee for success, rather, targeting the right market, right potential customers at the right time, with the right product. 26

40 Osterwalder and Pigneur (2010) posit that in sales and promotion for entrepreneurship, developing a well-constructed elevator pitch is the ultimate necessity for getting potential clients interested on an entrepreneurs products. They define an elevator pitch as a statement the describes what a product or service is, the problem the product and service is trying to solve so as to eliminate a customer s pain, and the potential long term benefits. Therefore, training youth entrepreneurs on how to develop and deliver good elevator pitches enhances the probability that they will make a sell. To this end, Gries and Naudé (2011) posits that sales and promotion services from NGOs and other development agencies are essential in helping youth entrepreneurs establish a foundation from which they can launch successful ventures. 2.5 Chapter Summary This chapter has presented literature review based on specific objectives of the study. The specific objectives on the extent to which youth entrepreneurship training influences business start-ups was presented first, followed by how access to finance affects the success of youth business start-ups, and finally, the chapter also has examined how business development services affect the success of youth business start-ups. The next chapter 3 presents the study methodology. 27

41 CHAPTER THREE 3.0 RESEARCH METHODOLOGY 3.1 Introduction The research design for this study is discussed in this chapter. In identifying factors that influence the success of youth entrepreneurship in business start-ups, the study has identified the population and the sampling design to come up with a representative sample. This involved identifying a sampling frame from which the sample is to be drawn. The chapter also states the sampling technique and the sample size. Finally, this chapter presents research procedures, data collection methods, and data analysis methods that have been adopted for the study. 3.2 Research Design Copper and Schindler (2014) defines research design as the blue print for the research process. It shows exactly how the study will be conducted in technical terms; it elaborates how the researcher will conduct sample selection, the data collection instruments that will be used and research procedures among other specific tasks. Cox and Hassard (2010) on the other hand define research design as clearly defined structures within which a research study is implemented. This study adopted a descriptive research design, which involves direct exploration, analysis and description of particular phenomena as free as possible from unexplained presumptions, aiming at maximum intuitive presentations (Copper and Schindler, 2014). According to Saunders, Lewis and Thornhill (2009), descriptive design is used to document a study phenomenon in its real situation, without the interference of the researcher. This design enabled the researcher to identify and describe characteristics of the study population, and their relationships. 3.3 Population and Sampling Design Population Copper and Schindler (2014) define population as the total collection of elements about which the researcher wishes to make inferences. This study will be interested in making inferences about youth aged between eighteen to thirty in Nyeri County, Kenya, who have undergone through the TechnoServe s Stryde entrepreneurship training and have 28

42 started off businesses. The population of this study consisted of 410 youth under TechnoServe s Stryde entrepreneurship training program in phase two, cohort one youth beneficiaries in Nyeri County, Kenya. Population distribution is indicated in Table 3.1. Table 3.1: Population Distribution Cluster: Nyeri County Population % Distribution Kieni sub county 82 20% Tetu sub county 82 20% Mathira sub county 82 20% Mukurwe-ini sub county 82 20% Othaya sub county 82 20% Total % Source: TechnoServe (2016) Sampling Design Mugenda and Mugenda (2012) define a sampling design as the framework of guide that helps determine how study samples will be determined from a study population. On the other hand, Saunders et al., (2009) define sampling design as the procedure or process or technique that is used by a researcher to pick a sub group from a population to participate in the study. The subgroup is carefully selected so as to be representative of the whole population with the relevant characteristics. Each member or case is referred to as a subject, a respondent Sampling Frame According to Cooper and Schindler (2014), a sampling frame is a list of all elements from which the sample will be drawn. This study adopted TechnoServe Stryde Program graduate database from phase two cohort one beneficiaries, as a sampling frame to identify the youth who have started start-ups Sampling Technique The sampling technique is the specific process by which the entities of the sample are selected (OECD, 2012). This study adopted a clustered sampling, and random sampling technique to pick the study sample. Clustered sampling was used because youth entrepreneurs under this program are not homogeneous, but rather, heterogeneous. This 29

