Lessons from Laikipia on how to scale up micro and small businesses
Mr Peter Maina displays face masks at his shop in Nanyuki town on April 14, 2020. He makes aesthetic face masks for children under the Laikipia County Innovation and Enterprise Development Programme.
Presidential hopefuls are working overtime to woo the vote-rich Mt Kenya region. One strategy, and by far my favourite, is pledging support to micro and small businesses.
According to the 2016 Micro, Small and Medium Enterprises Survey by the Kenya National Bureau of Statistics, there are more than 3 million MSMEs in the region.
A majority (62 per cent) are in wholesale and retail trade as well as motor vehicle and motorcycle repair. Others are in manufacturing (12 per cent), accommodation and food services (nine per cent), agriculture and forestry (three per cent) as well as transportation and storage (three per cent).
The Laikipia enterprise programme shows how these businesses can be supported. Now in its third year, the programme directly supports 1,500 micro and small businesses.
Our immediate target is to reach 5,000 and help them with intellectual property protection, business planning, and access to financing, incubation and working spaces, access to markets, training, as well as research and development.
To support them, we have 200 business development officers. For instance, officers in the Roads and Infrastructure department prop up indigenous firms dealing in construction and building materials. Businesses in the programme currently provide 18,000 jobs!
Sh5 billion borrowed
Laikipia accounts for only 1.3 per cent of the national economy. Scaled up to the national level, we’d have about 150,000 to 200,000 micro and small businesses receiving support. Compare that to the State Department of Industrialisation programme that targets 250! Too few in my view, given that Sh5 billion has been borrowed for the programme.
The Laikipia stimulus programme has disbursed Sh85 million to 173 enterprises. The loans are for working capital, invoice discounting, LPO and asset finance as well as loans to cooperatives.
A majority (85 per cent) are Sh500,000 or less. In fact, disbursements below Sh100,000 account for 49 per cent of the total.
Laikipia’s Sh3 billion economic stimulus package is a market-based partnership with top financial institutions to help businesses recover from Covid-19 shocks. Scaled up nationally, it would be a Sh150 billion programme. Compare that to the current national government’s Sh10 billion SME guarantee scheme!
In Laikipia, we are collapsing development finance institutions into one. These include Small Enterprise Finance Company (Sefco), Kenya Industrial Estates, Industrial Development Bank, Development Bank, and Industrial & Commercial Development Corporation (ICDC). The various funds will also be collapsed into one – including Uwezo fund and Youth Fund.
Earlier ideas of SME financing involved giving commercial banks money to lend. A better strategy, however, is to buy down the cost of the credit, but leave the banks to do their work. That is how small businesses are accessing credit in Laikipia at 7 per cent per annum.
Ndiritu Muriithi is the Governor of Laikipia County. @NdirituMuriithi
