Beyond credit, we need novel solutions for MSMEs

Micro, Small, and Medium Enterprises (MSMEs) are the backbone of Kenya's economy, contributing significantly to innovation and economic growth. According to the Kenya National Bureau of Statistics (KNBS) Economic Survey 2022, MSMEs account for 33.8 per cent of the national output and are pivotal in realising Vision 2030 development aspirations, particularly in trade, manufacturing, agriculture, tourism and financial services.

MSME’s account for over 90 per cent of private sector enterprises in Kenya, playing a crucial role in the decentralised economic development model promoted by devolution that aims to achieve equitable social and economic development across the country.

As we marked the World MSME Day on June 27, the significance of these enterprises was highlighted. Despite their critical role in economic growth and job creation, MSMEs face significant challenges, including high rates of business closure within the first year of operation. To address these challenges and ensure sustainable growth, there is a pressing need for digital and innovative financial products and services beyond traditional credit offerings. These solutions can provide MSMEs with the tools and resources necessary to thrive in an increasingly digital economy.

MSMEs are essential for economic development, providing employment opportunities and contributing to poverty alleviation and inclusive growth. However, despite the introduction of favourable policies over the years, a significant proportion of MSMEs continue to face financial constraints, limiting their ability to thrive and expand.

Ddigital lending

The introduction of unsecured digital lending products by banks in recent years has revolutionised access to finance for MSMEs. These products, accessible via mobile apps, offer faster and more efficient loan application and renewal processes, enabling businesses to access funds quickly and conveniently. Such innovations are crucial in a digital era where speed and accessibility can significantly impact business success.

The Covid-19 pandemic highlighted the vulnerability of MSMEs to external shocks. Digital insurance products and risk management solutions can provide a safety net for these businesses, protecting them from unforeseen events and ensuring business continuity.

Technology today plays a pivotal role in the provision of innovative financial services. Digital platforms enable financial institutions to interact with MSMEs efficiently, from application and onboarding to monitoring and fund disbursement.

As we move towards a more digital and data-driven financial landscape, it is crucial to continue developing and implementing financial solutions that cater to the diverse needs of MSMEs, ensuring their resilience and success in an ever-changing economic environment.

Ms Kinyanjui is head of Small Business at I&M Bank Ltd.