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Three-quarters of MSMEs likely to face closure

NEWS
By Saada Hassan | May 28th 2020

75 per cent of Kenya's Micro, Small and Medium Enterprises (MSMEs) are likely to face closure by the end of June according to Central Bank of Kenya Governor Patrick Njoroge.

In a virtual press briefing on Thursday, the Governor gave an update on the status of the economy and announced that something needs to be done to ensure the survival of Kenya's MSMEs.

"Three-quarters of MSMEs, according to a survey, would be in a critical state by the end of June. Whatever policy action is put in place to help MSMEs needs to go beyond finance, into ‘finance plus’, including linkages to other markets," he stated.

There are about 7.41 million MSMEs in Kenya as per data from Kenya Association of Manufacturers (KAM) with only 1.56 million being licensed whereas 5.85 million are unlicensed. This translates to at least 5 million small firms staring at potential closure.

According to the CBK governor, the economy remains on a steady path as banks have continued to be operational, and to also protect their staff and customers during the period.

“There has been confirmation of the very dire situation in the global economy. The stabilisation measures for the economy are welcome.”

Kenya’s MSMEs contribute an estimated 40 per cent of the GDP with the majority falling in the informal sector, often dubbed as the lifeblood of the economy.

"The Kenyan economy grew by 5. per cent in 2019. We are expecting the data for Quarter 1 (Q1) 2020, but leading indicators show that the quarter was relatively strong.”

According to a report by Deloitte, an audit firm, Kenya’s GDP stood at 5.4 per cent in 2019 and had been projected to grow at about 5.7 per cent in 2020.

In light of Covid-19 pandemic the economy is now expected to decline to 1.0 per cent as per the report majorly due to less spending from households to businesses. A 30 per cent decline in supply chain for key inputs in machinery and chemicals, decline in imports, less tourism activities in the country and a decline in government spending in different sectors.

 

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