Nakuru: The proposed Micro, Small and Medium Enterprises (MSME) policy is designed to create a more productive, diversified, and competitive MSME sector that drives economic transformation and social empowerment, experts have said.
According to Kenya News Agency, Youth Enterprise Development Fund Manager in charge of Innovations, Daniel Mathenge, explained that the new policy being formulated by the Micro and Small Enterprises Authority (MSEA) will improve the efficiency and sustainability of Kenyan MSMEs and support their growth from incubation to fully fledged businesses. Speaking during a public participation exercise for five counties held in Nakuru to review the draft MSME Policy 2020 and MSME amendment Bill of 2025, Mathenge said the new document will not only address some eleven major challenges affecting the MSME sector but will also come up with practical solutions to the issues bedeviling the sector.
He elaborated that the operationalisation of the MSME Policy 2020 had been challenging because it failed to capture and address issues that are related to MSMEs, adding that there was a need to revise it so that it is more inclusive and responsive to the needs of the current business owner. ‘The current framework has failed to support the sector that employs thousands of Kenyans, with 84 percent of MSMEs dying before their first anniversary,’ added the manager.
The proposed MSMEs 2025 Act outlines a robust framework for funding and marketing their products, with the government playing a leading role in managing and supporting the sector. Among the key proposals in the draft law is the recognition of MSMEs by banks, allowing them to access credit facilities upon presenting their business licenses.
The official expressed optimism that the new law will cultivate focused management of the micro and small businesses through new structures that are to be constituted, adding that what has been lacking in the MSME sector was a sound regulatory framework and finance to support the growth of businesses. The manager noted that though the youth constitute the largest majority of Kenya’s population and many of them are in MSMEs, they lack the right guidance on how to grow their businesses, adding that through the proposed policy, the country will be able to nurture talents, incubate innovations, and encourage the youth to become entrepreneurs.
MSME Policy and MSME Act 2025 further focus on improving access to finance, easing regulatory burdens, expanding market access, and upgrading infrastructure to shape an inclusive and dynamic MSME ecosystem, added Mathenge. The official further said the policy will include strengthening the institutional and regulatory framework, creating an enabling environment, promoting capacity building and innovation, enhancing market linkages, and fostering equity and inclusivity.
In order to actualise the policy goals, Mathenge argued that a comprehensive legal framework would be required to address gaps in the current MSME Act 2012 and also strengthen the institutional frameworks, adding that the country’s vision was to build a highly productive, diversified, and competitive MSME sector that drives economic transformation and social empowerment challenges.
The MSME draft policy 2025, he noted, aims to create an integrated enabling business environment for a productive, competitive, and sustainable MSME sector for wealth and employment creation. The official cited some of the key challenges facing the sector, including limited access to finance, inadequate infrastructure, lack of skilled labour, limited market access, lack of technology adoption, and regulatory and compliance issues.
Other challenges he added include lack of business skills and training, lack of coordination between development partners and stakeholders, lack of coordination, and vulnerability to covariate shocks such as pandemics. To address these challenges, the policy, once implemented, will seek to support the formalisation of MSMEs, especially those who have not been registered, foster entrepreneurial culture, enhance skills development for MSMEs, and encourage innovation, research, and development for the sector, explained Mathenge.
The head of Programme for Promotion of Self-Employment and Entrepreneurship at the German Corporation for International Cooperation (GIZ), Irene Omogi, said some of the key challenges that the policy review will address include putting in place regulations that will ease access to credit for informal businesses, adding that the new policy would also address the issue of market linkages with the aim of expanding market reach for the local businesses to the regional and global markets.
Other key objectives of the policy, Ms Omogi said, would include enhancing access to diverse and affordable financial products and services and building MSME resilience and adaptability. Ms Omogi said for MSMEs to access international markets, they required certain prerequisites such as quality standards of products and also had to attain certain quantities, adding that they were looking at how these MSMEs could be able to satisfy the market in Kenya and go to regional and international markets.
‘We are also looking at how we can integrate our MSMEs into global supply chains so that when they are producing for a certain market, they know what fits that market,’ she added. There are also proposals to promote link learning and research institutions, technology developers with MSMEs as a way of encouraging skills transfer. Additionally, the policy has also proposed strategies that will incorporate innovations into the daily operations of their businesses and ensure that they are able to meet the client needs.
‘Most Kenyans do not have the right skills for them to run their businesses sustainably. This policy review is looking at getting as many MSMEs as possible to have basic skills or advance their skills to be able to run their businesses,’ said Ms Omogi. She said that the policy will provide interventions that government and other stakeholders in the sector could utilise to enable them to support the MSMEs.
Secretary General to Kenya National Federation of Jua Kali Associations- (KNFJKA)- Nakuru Chapter, Ms Asumpta Wangui, cited limited funding and lack of market access as the primary reasons for early business collapse, adding that the new law will enhance the profile of small and medium entrepreneurs in the country because it addresses issues like lack of finance and a sound regulatory framework that have been hurting growth of the sector. Ms Wangui hailed the policy review, adding that it would go a long way in dignifying the MSME sector and support the growth of industries in the country.
Once approved, the new policy will apply to both National and County Governments, as well as Micro, Small, and Medium Enterprises (MSMEs) and the broad network of supporting institutions, including private sector entities, development partners, and other non-state actors involved in MSME development. At the national level, the policy will guide overarching strategic planning and implementation regulatory frameworks and resource allocation to foster a supportive ecosystem for MSMEs. At the county level, the policy will guide county policy development, address localised implementation, capacity building, infrastructure development, and market access tailored to regional needs.
According to the Kenya National Bureau of Statistics MSME Survey of 2016, there are over 7.4 million MSMEs in Kenya, employing over 14.4 million Kenyans across all sectors, which contributed approximately 33.8 percent to the national GDP in 2015.