In Kenya, MSME sector is a hotbed of entrepreneurial activities employing over 90 percent of the working population, contributing to about 34 percent of the country’s national output, and over 30 percent of the Gross Value Added. Yet, due to a lack of structural support, credit access, and formal integration, these enterprises remain tragically undervalued.
This systemic neglect mirrors the ancient wisdom that 'a pig does not appreciate the value of a pearl.' By failing to recognise the high-yielding potential of small businesses, policymakers act as the short-sighted custodian who overlooks a priceless asset simply because it is buried in the mud of the informal economy." Yet globally, MSMEs are celebrated as the crown jewels of economic transformation.
Kenya has demonstrated leadership in the FinTech space in Sub-Saharan Africa region kickstarted strongly by the enthusiasm around mobile money usage.
Kenya’s FinTech industry and penetration is anchored on mobile money innovations, tech-savvy population and dominated by mobile money and credit platforms through subscriptions and financial performance. It is largely driven by mobile money services which account for a significant share of digital payments – peer to peer payments, merchant transactions, savings, and lending.
Use of internet and advances in data science have contributed to the rise of FinTech, with big data, artificial intelligence and machine learning paving the way. Other key developments in the FinTech space are in the areas of Insurtech, blockchain, crowdfunding, credit scoring, asset financing, crypto currencies, cross-border payments and debt financing.
FinTechs are useful in bridging gaps in financial access for enterprises hence can act as a bridge towards sorting the perennial problem of financing for MSMEs. This consistent with Sustainable Development Goal focusing on promoting development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity, and innovation.
They also provide investment management advice, create jobs, spur innovation, increase opportunities in global trade, and contributing to overall economic growth.
Despite the existing innovation-entrepreneurship axis, the scholarship around FinTech-entrepreneurship remains thin. Recent evidence on theoretical tensions and policy debates on the role of technology in spurring entrepreneurship show that uptake of FinTech by firms is driven by formality status, gender of the owner, education level, propensity to innovate and access to credit.
This discourse calls for a policy framework that is anchored on the stimulation of digitalisation and digital entrepreneurship. Such policy would lower informality, and promote digital trade particularly with the advent of African Continental Free Trade Area.
Furthermore, FinTech impacts entrepreneurial outcomes differently and potentially shapes the future of entrepreneurship. It promotes opportunity entrepreneurship, reduces necessity entrepreneurship, and strongly supports employment growth. It also reduces push and pulls entrepreneurship.
In addition, bridging gender gap in digitalization, incorporating aspects of digitalization and entrepreneurship into the new education curriculum, and using digitalization to close access to credit gaps for firms become paramount.
The policies should also incorporate components of MSME sensitization on leveraging of technology.
Finally, pursuit and investment in frequent entrepreneurial data collection capturing the evolving tenets of digitalization and the digital world that are useful to scholars and researchers in shaping research narratives, including impact evaluation studies should be targeted periodically.
Dr Rogers Musamali and Joseph Kieyah are public policy analysts at the Kenya Institute for Public Policy Research and Analysis (Kippra).
