Principal Secretary for the State Department of Micro, Small and Medium Enterprises Development Susan Mang'eni has attributed the slow growth of Kenya’s Micro, Small and Medium Enterprises (MSMEs) to structural and perception challenges that continue to lock businesses at the micro and small levels.
Speaking on Radio Generation on Thursday, Mang’eni said the sector, despite being the backbone of the economy and a key driver of job creation, is struggling to transition enterprises into medium and large-scale businesses.
“The biggest challenge we have in our economy is the stunted growth of the MSME sector. You find a lot of players are still at the micro level and small level,” she said, emphasizing that failure to scale limits the sector’s contribution to sustainable economic growth.
She noted that one of the major barriers is the widespread fear of taxation, which discourages entrepreneurs from formalizing their businesses.
According to Mang’eni, many business owners associate formalization purely with compliance and penalties.
“The moment you tell someone… is your business formalized? The first thing — ‘you want government to know we exist so that they can see paying taxes’,” she said, adding that this perception needs to change.
Mang’eni stressed that formalization should instead be viewed as a growth enabler, not a punitive process. “It’s not just a compliance issue… it is a question of being visible so that then you can be supported to grow,” she explained.
She pointed out that lack of visibility denies businesses access to critical support such as market linkages, incentives, and financing opportunities.
“We cannot link you to the market if we do not know you exist,” she added.
The PS also cited misinformation and lack of understanding about formalization as key contributors to high levels of informality in the sector. Many entrepreneurs, she said, are unaware of the long-term benefits of registering their enterprises.
In addition, Mang’eni highlighted the complexity and cost of regulatory processes as a significant deterrent. She explained that navigating multiple agencies and compliance requirements often overwhelms small business owners.
“These regulatory systems become so complex in a way that navigating them becomes a big challenge,” she said, noting that the burden of moving between offices, paying fees, and meeting requirements discourages many from even starting businesses.
She illustrated how these barriers affect young entrepreneurs, saying the process of setting up a business can quickly erode initial enthusiasm.
“The moment of excitement starts slipping away because then it is so difficult… you get tired,” she said.
Mang’eni noted that the government is addressing these challenges through policy reforms, digitization, and efforts to simplify compliance processes via platforms like eCitizen.
However, she emphasized that overcoming these barriers will require a shift in mindset, improved systems, and a more supportive business environment to enable MSMEs to grow, formalize, and scale sustainably.