43 means that they possess different entrepreneurship ventures in different sectors, therefore experience different divides a heterogeneous population into distinct categories challenges or successes in their entrepreneurship venture. Types of youth start-ups were put into stratums of independent sub population from which individual elements can be randomly selected. Mugenda et al., (2012) defines random sampling technique as a method that gives elements within a study population or stratums an equal chance of being sampled Sample Size A sample size comprises a group of respondents, consisting of part of the target population carefully selected to represent that population (Cooper & Schindler (2014). To determine the sample size, Krejcie and Morgan (1970) formula was used to come up with a sample size of 196, computed as follows: S = X2NP (1-P) / d2 (N-1) + X2 P (1 P) S = required sample size X2 = the table values of chi-square for 1 degree at the desired confidence level (3.841) N = the population size P = the population proportion (assumed to be.50 since this would provide the maximum sample size) d = the degree of accuracy expressed as a proportion (.50) Sample size = *410 *.50(1-.50) / {(.05 2 (504-1) *.50(1-.50)} = 196 Table 3.2: Sample Size Distribution Clustered: Nyeri County Population Sample Size Sample Size Distribution Kieni sub county % Tetu sub county % Mathira sub county % Mukurwe-ini sub county % Othaya sub county % Total % 30

44 Source: (TechnoServe, 2016) 3.4 Data Collection Methods The study utilized only primary collected from the field. Copper and Schindler (2014) defines primary data as original search where data being collected is designed specifically to answer the research questions. The researcher used structured interview questionnaires to collect primary data. The questionnaire was administered by the researcher and research assistants. The questionnaire was divided into three sections. The first section captured the biodata of the youth participants. The second and third sections enabled to estimate the proportions of youth population that have access to finance, the business mentorship they have received and whether the entrepreneurship training enables them be successful in starting up businesses. The attached questionnaire has the Likert scale questions. 3.5 Research Procedures A pilot test was conducted using at least ten respondents to the sample population selected using random sampling approach. The results from the pre-test were analysed using the statistical program for social sciences (SPSS) to establish the internal consistency of the items in each of the independent variables. The pilot was also used to test reliability and validity of the study instrument. The research begun by seeking approval from TechnoServe Stryde program to conduct a research on their trained youth. This enabled in the researcher getting the sample frame which advised on the one hundred youth to be sampled based on the parameters of the study. This was then followed by cold calling a few of the respondents in the sample to establish their existence, and later set up appointments to meet the respondents and administer the questionnaire face to face. The data collected was then be coded and entered into the statistical program for social sciences (SPSS) to determine findings. 3.6 Data Analysis Methods Data analysis is the process of bringing order, structure and meaning to the mass of information collected in a research (Mugenda et al (2012). The quantitative data was analyzed using descriptive and inferential statistics provided by the statistical program for 31

45 social sciences (SPSS) to generate the required frequencies and percentages that was interpreted to answer the research questions. Inferential analysis included correlations and regressions between youth entrepreneurship training, access to finance, business development services and the success of youth business start-ups. Correlation was used to determine whether there exists any relationship between the variables. Regression analysis was used to test the level of significance for the relationship. The findings of the study have been presented using tables and figures. 3.7 Chapter Summary This chapter has presented the study methodology that was adopted for the study. The descriptive research has been adopted as the study research design. The researcher was also able to identify the population as 410 youth entrepreneurs under TechnoServe s Stryde entrepreneurship training program, phase two, cohort one beneficiaries. The stratified and random sampling techniques have also been presented as the study sampling techniques. Data collection was conducted using a closed ended structured questionnaire. The research procedures included seeking permissions from TechnoServe s to carry out the study, and also conducting a pilot test to determine reliability and validity. Data was analyzed for descriptive and inferential statistics using Statistical Packages for Social Sciences (SPSS). The study findings were presented using tables and figures. The next Chapter 4 presents study results and findings. 32

