PROSPECTS

State to set up fund, new policy for SMEs

The government is counting on MSMEs to help meet the 500,000 annual job creation target.

In Summary

•The sector accounts for more than 90 per cent of all businesses in Kenya and creates around 75 per cent of the jobs.

•MSMEs face numerous challenges among them limited access to financial services.

Traders at a section of Kibuye market./FILE
Traders at a section of Kibuye market./FILE

The government is at an advanced stage of setting up a fund for Micro, Small and Medium Enterprises, Industrialisation PS Francis Owino has said, as the new policy for the sector takes shape.

The fund is meant to address capital deficit and credit access to small businesses which have suffered in the last four years when the cap on interest rates was in place. The law was  repealed in November last year.

“The government has agreed to set up an SME fund. We already have the draft regulations to operationalise these funds. From next week, the regulations will be subjected to public participation to see how SMEs will be accessing these funds,” Owino said.

 

He however declined to reveal the amount.

He spoke in Nairobi yesterday during a forum to deliberate the MSMEs policy review in the push for new regulations to run the sector.

To further boots growth of small businesses, the government is setting up 'Biashara Centres' in all the regions across the country.

These centres will act as one-stop-shops in providing services to SMEs in a new push to ease doing business. The centres will be in place by June, the PS said.

The latest developments come as the government and private sector push for a review of regulations guiding small businesses in the country.

The MSME Policy underwent public deliberations last week, with sittings in all counties.

According to Owino, the government recognizes the important role the sector plays as a major contributor to both GDP and employment.

 

The sector accounts for more than 90 per cent of all businesses in Kenya and creates around 75 per cent of the jobs, including providing employment for vulnerable groups such as women, young entrepreneurs and poor communities.

The government is counting on MSMEs to help meet the 500,000 annual job creation target.

However, the sector faces numerous challenges according to industry players which includes limited access to financial services, inadequate access to skills and technology, poor access to markets and market information and limited access to infrastructure.

Other challenges are unfavorable policy, legal and regulatory environments, inadequate business skills, limited linkages with large enterprises and unfavorable taxation regime among others.

Led by the Kenya Association of Manufacturers, private sector players have since called on the government to address bureaucracies within state agencies which have continued to frustrate small businesses.

These includes requirements in setting up businesses. They are also faced with multiple taxes and poor market access.

“The ability to scale through the different government requirements and departments in order to get the business up and running is difficult,” KAM chief executive Phyllis Wakiaga said.

Meanwhile, she has called for speedy clearance of VAT refunds to address liquidity challenges faced by industry players.

The government, through Kenya Revenue Authority, owes about Sh30 billion in VAT refunds, which is said to affect those in international trade.

The government has however been on an aggressive mission to address pending bills to improve liquidity especially in the private sector.

Last year, KRA paid about Sh14.2 billion in VAT refunds. It committed to clear pending 6,000 VAT refunds worth Sh27.6 billion by April this year.