To Improve SMEs’ Competitiveness, Sector-Specific Policies are Key

To Improve SMEs’ Competitiveness, Sector-Specific Policies are Key

In Kenya, Micro, Small, and Medium Enterprises (MSMEs) employ more than 80 percent of the working population and contribute about 33.8 percent of the national output.

Making MSMEs more competitive can help achieve development objectives by creating more jobs, increasing revenues, and per capita economic contribution.

In a report, Promoting
SME competitiveness in Kenya,
the International Trade Centre (ITC) notes
that targeted solutions could help address shortcomings in specific areas of
competitiveness to enable SMEs to access more local, regional, and
international markets.

Moreover, the survey targeted 893 businesses across 23
counties in the agri-food, manufacturing, and services sectors across Kenya in
2017-2018.  

SMEs align with sustainable development goals (SDGs) of ending poverty in all its forms everywhere and promoting inclusive and sustained economic growth.

Moreover, SMEs are critical in achieving SDG goal 9 (build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation).

Two-thirds of interviewed firms that needed funding successfully obtained a loan, but half of the participants lacked access to financial institutions which negatively affected their operations.

Policy and business
reforms

Policies to boost sectoral competitiveness of MSMEs must be
sensitive to the sector-specific conditions, strengths, and weaknesses.

In addition, the policies should promote evidence-based decision-making by making use of information, data, and analysis of available opportunities and constraints faced by SMEs.

Agri-food Sector

The Kenyan agri-food sector which includes agriculture, livestock, forestry, and fishing contributed about 35 percent of GDP in 2017. The bulk of the agri-food sector comprises of smallholder farmers and SMEs that are undercapitalized and in need of technical support.

Cost friendly and efficient logistics services would make agri-food MSMEs more competitive by ensuring efficient delivery and better inventories management.

In addition, improving rural road network would help agri-food SMEs improve supply chain efficiency due to the highly perishable nature of the goods.

Non-food manufacturing
sector

Manufacturing sector overall generated 18 percent of employment in Kenya in 2018, with MSMEs constituting 67 percent of enterprises within the sector. It is among the BIG 4 Agenda projects as it promotes economic diversification and reduces poverty through creation of jobs.

Manufacturing firms would benefit from favourable intellectual property laws. About 45 percent cited high costs of; raw materials, machines, technology, and skilled staff as the biggest barrier to adopting research and innovation.

Furthermore, the sector requires innovation to improve product and services offering through industrial and technology parks, incubation centres, and start-up and accelerator programmes.

For SMEs to be competitive in the local and international market, they need business-support institutions such as trade promotion organizations, investment promotion organizations, chambers of commerce, and sector associations to provide market information, as well as training and networking opportunities.

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