46 CHAPTER FOUR 4.0 RESULTS AND FINDINGS 4.1 Introduction This chapter presents the results and findings based on the study specific objectives. The findings the influence of youth entrepreneurship training is presented first. This is followed by the findings on how access to finance influences success of youth entrepreneurs, and finally how business development services influence success of youth entrepreneurship services. This study had a sample size of 196 respondents. Out of the 196 questionnaires that were given out, and 150 were received back, making a 77% response rate Reliability Analysis A pilot test was conducted to determine the reliability for the questionnaire tool. For a study to be reliable, it has to yield a Cronbach Alpha value above 0.6. When a reliability analysis was conducted for this study, a Cronbach Alpha value of 0.814, and thus the study tool was reliable as indicated in table 4.1 Table 4.1: Reliability Analysis Areas of Analysis Items Cronbach's Alpha Success of Youth Entrepreneurs Entrepreneurship Education Access to Finance Business Development Services Average Demographic Data The demographic data of this study included gender of the respondents, age, level of education, marital status, and area of entrepreneurship. 33

47 4.2.1 Respondents Gender The findings of this study show that 62% of respondents were male, while 38% were female as indicated in figure 4.1 below 38% 62% Male Female Figure 4.1: Respondents Gender Respondents Age Figure 4.2 below shows the respondents age. The findings of the study revealed that respondents aged years were the majority (44%), followed by those aged 18-21% at 24%, those aged years were 17%, while those aged years were 15% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 44% 24% 15% 17% Years Years Years Years Figure 4.2: Respondents Age 34

48 4.2.3 Respondents Level of Education The findings of the study show that 44% of respondents had college education, followed by 32% who had secondary level education, then 18% who had university education, and finally 6% who had primary level education as indicated in figure % 40% 35% 30% 25% 20% 15% 10% 5% 0% 44% 32% 18% 6% Primary Secondary College University Figure 4.3: Respondents Level of Education Marital Status The findings of this study show that 78% of respondents were single, while 22% were married, as indicated in figure % Single Married 78% Figure 4.4: Respondents Marital Status 35

49 4.2.5 Location of Entrepreneurship When respondents were asked to indicate location of entrepreneurship, 52% indicated agriculture, 21% retail shop, 20% sales and marketing, while 7% said they operate retail shops as indicated in figure % 50% 40% 30% 20% 10% 0% 7% 52% ICT Agriculture Sales & Marketing 20% 21% Retail Shop Figure 4.5: Location of Entrepreneurship 4.3 Entrepreneurship Training and Success of Youth Business Start-Ups Respondents of the study were asked to indicate whether youth entrepreneurship training had an influence on youth business start-ups. On the question on whether respondents had received education under TechnoServe Stryde program, 67% strongly agreed, 13% disagreed, 10% agreed, while another 10% strongly disagreed. On the question on whether entrepreneurship education had contributed to success of respondent s start-ups, 50% of the respondents agreed, 25% strongly agreed, 12% strongly disagreed, 9% disagreed, while 3% remained neutral. On whether the training objective was met, 41% of respondents agreed, 39% strongly agreed, 8% disagreed, 7% strongly disagreed, while 5% remained neutral. When asked whether the trainer was knowledgeable enough, 56% agreed, 25% strongly agreed, 10% disagreed, 5% strongly disagreed, while 4% remained neutral. Similarly, on the question on whether the training content was sufficient to make start-ups succeed, 45% agreed, 36% strongly agreed, while 9% disagreed and strongly disagreed respectively. When asked whether they would recommend the training to other start-ups, 64% strongly agreed, 23% agreed, 7% disagreed, 3% remained neutral, and strongly disagreed respectively. When respondents were asked whether they had received 36

