18 million micro businesses: Kenya's forgotten economic powerhouse

Staff packaging garments at the New Wide Garments Kenya EPZ Limited in Machakos County. [David Gichuru, Standard]

Whenever the conversation on small businesses is held, the micro sector is rarely mentioned. If it makes it as a mention, it is in passing.

It may be a slip of the tongue, an oblivious omission, or the palate's easiness in pronouncing the acronyms SME as compared to MSME - but this has finally gotten the attention of the State.

The Principal Secretary State Department of MSMEs Susan Mang'eni is all too aware of the little attention these entrepreneurs in this sector receive.

The PS notes that the Kenyan economy is largely micro, and that is why most of the businesses in the MSME sector are informal.

"Out of the potentially 18 million plus MSMEs you find that over 10 million are in micro. These are MSMEs that are still informal, have no linkages to any opportunities, cannot access financing, they are unbanked, underserved and some of them are totally unserved," said the PS.

The PS, speaking on the sidelines of a recent SME convention planned by the Kenya Association of Manufacturers(KAM), highlighted spoke pf the unheard voices of these businesses 'yet they are the ones that later grow to become SMEs'.

"When you talk about being unserved, I mean, they are even locked out of opportunities for capacity building, social networking, and digitalisation," she said. "This is the segment of the MSME we as a State Department we are putting a lot of focus on because they are the majority."

It was in the wisdom of President William Ruto, and in line with the Hustler movement campaign, that he set up a Ministry headed by Cabinet Secretary Simon Chelugui specific for small businesses. Additionally, this also informed the Hustler Fund, which is a platform where individuals and businesses can borrow money at low interest, a venture targeting the unbanked in the MSME sector.

How to bring these businesses on board, however, has been the challenge.

From the government's perspective, the only way the micro sector can get the attention it deserves from all stakeholders is if that business is registered.

The Ministry of Cooperatives and MSMEs, through the Micro and Small Enterprises Authority(MSEA) has an ongoing exercise of registering these businesses in order for them to benefit from Hustler Fund.

In 2020, the Insurance Regulatory Authority(IRA), with knowledge of how this sector is as well uninsured, provided regulations and guidelines for registration of micro insurance companies that would basically focus on small businesses.

"And this should also encourage inclusion and access which is very important," said IRA chief executive Godfrey Kiptum during the launch of BiznaSure, an insurance product by Fidelity Insurance and Minet Kenya targeting SMEs.

While potentially, there are over 18 million MSMEs in the country as the PS noted, the Kenya National Bureau of Statistics (KNBS) records just 7.4 million. These 7.4 business employ upwards of 14 million Kenyans, which is 93 per cent the employed population while contributing a third to the economic growth.

Sammy Muthui, Minet Kenya chief executive said while these numbers are impressive, such cannot be compared to other economies like South Africa.

"South Africa MSMEs actually contribute 55 per cent of the country's gross domestic product (GDP) which is much bigger than Kenya's. I would challenge especially the Kenya National Chamber of Commerce and Industry (KNCCI) and the Ministry that there is still room for great growth in terms of contribution to the economy, and businesses and balance sheet of SMEs in this country."

PS Mang'eni describes the micro sub-sector as the epitome of the country's grassroots economy. She says they are the reason behind the vibrancy of livelihood in the grassroots economy since they help in overcoming poverty even when their capacity is still very low and operate informally.

"Our major work as a state department is to see how we can formalise them. We can do this by enhancing their capacity in terms of skills and knowledge through deliberate training programmes, which are informed by opportunities and driven by demand," she said.

The government can also direct them to areas where opportunities exist, she adds.

"What the government has done is we have flagged out key priority value chains that have high growth potential which can help us create more jobs and promote industrialisation," she said.

These key priority areas are around the domestic and export market and can help them (small businesses) access financing immediately.

PS Mang'eni insisted that the challenge in the country's economy is not a lack of opportunities, ideas or human capital.

"We have a hardworking brilliant labour force and massive opportunities," she said. "What has been lacking in our economy is how to reorganise these opportunities to increase uptake or initiate offtake by the MSMEs."

She said the focus on that MSMEs by the government is important because this sub-sector has been largely regarded as high risk to do business with.

"They do not have any titles or collaterals and now they had become victims of exploitation by loan sharks and predatory lenders in the market," she said.