Looking back, in July 7, 2023 we authored a post where we debunked the Board Myths for Micro, Small and Medium Enterprises (MSME) as they are defined under the Micro and Small Enterprises Act 55 of 2012.

To recap, our take was that Micro enterprises (1 to 10 employees)do not require a board, and to be accountable, a business coach or business mentor would do. A small enterprise (10-50 employees)can opt to have a Board if they are structurally and financially ready but an Advisory Board would do just fine in the interim. A Medium enterprise (between 50- 100 or 50-250 employees)definitely requires a Board.

MSME’s in Kenya constitute 98% of all business, create 30% of jobs annually and contribute at least 40% towards the country’s GDP. This is according to a June 2024 report by Ipsos Kenya, contracted by Safaricom Limited, to guide Safaricom and FSD Kenya in developing a solid and holistic MSME strategy, both for product innovation as well as capacity building.

The report noted that most business people get into the MSME sector with minimal knowledge on what it takes to run a business, requiring a lot of support and one important aspect of the non-financial support identified was ‘mentorship’. In our view, mentorship is for the purpose of both governance and guidance and hence what we had earlier shared on what that would look like in an MSME.

Focussing on Advisory Boards, an enterprise can scout for experts and business associates to walk alongside them in an advisory capacity and whose role would be:
i. To participate in board meetings and provide feedback on strategic decisions
ii. To offer support and guidance to the organization’s leadership team on best practices without stepping into management roles
iii. To provide introductions to their network and connecting the business with key decision-makers and industry influencers
iv. To attend events and functions on behalf of the organization, such as industry conferences or networking events

An Advisory Board is different from a Governing Board in the following ways:
1. Its members (not referred to as directors) are not financially and legally liable for the acts of the organisation.
2. Management is not duty bound to implement the advice they receive from Advisory Board members, as they are primarily a sounding board.
3. The members of the advisory board do not have the mandate to recruit or terminate the CEO or key leaders in the organisation.

It does not then mean to say that an Advisory Board is perfunctory or a toothless dog within the governance of an MSME. It is actually a path to full governance with a governing board of directors, and if constituted and treated well, could be a priceless mentorship resource for management.

So if you are looking for mentorship and guidance for your MSME, consider setting up an Advisory Board and we at Akira Consult Limited look forward to helping you put this in place.