50 record keeping training, 53% agreed, 30% strongly agreed, 7% strongly disagreed and agreed respectively, while 3% remained neutral. On the question on whether record keeping was essential for business start-ups, 48% agreed, 22% strongly agreed, 11% strongly disagreed, 9% disagreed, while 5% remained neutral. When asked whether record keeping had help respondents start-ups succeed, 45% strongly agreed, 37% agreed, 13% disagreed, while 5% strongly disagreed. When respondents whether they had received finance management training, 49% agreed, 29% strongly agreed, 10% strongly disagreed, 7% remained neutral, while 5% disagreed. Finally, on whether financial management training is essential for success of start-ups, 52% agreed, 31% strongly agreed, 8% disagreed, 5% strongly disagreed, while 3% remained as indicated in table 4.2. Table 4.2: Entrepreneurship Training Statement You have received education under TechnoServe Stryde Program Entrepreneurship Education has contributed to success of your business Distribution Strongly Disagree Disagree Neutral Agree Strongly Agree f % f % f % f % F % 15 10% 20 13% % % 18 12% 14 9% 5 3% 75 50% 38 25% Was the training objective met 10 7% 12 8% 8 5% 62 41% 58 39% Was the trainer knowledgeable enough 7 5% 15 10% 6 4% 84 56% 38 25% Was the training content sufficient to make you succeed as an entrepreneur 14 9% 14 9% % 54 36% Would you recommend this training to other youth start ups 5 3% 10 7% 5 3% 34 23% 96 64% You received Record Keeping Training 10 7% 11 7% 4 3% 80 53% 45 30% Recording Keeping is essential for success of Youth start-ups 16 11% 14 9% 8 5% 72 48% 40 27% Record Keeping has helped your start-up to succeed 7 5% 20 13% % 68 45% You have received finance management training 15 10% 7 5% 10 7% 74 49% 44 29% Finance management training is essential for start-ups 8 5% 12 8% 5 3% 78 52% 47 31% 37

51 4.4 Access to Finance and Success of Youth Business Start-Ups Initial Start-Up Capital Respondents of this study were asked to indicate how they obtained their initial capital for their business start-ups. The findings show that 30% got start-up capital from youth fund, 28% from personal savings, 18% from family support, 17% from TechnoServe seed capital, while 7% got a bank loan as highlighted in figure 4.6. TECHNOSERVE SEED CAPITAL 17% YOUTH FUND 30% FAMILY SUPPORT 18% BANK LOAN 7% PERSONAL SAVINGS 28% 0% 5% 10% 15% 20% 25% 30% 35% Figure 4.6: Initial Start Up Capital Hindrances on Access to Capital Respondents of this study were also asked to indicate the hindrances they had uncounted in access to business start-up capital. The findings show that 44% indicated lack of collateral was main hindrance, 38% indicated cumbersome procedures, 10% lack of business plan, 8% indicated that low loan amount was the main hindrance as indicated in figure

52 CUMBERSOME PROCEDURES 38% LOW LOAN AMOUNT 8% LACK OF BUSINESS PLAN 10% LACK OF COLLATERAL 44% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% Figure 4.7: Hindrances on Access to Capital Access to Loans Has Stringent Conditions for Youth Start-Ups Respondents of the study were asked to indicate whether they felt that access to loans for youth start-ups had stringent conditions. The findings 73% agreed, 19% strongly agreed, 11% strongly disagreed, while 4% disagreed as indicated in table 4.3. Table 4.3: Access to Loans Has Stringent Conditions for Youth Start-Ups Scale Frequency Percentage Strongly Disagree 16 11% Disagree 6 4% Neutral 0 0% Agree % Strongly Agree 28 19% Total % Stringent Loan Hinder the Success of Youth Business Start-Ups On the question on whether stringent loan conditions do hinder youth access to business start-ups, 47% of respondents agreed, 42% strongly agreed, 7% disagreed, while 5% remained neutral as highlighted in table

53 Table 4.4: Stringent Loan Hinder the Success of Youth Business Start-Ups Scale Frequency Percentage Strongly Disagree 7 5% Disagree 10 7% Neutral 0 0% Agree 70 47% Strongly Agree 63 42% Total % Stringent Loan Conditions Should Be Abolished to Access to Finance When respondents were asked whether they believed that stringent loan conditions should be abolished, 51% of respondents strongly agreed, followed by 37% who agreed, then 10% who disagreed, 5% who strongly disagreed, and 4% who remained neutral as highlighted in table 4.5. Table 4.5: Stringent Loan Conditions Should Be Abolished to Access to Finance Scale Frequency Percentage Strongly Disagree 7 5% Disagree 15 10% Neutral 6 4% Agree 58 37% Strongly Agree 76 51% Total % Training Has Enhanced Your Business Experience Respondents were asked to indicate whether training had enhanced their business experience. The findings show that 62% of respondents agreed that training had enhanced their business experience, 21% strongly agreed, 9% disagreed, 3% remained neutral while 2% strongly disagreed as indicated in table

