Kenyan Small Businesses Urged to Formalize and Embrace Digital Transformation
Small and medium-sized enterprises (SMEs) in Kenya are being encouraged to formalize their operations and adopt digital tools to improve growth, efficiency, and long-term sustainability. This call, supported by government officials, tech stakeholders, and financial institutions, comes amid increasing efforts to bring more informal businesses into the formal economy and improve digital inclusion across the country.
According to a recent report by Bizna Kenya, the formalization of small businesses will open access to vital services such as credit, government contracts, and growth opportunities through digital platforms. The government has also emphasized that formal businesses are better positioned to benefit from regulatory protections and structured support systems.
Digital transformation has emerged as a key pillar in this transition. The Communications Authority of Kenya has unveiled a Ksh 40 billion Universal Service Fund Strategy aimed at rolling out 100,000 km of fiber optic cable, over 25,000 public Wi-Fi hotspots, and 1,450 ICT hubs across the country. These efforts are designed to empower rural and underserved communities, ensuring equal digital access for all Kenyans.
In addition, the Ministry of ICT has digitized over 19,000 public services through the eCitizen portal and the newly launched “Gava Mkononi” app, which enables citizens and businesses to access government services on their mobile phones. This is a major step in reducing bureaucracy and increasing ease of doing business for SMEs.
Financial inclusion is another key driver in this digital shift. According to Mastercard’s SME Confidence Index, 91% of Kenyan small businesses have adopted digital payment platforms, including mobile money and card payment systems. This trend has not only improved efficiency and customer satisfaction but has also contributed to the credibility and traceability of SME operations—two essential factors for accessing credit and investment.
However, challenges remain. Many small businesses still face hurdles such as high internet costs, limited access to affordable smart devices, and low digital literacy, especially in rural areas. Some informal traders have expressed concern over increased scrutiny from tax authorities and are hesitant to register or adopt digital platforms due to fears of taxation.
To address these issues, experts are calling for increased investment in training programs, access to affordable smartphones, and incentives to encourage formalization. Local ICT hubs, particularly those targeting youth and women, are seen as crucial in equipping entrepreneurs with the skills needed to thrive in a digital economy.
