Micro, Small and Medium Enterprises’ (MSMEs) participation in Kenya’s Digital Economy: Gaining a Seat, a Voice and an Opportunity at the Table

According to the Kenya National Bureau of Statistics (KNBS), there are, 7.41 million Medium Small and Micro Enterprises1 (MSME) in Kenya (of which only 1.56 million are officially licensed), who collectively employ over 14.1 million people. This accounts for 90% of the private sector enterprises and 93% of the total labour force2 . When broken down even further, in terms of GDP, Micro Enterprises account for 12% and Small Enterprises for 11% of GDP. They jointly comprise Micro and Small Enterprises (MSE). As part of the Kenya Vision 2030, the Government of Kenya (GoK) recognizes the importance of MSE/ MSME to the business environment and the role of the digital economy in the country’s sustainable economic progress. The digital economy relies on enhanced interconnectivity of networks and the interoperability of digital platforms in all sectors of the economy and society to offer convergent services. In recognizing this, as part of its strategy to create an enabling environment, the Government
implemented ‘The Digital Economy Blueprint (2019)’, in which the digital economy is defined as “the entirety of sectors that operate using digitally enabled communications and networks leveraging the internet, mobile and other technologies”.

Understanding by the government of the status of MSEs and MSMEs in this sector necessitates
stronger public-private partnership on digital economy policies to encourage their increasing engagement and equitable proliferation of digital technology. To gain a deeper appreciation of the knowledge gaps and thus start addressing the issues, the Center for International Private Enterprise (CIPE) commissioned a research study to identify
policy and administrative hurdles experienced by MSE/MSME in the Digital Economy 1 See Table 1 in the Annex for a definition of MSME 2 Sessional Paper No. 05 of 2020 on Kenya Micro and Small Enterprises Policy for Promoting Micro and Small Enterprises (MSEs) for Wealth and Employment Creation.

The study objectives were:

1. To establish how MSE/MSME are utilizing digital technologies in their business operations;
2. To examine the barriers to using digital technologies by MSE/MSME;
3. To determine the challenges MSE/MSME face when trying to digitize their business operations;
4. To determine digital areas MSE/MSME are likely to utilize more in the future;
5. To establish what support is necessary for MSE/ MSME to utilize digital technologies more effectively.

CIPE formed a Digital Economy Working Group with experts from Kenya’s private sector who specialize in the field and advocate for related policies. The Working Group analyzed and validated the study findings, which led to the compilation of the three core products: a Report on the research findings, a Policy Brief with recommendations to advance the inclusion of SMEsin Kenya’s digital economy, and a Toolkit to support county- level dialogue on digital economy policies. The purpose of these three products is to encourage issue-based contributions regarding the inclusion of micro and small enterprises as a subset of MSME in the broader national policy dialogue on the digital economy. The Report [Micro and Small Enterprises Participation in the Digital Economy: Gaining a seat, a voice and an opportunity at the table provides a detailed discussion of all aspects of the research study including definitions, methodology, and findings. The Policy Brief provides a series of specific priorities and recommendations with a focus on actors from Government, Industry, and Academia, while the Toolkit looks at practicable steps that Government, Industry, and Academia can take to support MSE, to enable their greater participation in Kenya’s Digital Economy.