54 Table 4.6: Training Has Enhanced Your Business Experience Scale Frequency Percentage Strongly Disagree 3 2% Disagree 14 9% Neutral 5 3% Agree 93 62% Strongly Agree 32 21% Total % Lack of Business Experience Hinders Access to Finance This study sought to determine whether lack of business experience hindered youth access to start-up finance. The findings show that 54% of respondents agreed that lack of business experience hindered them from accessing start-up finance, 27% strongly agreed, 7& disagreed, 3% strongly disagreed, while another 3% remained neutral as indicated in table 4.7. Table 4.7: Lack of Business Experience Hinders Access to Finance Scale Frequency Percentage Strongly Disagree 4 3% Disagree 10 7% Neutral 5 3% Agree 81 54% Strongly Agree 40 27% Total % Lack of Experience Should Not Hinder Access to Finance Respondents were asked to indicate whether lack of finance should hinder youth access to finance. The findings show that 51% agreed that lack of business experience should not hinder youth access to finance, 37% strongly agreed, 5% strongly disagreed, while 3% disagreed and remained neutral respectively as indicated in table

55 Table 4 8: Lack of Experience Should Not Hinder Access to Finance Scale Frequency Percentage Strongly Disagree 8 5% Disagree 5 3% Neutral 5 3% Agree 77 51% Strongly Agree 55 37% Total % Currently Interest Rates for Loans on Youth Start-Ups Are High Respondents of this study were asked to indicate whether they believed that the current interest rates were high for youth start-ups to succeed. The findings indicate that 47% of respondents strongly agreed that the current interest rates were high for youth start-ups to succeed. Equally, 36% or respondents agreed, 8% disagreed, 6% remained neutral, while 3% strongly disagreed as indicated in table 4.9. Table 4.9: Currently Interest Rates for Loans on Youth Start-Ups Are High Scale Frequency Percentage Strongly Disagree 4 3% Disagree 12 8% Neutral 9 6% Agree 54 36% Strongly Agree 71 47% Total % High Interest Rates Hinders the Success of Youth Start-Ups This study equally sought to determine whether high interest rates hindered the success of youth start-ups. The findings show that 64% of respondents strongly agreed, 21% agreed, 9% disagreed, while 6% strongly disagreed as highlighted in table

56 Table 4.10: High Interest Rates Hinders the Success of Youth Start-Ups Scale Frequency Percentage Strongly Disagree 9 6% Disagree 13 9% Neutral 0 0% Agree 32 21% Strongly Agree 96 64% Total % 4.5 Business Development Services and Success of Youth Business Start-Ups Type of Institutions that Provide Business Development Services Respondents of this study were asked to indicate the type of institution they accessed for provision of business development services. The findings indicate 56% of respondent s access business development services from NGOs, 37% from government, 5% from banks, and 2% from chamber of commerce as indicated in figure 4.8 B A N K S 5% C H A M B E R O F C O M M E R C E 2% N G O S 56% G O V E R N M E N T 37% Figure 4.8: Type of Institutions that Provide Business Development Services Challenges Facing Marketing of Youth Start-Up Products This study sought to determine the kind of challenges that youth start-ups face in marketing their products. The findings show that 32% have challenges with high market 43

57 costs, 30% with stiff competition, 24% poor business location, and 14% have challenges with low product demand as indicated in figure % 30% 25% 20% 15% 10% 5% 0% 30% Stiff Competition 24% 14% 32% Poor Location Low Demand High Market Cost Figure 4.9: Challenges Facing Marketing of Youth Start-Up Products You Have Marketing Services for Your Goods Services When respondents were asked whether they have marketing services for their products, 52% agreed, 27% strongly agreed, 11% strongly disagreed, 7% disagreed, while 3% remained neutral as indicated in table 4.11 Table 4.11: You Have Marketing Services for Your Goods Services Scale Frequency Percentage Strongly Disagree 17 11% Disagree 10 7% Neutral 5 3% Agree 78 52% Strongly Agree 40 27% Total % 44