MSMEs play a pivotal role in Kenya’s economic development. According to a 2016 survey done by Kenya National Bureau of Statistics (KNBS), Kenya had over 7.4 million MSMEs, employing around 14.9 million people across various sectors and contributing about 40percent of the gross domestic product (GDP).
The Fourth Medium Term Plan (MTP IV) of Kenya Vision 2030 (2023–2027) recognizes that transforming MSMEs is essential to increasing GDP growth from 4.8percent in 2022 to 7.2percent by 2027.
The key question remains: how can stakeholders enhance the survival and growth of MSMEs? The answer lies in effective risk management, adopting a collaborative approach to navigate both local and global uncertainties.
The IMF’s April 2025 World Economic Outlook notes that rising policy uncertainty, driven by global trade tensions, is disrupting growth and increasing risks. Global growth was revised down from 3.3percent to 2.8percent in 2025, mainly due to unexpected US tariff hikes and abrupt fiscal and monetary shifts.
The report urges governments and central banks to respond with coordinated, flexible policies, safeguarding liquidity, targeting structural reforms, and avoiding abrupt tightening of these policies to stabilise trade.
In Kenya, MSMEs should engage in fiscal policy discussions, as these decisions directly affect their operations.
For instance, the burden of multiple licenses continues to hinder ease of doing business. They also face challenges like poor governance, limited regulatory awareness, low financial literacy, inadequate infrastructure, succession gaps, and limited market access.
Establishing sound governance structures is foundational to business success. As the saying goes, "It doesn’t go wrong, it starts wrong."
MSMEs should define decision-making roles, accountability systems, and performance metrics from the start. Appointing a strong board or team of advisors ensures strategic direction and oversight.
For owner-managed or family-run businesses, governance also supports effective succession planning by identifying critical roles and future leaders.
Regulatory changes can significantly impact business operations. MSMEs should have a system in place to assess the impact of any regulatory shifts to their operations.
For instance, the 2025 Finance Bill proposes reclassifying some goods from zero-rated to exempt, potentially straining cash flows. It's also vital to track evolving laws like the Data Protection Act, PROCAMLA, and tax regulations to stay compliant.
Financial literacy remains a major gap among many entrepreneurs. Basic knowledge in bookkeeping and understanding financial statements, such as income, expenses, assets, liabilities, and cash flows is critical. Equally important is having clear budgets and performance targets to measure progress. As the saying goes, “what gets measured, gets done.”
Kenya’s Vision 2030 highlights the urgent need to improve MSME infrastructure, as many operate from temporary premises, face inefficient distribution value chains, and lack key utilities, raising costs and reducing competitiveness.
Proposed solutions include MSME Centers of Excellence in all counties, an EMPRETEC Centre for training and support, a tool room and Incubation Centre at the Kenya Institute of Business Training, and a National MSME Documentation Centre.
Finally, markets are essential for MSME success. As highlighted in the book, Ikigai by Héctor García and Francesc Miralles, a sustainable business aligns passion, talent, demand, and income potential. Kenyan MSMEs face stiff competition from counterfeit goods, post-harvest losses, and non-compliance with market standards.
With global trends, such as rising tariffs in the US and inward-looking trade policies, it is crucial to grow local demand while investing in innovation, value addition, and product development. MTP IV also calls for expanding export markets through regional blocs like EAC, Comesa, and AfCFTA. If fully implemented, the above interventions could greatly enhance MSME growth and sustainability.
Catherine Nyaga-Mbithi is the Co-Chair, Institute of Risk Management, East Africa Group
