Economic Update

Published 30 Mar 2017

Kenya’s ICT providers are working to tap into the country’s micro, small and medium-sized enterprise (MSME) segment, though a limited awareness of technology services presents a potential challenge to these efforts.

The allure of the MSME subsector for ICT players is clear: MSMEs are the largest single booster of the economy by number of establishments, employment and contribution to GDP, according to the “Micro, Small and Medium Establishments Basic Report 2016” by the Kenya National Bureau of Statistics (KNBS). Yet the use of ICT services in the segment is limited, with less than half of MSME owners using even their mobile phones for business purposes. 

Furthermore, small businesses in Kenya provide jobs for some 81% of the population, and the country’s 7.4m MSMEs – four-fifths of which are unlicensed – accounted for around 34% of GDP in 2015, according to the KNBS report. 

Market awareness

Though MSMEs are a potentially significant consumer group for ICT providers, a lack of knowledge regarding the benefits of technology could be a hindrance in leveraging this largely untapped source of revenue. 

The KNBS report, which surveyed Kenya’s small business community, found that 43.1% of all respondents said their business had no need for IT applications, 34.5% said it was not applicable to their business, while 14.3% stated that the cost of such technology priced it out of their calculations. 

More than three-quarters of licensed respondents said they had not received any advice on technology of any sort, with fewer than 5% saying they use computer, tablet, fax or digital camera equipment. 

A total of 10.5% of registered small businesses used no ICT equipment at all. 

Mobile money

One area of more widespread IT usage is money transfer: 49.3% of established MSME respondents said they used mobile money platforms for payments and receipt of cash. 

This figure indicates strong market potential for payment service providers, as technology uptake and improved connectivity drive greater use of electronic financial services, according to James Mwangi, CEO and managing director of Equity Bank.

“Now, with the arrival of smartphones and their increasing penetration in the market, customers will able to access their bank’s application easily,” he told OBG. 

Reaching out

Telecoms operators will need to reach out to this expanding client base, meeting the demand for cost-effective services able to carry faster and heavier data traffic. 

With internet users in Kenya numbering 37.7m as of the middle of last year, representing a penetration rate of 85%, growth potential exists in the domestic commercial and personal ICT market. This is particularly clear given the rapid expansion of broadband subscriptions, which rose by 1.1m quarter-on-quarter in the third quarter of 2016 to 11.9m, according to the Communications Authority’s most recent data.

Another promising sign is increasing mobile broadband speeds, which is expected to draw more Kenyans into the world of smartphones, contributing to ever-rising awareness of the usefulness of web-based applications in business settings. The expanded reach of 3G – and subsequently 4G – services across Kenya should therefore open doors for service and technology providers to tap the country’s extensive network of small businesses.