By Unlocking Kenya’s Next Phase of Growth
Kenya’s private sector has long been the backbone of the economy. Its dynamism and resilience have supported jobs, investment, and innovation across sectors. Manufacturing, financial services, and technology continue to drive activity even during periods of uncertainty.
Despite this strength, growth has not been evenly distributed. Many businesses remain vulnerable to shifting market conditions and policy uncertainty. Small and medium-sized enterprises (SMEs) are the most exposed.
Kenya’s economy expanded by 4.7% in 2024, according to the Kenya National Bureau of Statistics (KNBS, 2025). Growth was supported by improved performance in agriculture, fintech, and mobile money.
Inflation pressures also eased. The African Development Bank Group’s 2025 Kenya Country Focus Report shows inflation declined from 7.7% in 2022 to 4.5% in 2024. This was driven by improved food supply, a stronger shilling, and lower global oil prices.
Credit Constraints and the SME Challenge
While macroeconomic indicators have improved, access to credit remains a major concern. The 2024 KEPSA SME Policy Index Report shows private sector credit growth slowed to 4% by June 2024. This was a sharp drop from 13.9% the previous year.
Tighter monetary policy has made borrowing more expensive. Many firms have postponed expansion or cut back operations. The impact has been greatest on SMEs, which account for over 90% of jobs and roughly 40% of GDP.
Sustaining growth will require greater policy stability. Businesses perform best in predictable environments. Frequent regulatory changes raise costs and discourage long-term investment. The next phase of growth depends more on better enforcement of existing rules than on new regulation.
Fintech Innovation and Its Limits
Kenya’s position as the “Silicon Savannah” remains strong. According to Ken Research (2024), the mobile money and fintech ecosystem is valued at more than USD 2 billion.
Digital finance has transformed how businesses operate. Firms now access payments, credit, and customers through mobile platforms. Innovations in agriculture, logistics, and health technology have improved efficiency and resilience.
However, rapid expansion has also created risks. The 2024 FinAccess Household Survey indicates that loan default rates increased to 16.6%, up from 10.7% in 2021.
This highlights the need for stronger consumer protection. Responsible lending and financial literacy must accompany innovation. Sustainable growth requires trust, fairness, and inclusion.
Unlocking Kenya’s Next Phase of Growth
Formalising and Empowering SMEs
SMEs remain Kenya’s true growth engine. Yet many operate informally. This limits access to credit, government support, and large procurement opportunities.
Programs such as the Credit Guarantee Scheme and digital business registration are helping. Still, awareness remains low, and processes can feel complex to entrepreneurs.
Stronger links between SMEs and large corporates are critical. Supplier development, mentorship, and meaningful local content policies can help smaller firms scale.
Research by Beck, Demirgüç-Kunt, and Levine (2005) shows countries with vibrant SME sectors grow faster and reduce poverty more effectively. The benefits are strongest where financial systems work well. Supporting SMEs is not charity. It is smart economic policy.
Sustainability and the Road Ahead
Kenya’s future competitiveness will depend on adaptation. Global markets are shifting toward renewable energy, sustainable manufacturing, and ESG-aligned investment.
The Capital Markets Authority (2024) reports rising demand for sustainability-linked bonds and ESG reporting. The growth of green bonds signals a clear trend. Profitability and purpose are increasingly intertwined.
Kenya already has the foundations for sustained private sector growth. Innovation is strong, and SMEs are resilient. Yet potential will only be realised through coordinated action.
Policymakers must prioritise stability and smarter regulation. Financial institutions need to expand access to affordable credit. Corporates should deepen partnerships that help SMEs grow.
The opportunity is clear. With the right choices, Kenya can build a private sector that drives growth while delivering lasting economic security.
Mercy Mwelu is the General Manager of Business Development at Jubilee Asset Management. Mercy Kano is a Doctoral Fellow at the Strathmore Institute of Mathematical Sciences.
Article by Mercy Mwelu and Mercy Kano
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