Paul Njaga

CEO's Profile

Theme | Credit Demand & Accessibility
Topic | SME Credit Needs & Opportunities
MONTH | June 2015

Discussion Focus areas

  • Access to credit from Financial Institutions and impact of macroeconomic factors (e.g. Inflation, interest rates, exchange rates, GDP per capita growth rates.)
  • Access to new domestic markets created by the devolved county government system, and the regional markets as a result of theEast African Community Common Market Protocol.
  • Government policies focus on investment and tax incentives to SMEs.
  • How SMEs can leverage on enhanced skills, standards and capacity to improve their businesses.


The World Bank defines Small and Medium-sized Enterprises (SMEs) as businesses with turnover of Kshs.5 million per year. To capture a wider base of “small enterprises”, KBA defines SMEs as clients with turnover of Kshs.4 Million per year.

SMEs play an important role in the economy and contribute substantially to income, output and employment the world over.Locally, the sector has evolved to be the greatest contributor to the Kenyan economy --in terms of wealth creation and employment opportunities.

SMEs counter numerous challenges and opportunities. One key challenge business owners and entrepreneurs face is access to sufficient financing during early stages of their businesses growth. Many SMEs resort to borrowing from family members and friends; and invested capital such as venture capital or private equity, in addition to bank financing.

Other environmental factors facing SMEs in Kenya include policy limitations and inefficiencies within the legal system and Government ministries such as the Lands Office, all of which drive up the cost of doing business.

Despite the funding challenges and policy and efficiency issues, SMEs are exposed to greater opportunities in Kenya. Between 2013 and 2014 KBA member banks lent in excess of Ksh. 190 billion to SMEs. This level of financing places Kenya ahead of other markets, including South Africa and Nigeria when it comes to SME access to finance.

The Kenyan financial market is therefore growing at good pace in terms of SME lending, and SMEs can anticipate better progress on account of the devolved government system; the expanded regional market, as a result of the East African Community Common Market Protocol; and improved infrastructure, as well as re-ignited interests from the financial sector on SMEs as a target market segment.