By Anne Gitonga
Sustainable Development Goal No. 9 is about leveraging innovation for dynamic and competitive economic development, employment generation, and income generation. The EAC Vision 2050 and the Kenya Vision 2030 identify Science, Technology, and Innovation as a driver of economic growth and sustainable development. MSEs are drivers of innovation. They, however, experience constraints that limit their innovative activities. The key constraints include infrastructure and technology, skills, and industry linkages. These constraints are compounded by difficulties in accessing appropriate finance.
Infrastructure and Technology
Institutions such as the Micro and Small Enterprise Authority (MSEA) and the Kenya Industrial Research and Development Institute (KIRDI) play a critical role in fostering innovation by providing support through common manufacturing or user facilities and incubation services. Further, the Government, in the fourth Medium-Term Plan implementation of the Vision 2030 (MTP IV), has prioritized the construction of 10 additional common manufacturing facilities and equipping the existing Constituency Industrial Development Centres with common user facilities for incubation. The MTP IV has also proposed establishing incubation centres in the Technical and Vocational Education and Training (TVET) institutions to enhance access. This reveals the Government’s focus on expanding physical infrastructure that supports MSMEs. This infrastructural support assists MSMEs with access to affordable technology and technical expertise essential for the development of innovative products and services. The challenge, however, relates to limited access to relevant technology. MSMEs face difficulties in accessing relevant support conveniently.
Problem Solving and Technical Skills
Skills enhancement for MSEs is a Government priority. Government institutions such as MSEA, KIRDI, and the Kenya Institute of Business Training provide training programmes targeting MSEs. TVETs also play a significant role in capacity building. Many MSEs, however, face challenges in accessing relevant and affordable training opportunities. Skill, however, is an enabler of innovation. MSEs that offer training to their employees tend to innovate more compared to those that do not.[1] Innovative approaches, such as flexible online courses and knowledge-sharing platforms, are therefore needed to improve the reach of these programmes among MSEs. It is further paramount to strengthen the integration of innovation-focused curricula, which can be achieved by strengthening academia industry linkages and enhancing entrepreneurial skills. Institutions of higher learning further require practical learning environments though innovation hubs and incubators within training institutions.
To further support MSE skills development, the Government proposes the establishment of business development centres (BDCs) in every Ward. Expanding access to these BDCs has the potential to significantly boost skills enhancement among MSEs. The
MSEA-run Kariobangi MSE Centre of Excellence is an example of a BDC providing
technical capacity building and technology transfer through Common User Facility Machines. BDCs are typically designed to enhance skills through focused workshops, technical training, mentorship programmes, provision of technical support and toolkits and other vital resources for businesses. This has been adopted in various countries. Start-up Chile, a government facility, offers business development support in form of incubation, accelerator services and mentorship for start-ups.[2] The SME Corporation Malaysia, also by the government, offers a variety of business development support, including capacity building, business advisory and financial support.[3]
Industry Linkages
Networks and business associations present opportunities for knowledge diffusion, technology and skills transfer and business support services that can lead to the development of innovative products and services. A KIPPRA study[4]reveals that MSEs that interact with other firms are more likely to be innovative. In India, for example, MSE associations provide support services to MSEs with the Ministry responsible for MSMEs maintaining an accessible database of MSME associations. In Japan, business associations are certified as management improvement support providers to provide technical support and training to small enterprises. This demonstrates the importance of linkages and associations in supporting growth and innovation.
Access to Finance
The Government has come up with various initiatives to address financing constraints experienced by MSEs. The Moveable Property Security Rights Act (2017, CAP499a, for instance, recognizes intellectual property (IP) as a registrable form of security. MSEs, therefore, can use IP assets such as patents, trademarks, and copyrights, as collateral to access financing. This Act essentially creates new avenues for MSEs, particularly in innovative-driven sectors, to leverage their intellectual assets for capital growth.
Effective implementation of the Moveable Property Security Rights Act, however, requires appropriate valuation of IP assets. Countries such as Malaysia conduct training for IP valuers to support the application of the 2013 IP Financing Scheme programme designed to assist MSEs use IP as collateral. The country further developed a National IP Valuation Model. In Russia, the Law of Federal Standards of Evaluation guides IP valuation.[5] These international examples highlight the need for expertise and frameworks that can enhance the effectiveness of Kenya’s initiatives in promoting access to finance and innovation among MSEs.
Conclusion and Policy Recommendations
Pro-innovative MSE policies can be achieved through the provision of appropriate finance that leverages on IP; training and skills enhancement strategies that are innovation-focused that are accessible, practical, and relevant to MSEs; provision of innovation infrastructure such as incubation hubs; and strengthening of business networks facilitated by business associations.
Of policy priority, therefore, is the finalization and implementation of various relevant policy frameworks, which include the National IP Policy, and the Incubation and Subcontracting Strategy.
[1] Gitonga, A. and Moyi, E (2019), The Role of Information Communication Technologies in Innovation in Kenya’s Micro, Small and Medium Establishments. KIPPRA Discussion Paper No. 215. Nairobi: Kenya Institute for Public Policy Research and Analysis. Accessible from https://repository.kippra.or.ke/xmlui/handle/123456789/2864.
[2] https://www.iea.org/articles/start-up-chile
[3] https://www.smecorp.gov.my/index.php/en/
[4] Gitonga A, and Githinji N, (2022), Drivers of Firms’ Innovation in Kenya: Discussion Paper No 297 of 2022. Kenya Institute for Public Policy Research and Analysis accessible at https://repository.kippra.or.ke/xmlui/handle/123456789/4483
[5] Asia-Pacific Economic Cooperation _ APEC (2018), Best Practices on Intellectual Property (IP) Valuation and Financing in APEC. APEC Intellectual Property Rights Experts Group available at https://www.apec.org/docs/defaultsource/Publications/2018/4/Best-Practices-on-IP-Valuation-and-Financing-in-APEC/218CTIBest-Practices-on-Intellectual-Property-IP-Valuation-and-Financing-in-APEC.pdf
