Kenyan small and medium-sized manufacturers are being urged to shift focus toward high-value export markets to spur economic growth and job creation. This call comes from the 2025 Country Economic Transformation Outlook released by the Kenya Institute for Public Policy Research and Analysis (KIPPRA).
According to the report, most micro, small, and medium enterprises (MSMEs) in the manufacturing sector primarily serve local and regional markets, missing out on the lucrative opportunities in global exports. While Export Processing Zones (EPZs) have helped enhance production capabilities, Kenya’s manufacturing sector remains concentrated in low-value goods, with limited product and market diversification.
Key challenges include poor infrastructure in many counties, restricted market access, and a lack of skilled labor. Additionally, high input costs, complex licensing procedures, and burdensome regulations continue to hinder small businesses, making it difficult for them to scale operations or innovate.
KIPPRA recommends a multi-pronged approach to unlock the sector’s potential. These include establishing county-level one-stop shops to simplify MSME licensing processes, reforming microfinance institutions to provide affordable loans, and creating digital platforms to deliver real-time business information.
The report emphasizes the need to support women entrepreneurs, many of whom face cultural biases, exploitative practices, and delayed payments. KIPPRA proposes financial aid, mentorship by successful role models, and temporary regulatory relief to boost the participation of women in digital and manufacturing enterprises.
Worker protections also remain a concern. Many firms lack basic labor safeguards such as safe work environments, maternity or paternity leave, and compliance with minimum wage regulations. The report calls for stronger labor rights enforcement and the promotion of inclusive workplace practices.
While digital innovation in Kenya is growing, the report notes that its full potential remains untapped due to an unfriendly business climate, limited financing, and narrow market reach. High operational costs and outdated technology further restrict competitiveness and the ability to meet international standards.
KIPPRA concludes that targeted investments, policy reforms, and inclusive practices are essential if Kenya is to transition from low-value manufacturing to a globally competitive, innovation-driven economy.
