Gov't to roll out revised MSMEs policy to spur growth, formalisation and jobs

The government is set to avail a new revamped Micro, Small and Medium Enterprises (MSMEs) policy aimed at transforming the sector into a key driver of jobs, economic growth and inclusive development under the Bottom-Up Economic Transformation Agenda (BETA).

Principal Secretary for MSMEs Susan Mang’eni said the sector has made progress under the current administration and outlined key reforms designed to address long-standing challenges including informality, stunted growth, harassment of traders and high costs of doing business.

“The MSMEs programme was established by this administration because we recognised the contribution that MSMEs make to our economy, contributing about 40 per cent to GDP and accounting for nearly 90 per cent of businesses in Kenya” said Mang’eni

Despite their prevalence, many enterprises have remained small and informal, creating what the PS described as a “missing middle” in the economy.

To address this, the new policy — now awaiting Cabinet approval — prioritises formalisation, improved regulation and access to opportunities.

Ending harassment, organising informal work

A central pillar of the reforms is ending what PS Mang’eni called the “criminalisation of work”. She noted that many informal workers, including market traders and boda boda operators, were often treated as disorganised and burdensome.

“These are very important jobs in our country,” Mang’eni said. “This work gives opportunities to many Kenyans to earn a living, pay rent, send their children to school and sustain their families.”

The State Department has worked closely with county governments to designate trading spaces and agreed operating times that balance order and economic opportunity.

“We have seen these running battles between local authorities and traders reduce significantly because of this co-engagement,” she said.

Simplifying registration and fueling growth

The new MSME policy also features reforms to ease business entry and formalisation. Earlier requirements that 30 enterprises were needed to form a registered cluster have been reduced to five, allowing small businesses to organise more effectively.

“That was a major milestone. It has helped us to organise artisans and suppliers who are now able to open bank accounts, access credit and compete for contracts — things that were very difficult before” PS Mang’eni said

Since the reforms were introduced, the State Department says over 2.5 million enterprises have been registered in the last three years, boosting visibility and access to markets.

“Formalisation helps financial institutions understand what you do, and that makes it easier to get loans and grow your business,” she explained.

Recognition of prior learning

PS Mang’eni also highlighted progress under the Recognition of Prior Learning (RPL) framework, which enables workers with informal skills to be certified through institutions such as TVETs and the National Industrial Training Authority (NITA).

“One of the main reasons our skilled artisans could not work in certain sectors was because they lacked certification,” she said.

“Now, through RPL, we assess their skills and award certificates that open doors to bigger opportunities.”

Under the National Youth Opportunities Towards Advancement (NYOTA) programme, the government aims to support at least 20,000 young people with skill certification through RPL, with support from development partners including the World Bank.

PS Mang’eni said the revised MSME policy marks a shift from survival-focused micro enterprises towards growth-oriented, competitive businesses capable of creating sustainable jobs and absorbing Kenya’s growing youth population.

“Our goal is to build an MSME sector that grows, formalises and creates jobs. We have made significant progress, but we will continue working with partners at all levels to ensure that every Kenyan with an entrepreneurial spirit has the opportunity to succeed,” she said.