This archive report was first published on 29 June 2021.
Kenya's economy is heavily reliant on Micro, Small and Medium-sized Enterprises (MSMEs), which collectively create an estimated 15 million employment opportunities. The 2021 MSMEs Survey Report, released on June 29th, 2021, highlights the importance of these enterprises in driving economic recovery.
The survey, conducted by the KBA Centre for Research on Financial Markets and Policy in collaboration with the Japan International Cooperation Agency (JICA), sampled 279 MSMEs and found that over 90 percent were registered, indicating a high level of formalization. Meanwhile, over half of the businesses were fully incorporated, with 35 percent of them running as sole proprietorships.
According to the report, most of the enterprises (80 percent) operate a bank account in their business name, while the rest (20 percent) use personal accounts. The report also reveals that 54 percent of the enterprises seek personal loans while 46 percent obtain credit for business support.
Dr. Habil Olaka, KBA Chief Executive Officer, emphasized the need to strengthen the MSMEs sector in light of the COVID-19 pandemic. 'At a time when economies worldwide and more so our domestic economy continue to be characterized by fragility and substantial slack due to the COVID-19 pandemic and its containment measures, any conversation on economic recovery in a sustainable way must be centered on strengthening the MSMEs sector.'
Dr. Olaka added that a strong and sustainable economic recovery in Kenya will be underpinned by a vibrant MSMEs sector. 'Cognizant of the fact that a strong and sustainable economic recovery in Kenya will be underpinned by a vibrant MSMEs sector, the need to characterize the environment MSMEs operate in would be important to facilitate appropriate interventions, including enhancing credit to MSMEs.'
Anne Olubendi, JICA Kenya Chief Programs Officer, highlighted the need to support MSMEs. 'MSMEs are more generally seen as accelerating the achievement of wider socio-economic objectives, including poverty alleviation. Their ability to grow highly depends on their potential to restructure and innovate. All these investments need capital and hence access to finance.'
Access to MSME start-up capital remains limited, with only 22 percent of the enterprises reporting having applied for start-up loans, out of which only 9 percent were from banks. The survey also found that 49 percent of the MSMEs said their borrowing from the different credit providers required collateral.
Dr. Samuel Tiriongo, KBA Research and Policy Director, noted that most of the businesses surveyed are micro, with 85 and 87 percent having less than ten full-time and part-time employees, respectively. Only 9 percent of the enterprises are small (10-49 full-time employees), and 6.4 percent are medium-sized (50-99 full-time employees).
