Support SMEs in order to spur growth, create jobs

Ms Soin Chebet of Soin Honey arranges jars of honey sourced from Baringo County during the Nation Media Group SMEs Conference

Ms Soin Chebet of Soin Honey arranges jars of honey sourced from Baringo County during the Nation Media Group SMEs Conference and Expo in Nairobi on March 15, 2023.

Photo credit: Francis Nderitu | Nation Media Group

Small and micro enterprises (SMEs) account for the bulk of businesses worldwide. They are, therefore, the single-most-important vehicle for job creation and economic development. 

Post-modern theories of trade emphasise the role of SMEs as promoters of a healthy business climate and the key to resuscitating the world economies, which have been heavily battered by such factors as the 2020/21 Covid-19 pandemic, climate change effects, the Russo-Ukrainian war and the attendant increase in basic commodity prices due to disruption of global economic supply chains. In Kenya, SMEs are vital actors in enhancing innovation, competitiveness and entrepreneurship.

However, players in this space lack the requisite skills. For instance, poor financial literacy means many SMEs are locked out of the formal credit market as they do not operate in a manner that would enable lenders to ascertain their credit scores and, ultimately, their creditworthiness or lack thereof.

The national and county governments should have a strategy to provide SMEs with advisory support to upskill the traders. There is also an urgent need to link entrepreneurs to the markets. That can be done through regional blocs, given that certain products are easy to produce in certain regions due to the distribution of climatic and natural resources. The government can provide marketing and consulting services for SMEs at a low cost.

Huge gap

There is a huge gap between the stated intentions of the Kenya Kwanza administration and their understanding of the needs and challenges SMEs face. That calls for the alignment of government policies and actions to the needs of SMEs. For instance, lenders at the local level still insist on collateral—such as land and vehicle logbooks—which most ‘hustlers’ lack. This, even as the Hustler government champions credit scores as a tool for assessing creditworthiness, a path the Hustler Fund was intended to spearhead. 

Let the government support SME-specific loans. For now, boosting existing facilities with state lenders like Kenya Industrial Estates (KIE) and Kenya Farmers Association (KFA) would enable the institutions to extend unsecured loans of up to Sh3 million to SMEs, in exchange for such strategic considerations as sustainably hiring additional staff, providing internship to unemployed but trained youth to induct them into the world of work. And paying tax!

The government often talks of supporting manufacturing but does very little business with SMEs. Instead, counties are notorious for delaying payments to suppliers, inadvertently pushing many into liquidation. For market exposure, the government can use institutions like the micro and small enterprises authority MSEA), KIE, the Kenya Industrial Research and Development Institute (Kirdi) and the Kenya Export Promotion and Branding Agency (Keproba) to organise and subsidise conferences and other collaboration and networking events as well as trade fairs, where SMEs can participate at a lower cost. A case in point is the government-sponsored Nairobi International Trade Fair.

Mr Nyaga is the market development team leader at Katya Natures Limited. [email protected].