Why MSMEs are still winning in the Kenyan Economy
In Kenya, Micro, Small and Medium Enterprises (MSMEs) contribute approximately 40% of the GDP with the majority falling in the informal sector. While there are about 7.41 million MSMEs in Kenya, only 1.56 million are licensed whereas 5.85 million are unlicensed according to the statistics done by the Kenya National Bureau of Statistics in 2020. Statistics by the Ministry of Trade, Industry and Co-operatives indicate that MSMEs in Kenya employ more than 80% of the working population and therefore play a central role in the country’s economic growth strategies. With these numbers acting as a positive indicator on the beehive activities done in the economy, almost half of it falls back to MSMEs, a verification that they are still winning. However, there are still some salient factors that propel them to that level which deserves to be magnified.
There has been a lot of interest in MSMEs in relation to their importance to the social economic development of Kenya. Most organizations that include, the banking industry, the government, overgrown investors and non-governmental organizations (NGOs) among others are trying to find a niche of living among MSMEs.
In the recent years, there has been an unprecedented influx of MSMEs in the market, as most Kenyans continue to view it as the most viable place to shelter the rising gradual rise of their living standards and competitive economy.
By 2020, Kenya had about 7.41 million MSMEs, this included all sectors of the economy from the manufacturing, extractors, production, and service industry among other sectors. The number alone represented only 1.56 million MSMEs which had been licensed representing only 21 percent of the number in the government data, whereas about 78 percent remaining million are unlicensed.
This is a huge average, with regard to the pandemic that hit the world around March last year. According to AFP, the UN’s International Labour Organization (ILO) had found by early 2021 a full 8.8 per cent of global working hours had been lost in 2020, compared to the fourth quarter of 2019.
“That is equivalent to 255 million full-time jobs, or “approximately four times greater than the number lost during the 2009 global financial crisis,” the ILO said in a statement.
“This has been the most severe crisis for the world of work since the Great Depression of the 1930s,” ILO chief Guy Ryder told reporters in a virtual briefing in January this year.
The fact that pushed MSMEs to remain strong in an economy where most formal workforce had been undergoing an age of shrinking. Since MSMEs in Kenya do not require any technical skills, with talent and passion, most individuals have sufficed the ILO statistics and bred booming franchises without blinking.
More so, most MSMEs in Kenya have continually depended on the generating the produces and output locally. Despite the biasness by many importers who had to face the heat of the pandemic, local business continued to boom because people had belief on the available commodities that’s always cheap, durable and satisfy their needs almost immediately.
Lockdowns hit MSMEs at an unprecedented scale. Considering that the majority of small businesses run “paycheck to paycheck”, losing regular income immediately put them deep into debt. This means that financing had become even more of a priority for small businesses.
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However this revolutionized the performance almost immediately, with E-commerce businesses that were able to adapt to digital platforms thrived, in general, while traditional retailers that lacked modern tech and weak online strategies dwindled, with several prominent ones filing for bankruptcy. MSMEs won were at the rigorously forefront of this change, giving them a leap in the economy.
The next advantage that MSMEs have is, they have been at the forefront providing “Sole employments”. These are the private flagship businesses that are managed by the owner till success is determined. Over a long period of time, family businesses have been winning, and it has never been ignited that these actually are the roots of MSMEs. It is from these that roots of independence grow to generations determining the sole employments, and the bottom line still stand Family businesses have won. With differentiation and segmentation of output delivery now the Kenyan economy is versatile and oblique of very many businesses.
In Mombasa, there are about 19,708 MSMEs, an agility that has elevated the economic performance of the region compared to other formal jobs. Interestingly there are only about 79 MSMEs in Nairobi in the top 100 MSMEs in Kenya, making the capital city the hub of booming business in the country.
According to KNBS and Capital Markets Authority; “Majority of MSMEs (54.1 per cent) have a range between 10-49 employees and about 37 per cent have over 50 employees making it easily manageable and enable quick decision making. Most of the surveyed MSME’s (77.0 per cent) had over KSh.10 million annual turnovers.”
Also it finds that MSMEs comprise of both formal and informal businesses, but a majority of the MSMEs operate informally. These are concentrated within the urban centers in both Counties due to better services and infrastructure as compared to the rural areas. Majority of these MSMEs are traders while it is not uncommon to find businesses that operate within the same sphere and sector operating next door.
Due to their readiness in accommodating the wasted demography and also there has been stagnation of job creation in the public sector yet the public wage bill is rising into unsustainable levels.
Of particular importance is the ability to create new jobs in the country, often slated as taking the biggest share of trust in the volatile economy.
There are so many variables that make MSMEs win in the economy. As the last punch, the government of Kenya has been supporting them for the longest time, with the big four agenda to the Ksh 2 billion estimate in the credit guarantee scheme, dedicated to support them from the FY’2021/22. This was on top of the Sh10 billion that was allocated in the 2020/21 year.
This leaves no chance for MSMEs to grow, an advantage that cannot be differentiated.
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