Micro, Small and Medium-sized Enterprises (MSMEs) play a crucial role in the community, and it is no wonder that this year’s MSMEs Day focused on the resilient recovery of MSMEs.

According to the United Nations, MSMEs account for 90 per cent of businesses, 60 to 70 per cent of employment and 50 per cent of GDP globally, contributing to local and national economies and sustaining livelihoods. In Kenya, the sector, indicatively accounts for 24 per cent of GDP, over 90 per cent of private sector enterprises and 93 per cent of total labour force in the economy (Manufacturing Priority Agenda, 2022).

Despite the huge role that SMEs play in driving the growth of our economy, it is estimated that their contribution to production is minimal and many of them specialise in low-value addition. Essentially, many small businesses are part of a huge informal economy which may seem to offer relief for their short-term challenges but in the long run, minimizes their potential for growth, access to wider resources and markets  and ultimately limits their socio-economic impact.

There are several ways to unlock the potential for small businesses. First, there is an urgent need to formalise the informal segment of the SME sector through the promotion and simplification of business start-up operations. By formalising these entities, many more people, particularly the youth would gain an identity and, in the process, open themselves up for more business opportunities on their value chains.

Second, we need to develop and implement the SMEs subcontracting policy. This should aim at promoting the creation of strong linkages between large enterprises and SMEs whilst governing the contractual agreements between the two. This will not only boost the growth of the SMEs, but it will also result in the growth of the value chains, catalyzing a more vibrant economy.

Third, it is important that we foster SME innovation and patenting. The SME sector competitiveness and exploitation of economies of scale are largely determined by the quality of products developed and the right pricing. While the presence of innovation, inventions and modifications signifies growth, very few (30 per cent) companies have come up with new innovations within three years of their existence, according to a KAM study on Intellectual Property Rights. In this regard, it is critical that all 47 counties establish incubation centres for SMEs to resolve issues on product design, innovation and patenting.

Lastly, promoting market access of SMEs at both local and international levels. Unfair competition from cheap imports has continued to hinder the growth of the sector. Our domestic market is shared by a small portion of formal markets that have a preference for high-quality products and at reasonable prices, yet it is too small to bring down the cost of production due to economies of scale. Clear guidelines targeting SMEs for the smooth operation of the Buy Kenya Build Kenya Strategy are key. The government, being the largest consumer of goods and services, would be of great importance to SMEs, especially in the procurement of their products.

MSMEs are particularly important for providing job and income opportunities. Initiatives such as the Micro and Small Enterprises (MSE) Policy that seeks to enhance competitiveness, productivity and sustainability of MSMEs, are a critical step for our country.  We urge the government to create a favourable environment for SMEs to flourish by fast tracking the implementation of the MSE policy, among other policies and initiatives.

At Kenya Association of Manufacturers, we acknowledge our responsibility in supporting the growth of SMEs. Hence, we continue to support the development of an inclusive, innovative sustainable and competitive SME sector in Kenya and the region through our Manufacturing SME Hub. Through the Hub, we provide a platform to prepare, nurture and grow manufacturing SMEs to take full advantage of the available markets by addressing the challenges they face, among them, access to affordable finance. 

— The writer is the acting chief executive officer of Kenya Association of Manufacturers  [email protected].