Home Business & Finance Small businesses ignored in policy formulation, Kepsa study

Small businesses ignored in policy formulation, Kepsa study

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By VICTOR AMADALA, Source: The Star

  • The main objective of the study was to assess, gauge, and rank the Kenyan MSME regulatory environment with regards to MSME facilitation and growth
  • The survey that sampled 1,152 out of 118,726 formally registered MSMEs in three counties: Nairobi, Kiambu and Machakos
The informal sector is the largest source of new jobs

The informal sector is the largest source of new jobs

Kenya lags in implementing policies supportive of Micro, Small and Medium Sized Enterprises (MSME), a recent survey by the Kenya Private Sector Alliance (Kepsa) shows.

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The MSME Policy Index released on Tuesday focusing on eight business enablers gave an average index score of three, just below four,  which is regarded as favourable.

The study set out to assess, gauge, and rank the Kenyan MSME regulatory environment with regards to facilitation and growth.

The  survey sampled 1,152 out of 118,726 formally registered MSMEs in Nairobi, Kiambu and Machakos and found that half the policy dimensions are slightly unfavourable to MSME development.

The assessment of MSME policy in eight horizontal and targeted policy dimensions built upon a selected market constraints revealed that the sector is less represented in formulation of key national policies, with the study giving effective representation least index score of 2.5.

Policies on market linkage, supportive frameworks for business development and human capital and entrepreneurial skills development received scores of 2.8, 2.87 and 2.89 respectively, way below the study benchmark index.

Consideration of MSME interests in decisions of expert group including task forces and commissions of inquiry was rated at 2.66, consultation in public procurements decisions 2.26, direct participation in policy making processes 2.31 while simplicity in presentation of grievances to relevant authorities scored 2.66.

The study suggested that the government must adopt a policy mandating compulsory and adequate MSME consultation in policy-making and implementation.

The study however revealed that the government was doing better in formulation and implementation of policies supporting access of MMSE financing, enabling governance and business regulatory environment and enhancement of reliable infrastructure and access to input.

The three segments achieved higher index scores of 3.17, 3.3 and 3.38 respectively.

Early last month, the government led commercial banks in launching a credit platform for small and medium-sized enterprises (SMEs).

The platform, christened Stawi, is a mobile loan product that is allowing SMEs to access unsecured credit of between Sh30,000 and Sh250,000 at an interest rate of nine per cent per annum and repayment periods of one month to 12 months.

The introduction of interest cap on commercial loans in 2016 saw lenders shun from lending to small businesses which are considered as risky. Kenya has since scrapped the law that capped interest rates at four per cent above CRB rate.

To address the current decline in lending to MSMEs, Kepsa asked the government to actualize MSME Fund and Biashara Fund. The lobby also want an enterprise investment scheme set for private and public investors to mobilize equity participation in viable SME projects.

It also want the government to integrate entrepreneurship into the national curriculum by introducing entrepreneurship training in high schools and TVETs and special SME universities like in Japan to develop a solid MSME human capital base.

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