According to the latest survey report by the Kenya National Bureau of Statistics(KNBS), Kenya has approximately 7.41 million Micro Small and Medium Enterprises (MSMEs) contributing to about 34% of the country’s GDP and employ over 15 Million citizens.
This is a clear indication that MSME sector plays a very significant role in provision of goods and services, enhancing competition, fostering innovation, generating employment and in effect, alleviation of poverty.
The report further notes that of the 7.41 Million MSMEs, 1.56 million are licensed while the other 5.85 million are unlicensed. Around 60 percent of these businesses are either in the wholesale and retail trade and; repair of motor vehicles and motor cycles and accounted for more than creation of over 8 million informal jobs. Manufacturing, accommodation and food service activities accounted for 11.8% and 11.1% of all persons engaged in MSMEs, respectively.
The report shows that the major challenges faced by the MSMEs are related to tough regulatory framework due to requirement of multiple licenses for the same business.
“These licenses are also expensive and cumbersome to get. There is also interference from authorities; taxes are high and crippling; multiple procedures in applying for business registration that are hectic and restrictive.” KNBS.
Other problems faced by these important businesses include lack of capital, expensive loans, poor infrastructure and insecurity.
“The survey findings further shows that it was more difficult for MSMEs to access loans from commercial banks than from other small financial institutions. Some entrepreneurs reported of avoiding taking loans due to the high interest rates or lack of collateral to support the loan application.” it noted further.
Various challenges led to 2.2 million MSMEs being shut down in the last five years with most of them being in the wholesale and retail trade; repair of motor vehicle and motorcycles sector.
“On average, businesses were closed at the age of 3.8 years. Establishments that were started or acquired within the last two years were more vulnerable to closures and they accounted for 61.3 per cent of the total businesses closed.” Noted KNBS
