Small businesses are struggling to expand in the local and export market due to a poor regulatory environment, a new SME Policy Index report has shown.
Kenya’s Medium Small and Micro Enterprises (MSME) Policy Index 2019 survey the Kenya Private Sector Alliance (Kepsa) conducted shows that current policies are unfavourable to business growth and as a result, they are stagnating enterprises.
The survey showed that the overall MSME policy index stood at 3.0 out of 5, below the level of 4.0, which is the policymakers regard as to be ideal for growth.
The effectiveness of small businesses representation in the government’s development agenda scored the least mean index at 2.5, attributed to poor consultation of the sector during procurement decisions, legislation that affects them and participation in policymaking.
“The government needs to adopt public procurement frameworks to promote MSMEs’ access to these important markets.
“We also recommend adoption of a policy mandating compulsory and adequate MSME consultation in policy decisions such as on procurement of public goods and projects,” the report said.
This is in spite of the fact that in 2013, the government adopted the Access to Government Procurement Opportunities programme, which stipulates 30 percent of public tenders go to youth, women and the disabled.
According to the survey, MSMEs also find it difficult to export their products and services with ease, scoring 2.46.
The process of business registration has, however, improved over the years, with the index recorded at 3.5. Training for business owners to help them scale up their businesses was also highlighted as a positive.
Infrastructure and access to inputs ranked highest on the index with a score of 3.38. This is a result of heavy investment in the road network and the building of markets across the country.
Kepsa is also optimistic that the developing infrastructure between Kenya and its neighbours would support SMEs.
However, businesses pointed out a lack of partnerships for importing inputs from other countries at friendly prices.
“There is a need to develop sector-specific strategies to address access to quality and affordable raw materials for MSMEs,” read the report in part.
Other concerns that need to be addressed, according to the SMEs surveyed, are beefing up security to encourage a 24-hour economy.
The survey, which polled 1,152 small businesses, found that youth under 35 years run about 41 percent of the sector, with an equivalent percentage between 35-45 years. Only 18 percent are over 45 years.
The majority of businesses are run by people holding diploma and certificates at 55 percent, while 22 percent have a higher level of education from university levels.