The proposed Micro, Small and Medium Enterprises (MSME) policy is designed to create a more productive, diversified and competitive micro-finance sector to spearhead Kenya’s economic growth and social empowerment, its drafters and promoters say.

Youth Enterprise Development Fund Manager for Innovation Daniel Mathenge says the draft policy, which currently going through mandatory public participation stage, was conceived by Micro and Small Enterprises Authority (MSEA) as a way of improving efficiency and sustainability of Kenyan MSMEs and support their growth from incubation to fully-fledged businesses.

Speaking in Nakuru during a public participation form for five counties to review the draft MSME Policy 2020 and MSME Amendment Bill of 2025, Mathenge said the new law will not only address some 11 major challenges that affect the MSME sector but also come up with practical solutions to issues that negatively affect the finance sector.

He explained that the operationalisation of the MSME Policy 2020 ran into headwinds because it failed to capture and address issues that are related to MSMEs, adding that there was need to revise it so that it is more inclusive and more responsive to the needs of the current business owner.

“The current framework has failed to support the sector that employs mullions of Kenyans with 84 per cent of MSMEs dying before their first anniversary,” the manager explained.

The proposed MSMEs 2025 Act outlines a robust framework for funding and marketing their products, with the government playing a leading role of overseeing the sector. Among the key proposals is the recognition of MSMEs by banks, allowing them to access credit facilities upon presenting business licences.

The official expressed optimism that the new law will cultivate focused management of the micro and small businesses through new structures to be constituted. In addition, he said, what has been lacking in the MSME sector was sound regulatory framework and finance to support business growth.

The manager noted that, although the youth constitute the largest majority of Kenya’s population and many of them are in MSMEs, they lacked the right guidance on how to grow their businesses adding that through the proposed policy, the country will be able to nurture talents, incubate innovations and encourage the youth to become entrepreneurs.

MSME Policy and MSME Act 2025 further focuses on improving access to finance, easing regulatory burdens, expanding market access and upgrading infrastructure to shape an inclusive and dynamic MSME ecosystem, added Mathenge.

The official further said the policy will include strengthening the institutional and regulatory framework, creating an enabling environment, promoting capacity building and innovation, enhancing market linkages, and fostering equity and inclusivity.

In order to actualise the policy goals, Mathenge argued that a comprehensive legal framework would be required to address gaps in the current MSME Act 2012 and also strengthen the institutional frameworks adding that the country’s vision was to build a highly productive, diversified and competitive MSME sector that drives economic transformation and social empowerment challenges.

The MSME draft policy 2025, he noted, aims to create an integrated enabling business environment for a productive, competitive and sustainable MSME sector for wealth and employment creation.

The official cited some of the key challenges the sector faces limited access to finance, inadequate infrastructure, lack of skilled labour, limited market access, slow technology adoption, regulatory and compliance issues.

Other challenges, he enumerated, include lack of business skills and training, lack of coordination between development partners and stakeholders, lack of coordination and vulnerability to covariate shocks such as pandemics.

To address these challenges, the policy, once implemented will seek to support the formalisation of MSMEs especially those that have not been registered, foster entrepreneurial culture, enhance skills development for MSMEs and encourage innovation, research and development for the sector, explained Mathenge.

Head of Programme for Promotion of Self-Employment and Entrepreneurship at the German Corporation for International Cooperation (GIZ) Irene Omogi said some of the key challenges that the policy review will address include putting in place regulations that will ease access to credit for informal businesses. Omogi also observed that the new policy would also address the issue of linkages expand market reach for the local businesses to the regional and global markets.

Other key objectives of the policy, she said, will include enhancing access to diverse and affordable financial products and services and building MSME resilience and adaptability.

Omogi pointed out that for MSMEs to access international markets, they must meet prerequisites such as quality standards of products and also attain certain quantities, in addition to ensuring the MSMEs satisfy the market in Kenya before venturing into regional and international markets.

“We are also looking at how we can integrate our MSMEs into global supply chains so that when they are producing for a certain market, they know what fits that market,” she added.

There are also proposals to promote link learning and research institutions, technology developers with MSMEs as a way of encouraging skills transfer. The policy also proposes strategies that incorporate innovations in the daily operations of their businesses and ensure that they are able to meet the client needs.

 “Most Kenyans do not have the right skills to run businesses sustainably. This policy review is looking at getting as many MSMEs as possible to have basic skills or advance their skills to be able to run their businesses,” Omogi explained.

She said that the policy will provide interventions that government and other stakeholders in the sector could utilise to enable them to support the MSMEs.

Secretary-General to Kenya National Federation of Jua Kali Associations (KNFJKA) Nakuru Chapter Asumpta Wangui cited limited funding and lack of market access as the primary reasons for early business collapse.

According to Wangui, the new law will enhance the profile of small and medium entrepreneurs in the country because it addresses issues like lack of finance and a sound regulatory framework that have been hurting growth of the sector. She hailed the policy review, which she says will dignify the MSME sector and support the growth of industries in the country.

Once approved, the new policy will apply to both national and county governments, the Micro, Small, and Medium Enterprises (MSMEs) and the broad spectrum of supporting institutions such private sector entities, development partners and other non-state actors involved in MSME development.

At national level, the policy will guide overarching strategic planning and implementation regulatory frameworks and resource allocation to foster a supportive ecosystem of MSMEs. At county level, the policy will guide county policy development, address localised implementation, capacity building, infrastructure development, and market access tailored to regional needs.

According to the Kenya National Bureau of Statistics, MSME Survey of 2016, there are over 7.4 million MSMEs in Kenya that employ over 14.4 million people across all sectors. They contributed to approximately 33.8 per cent to the national gross domestic product in 2015.

The proposed Micro, Small and Medium Enterprises (MSME) policy will also empower more women and youths in the MSME businesses.

• A Tell Media / KNA report / By Esther Mwangi and Dennis Rasto