World MSME Day: High Cost of Production Still A Major Undoing In Growth Of Smes

June 27 marks World Micro, Small and Medium-sized Enterprises (MSME) Day, a United Nations observance dedicated to recognizing the vital role that small businesses play in creating jobs, reducing poverty, fostering innovation and driving sustainable economic growth.

Established by the United Nations General Assembly in 2017, World MSME Day celebrates enterprises that account for nearly 90 percent of businesses worldwide, provide 60 to 70 percent of global employment, and contribute about 50 percent of global GDP. In 2026, the global theme, “Human-Centered Entrepreneurship in an AI-Driven Future: Economic Empowerment for the Next Generation of MSMEs,” highlights the need to equip small businesses with digital skills, innovation and emerging technologies to remain competitive.

In Kenya, micro, small and medium-sized enterprises remain the backbone of the economy. The sector employs millions of people and contributes significantly to trade, manufacturing, agriculture, transport and other service industries. For many households, MSMEs are the primary source of income and employment.

Over the past few years, the Kenyan government has introduced several initiatives aimed at strengthening the sector. These include the Hustler Fund, which provides affordable credit to small traders and micro-enterprises; increased funding for the Youth Enterprise Development Fund, Women Enterprise Fund and Uwezo Fund; and the expansion of digital government services that have simplified business registration and access to some public services. The government has also continued to promote the Buy Kenya, Build Kenya initiative, encouraging the consumption of locally manufactured products and participation of local businesses in public procurement.

The government has further sought to improve access to markets through trade fairs, support for export promotion, and investments in industrial parks and county aggregation and industrial hubs intended to benefit small manufacturers and value-addition enterprises. It has also promoted financial inclusion through digital lending and mobile money platforms, enabling many small businesses to access credit more easily than before.

However, despite these efforts, many entrepreneurs say significant challenges remain. High taxation, rising electricity and fuel costs, expensive borrowing from commercial lenders, delayed payments for businesses supplying government institutions, and multiple county levies continue to strain MSMEs. Many businesses also cite limited access to larger markets, inadequate business development services, and the high cost of complying with regulatory requirements as barriers to growth.

Business associations have welcomed government initiatives such as the Hustler Fund but argue that affordable financing alone is not enough. They continue to call for a more predictable tax regime, lower compliance costs, timely settlement of pending bills owed to suppliers, improved infrastructure, and stronger support for digital transformation and innovation.

As Kenya joins the rest of the world in marking World MSME Day, stakeholders say sustained collaboration between government, the private sector and development partners will be essential to unlocking the full potential of MSMEs. They argue that empowering small businesses through better financing, skills development, technology adoption and a more conducive business environment will be critical to creating jobs, reducing poverty and accelerating inclusive economic growth.