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International trade

Promoting SME Competitiveness in Kenya: Regional Challenges and Opportunities

Strategic Insights

— 2 min read

Kenya's Small and Medium Enterprise (SME) sector plays a vital role in the country's economic growth, with the Central Region Economic Block (CEREB) being one of the largest regional economic blocks in East Africa. However, the region's SMEs face significant challenges in terms of access to finance, logistics, and innovation, which hinder their competitiveness. A 2019 study on SME competitiveness in Kenya found significant regional differences in access to utilities and logistics, negatively impacting competitiveness in the north and southern parts of the country.

Key Takeaways:

  • The 2019 study on SME competitiveness in Kenya identified three dimensions of competitiveness: capacity to compete, to connect, and to change.
  • Capacity to compete examines the efficiency of firms in terms of cost, time, quality, and quantity, while capacity to connect focuses on how companies gather and exploit information and knowledge about consumer profiles, preferences, and demand.
  • Capacity to change measures the ability of firms to respond to dynamic market forces and innovate through investments in human, intellectual, and financial capital.
  • The study found significant regional differences in SME access to utilities and logistics, negatively impacting competitiveness in the north and southern parts of the country.
  • Non-food manufacturing firms innovate to stay competitive, but at high cost.
  • Vision 2030's promise of investment in energy, water, and information and communications technology infrastructure was aimed at resolving these issues and improving the productivity and competitiveness of firms across the republic.
  • Devolution has led to improvements in rural roads, cutting the costs of, and increasing the efficiency of logistics services, making SMEs more competitive.
  • Marsabit was the fastest-growing county at 9.3% during the 2019-2023 period, followed by Tana River, Nakuru, Kajiado, Isiolo, and Turkana.
  • The combined gross county product (GCP) of Mt. Kenya counties is approximately $28 billion.
  • The Central Region Economic Block (CEREB) is larger than 103 economies on a UN list of countries and territories by size.

Statistics:

  • By 2022, there were 670,000 small businesses in the region, with 40% (265,000) being minor traders, shops, or retailers selling everyday household goods and agricultural tools and inputs.
  • There are 27,200 manufacturing enterprises in the region, categorized as small, medium, and large size workshops and industrial plants.
  • The 27,000 manufacturers should produce what the 265,000 retailers are selling, but imports from China and India dominate.
  • SMEs account for hundreds of thousands of jobs and increased incomes, but national progress on access to finance has remained elusive.

Sources:

  • Ministry of Industry Trade and Investment, International Trade Centre, and the Kenya National Chamber of Commerce and Industry (2019)
  • Central Region Economic Block (CEREB)
  • United Nations (n.d.)

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