Last week the Inaugural Presidential Roundtable for SMEs was held at Strathmore University with a focus on six sectors linked to the Big Four Agenda: Textiles, Livestock (dairy, beef and leather), Agro-processing, Aquaculture, Construction and Trading.
While the title of the roundtable headlined SMEs, it actually brought together micro enterprises as well, thus making it a forum for MSMEs.
Entrepreneurs discussed key issues and generated recommendations specific to their cluster, with cluster representatives selected to share their content with the President.
The importance of this roundtable ought not be dismissed because it is the first time under the 2010 Constitution and devolution that such high-level attention has been accorded the MSME sector.
MSMEs are crucial as they constitute at least 80 percent of the private sector in Kenya and are central in generating employment, creating new jobs and contributing to GDP.
Thus, the focus on MSMEs is welcome, particularly at a time many Kenyans feel economic growth does not lead to economic security and welfare.
This is largely because MSMEs are locked out of financing and support structures that allow them to become more productive, profitable and scale up. As a result, often the returns generated are not commensurate to the effort and time invested in business ventures by most.
For the most part, most low-income Kenyans stay confined to subsistence, informal business activity, mainly as micro and small businesses.
The roundtable is important and signals that the government has recognised the importance of MSMEs, and has an interest in learning about the sector to address their challenges.
It also signals to financiers and business development providers that the MSME sector ought not be neglected if the country is to get on a credible path of economic transformation.
One key issue is that, at the moment, MSMEs seem stuck in a vicious cycle where they are shunned by most financiers, and thus do not grow and strengthen financially, and so remain vulnerable and ‘high risk’ and shunned.
Given the return on assets of banks in Kenya where the top three Kenyan banks are outperforming global peers in profitability and are among the top 20 in the world, there is room for banks to become more creative and relevant in financing MSMEs.
For only then will a transition from micro to small and medium enterprise occur at a scale where a pool of larger businesses emerge that provide a wider and deeper deal pipeline for financiers.
Beyond financing and business development support, another key issue is market access, an area with which many MSMEs struggle, particularly in terms of the physical market spaces in which they operate.
Most physical markets in which MSMEs conduct business are congested, dilapidated, have limited to no amenities in terms of electricity, water and sanitation, have poor security and are serviced by poor transport infrastructure.
These factors alone discourage customers from visiting them, thereby locking MSME out of a lucrative consumer base.
Last year, the Central Bank of Kenya made the point that MSMEs were key in the resilience of Kenya’s economy and are crucial to economic recovery and performance.
MSMEs have proven their worth.
Let them be accorded the seriousness and focus they warrant, for, in doing so, Kenya will more credibly achieve economic transformation and development.
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