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Ideas & Debate

How Kenya can tap the potential of MSMEs for jobs

Youth registering for job interviews in Mombasa
Youth registering for job interviews in Mombasa. FILE PHOTO | NMG 

The Kenyan labour market is characterised by inadequate employment opportunities especially for the fast growing youth population.

According to the United Nations Human Development Index (HDI) 2017 report, Kenya recorded 39.1 percent unemployment rate.

The statistics show that Kenya for the last 30 years has not had its economy expand enough, and the progression has been correspondingly inconsistent to consolidate any gains made in job creation. This is exacerbated by Kenya’s population that surges by one million people each year.

Widespread joblessness, particularly among the large youth population, is a strain on the economy because it forces unemployed adults to depend on the small working class, stretching family resources and consuming savings for future investments.

How can we address the unemployment question? Of the many ways that exist, harnessing the power of the micro small and medium enterprises, commonly referred to as MSMEs, holds the key.

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While, the MSME sector in Kenya has over the years been appreciated for its role in the provision of goods and services, enhancing competition, fostering innovation, and in effect, alleviation of poverty, generation of employment has been the most significant.

The critical role of MSMEs is highlighted in the Vision 2030 development blueprint, which strives to transform Kenya into an industrialised middle-income country, providing a high-quality life to all its citizens in the next 10 years.

According to 2016 National MSME survey, the sector engaged about 14. 9 million persons in 2015, arguably providing the highest number of employment opportunities in the country.

The immense potential the sector holds must have influenced the government to identify it as one of the key focus areas in tackling the soaring unemployment rates.

To fully exploit the potential of the MSMEs, the government can reinforce its partnership with the private sector, encourage value-added services, leverage on improved skills and know-how (indigenous and universal), and fortify coordination among various State entities dealing with MSMEs such as Kenya Industrial Estates, Micro, Small and Enterprises Authority (MSEA), the Kenya Bureau of Standards (Kebs), Industrial & Commercial Development Corporation (ICDC) and Kenya Research Development Institute (KIRDI) to stimulate quick adoption of the emerging technology, set computable targets and monitor development of the sector.

To further intensify the growth and development of the MSME sector, the government can progressively build on the existing SME sector framework ranging from regulatory to policy formulation. Specific areas incorporating this include policy development, industrial incubation, capacity building and access to finance and markets.

In addition, accessible credit should be made available to the MSMEs. Low credit availability to the sector was attributed to the interest rate capping in 2016, prompting commercial banks to deliberately avoid channelling funds to businesses considered as risky ventures.

Moreover, credit providers should adopt inventive and innovative strategies of lending. These fresh strategies should give consideration to the uniqueness of various businesses especially start-ups that often lack tangible collateral to access credit.

More importantly, credit services should be made available to rural areas to foster entrepreneurship.

KIE, as a government agency in charge of advancing the MSME agenda and promotion of industrialisation, is playing a critical role in this sector by providing affordable industrial credit, relevant entrepreneurship trainings and industrial sheds.

It strives to support the sector and help solve the unemployment problem, leveraging on its collaboration with the government and 50-year experience working towards industrialisation of this country, a 37 branch office network across the country equipped with staff and modern IT infrastructure.

Doyo is the Head of Marketing and Communications at Kenya Industrial Estates.

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