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A new perspective on small firms in Kenya - Key findings from the Kenya Small Firm Diaries study

May 23rd, 2023

Financial Sector Deepening (FSD) Kenya and the Financial Access Initiative (FAI) research center of New York University, published the results of the Kenya Small Firm Diaries (SFD) study in Nairobi on Tuesday 23rd May 2023.

The Small Firm Diaries is a global research project being conducted between 2021 to 2023 in seven countries: Kenya, Nigeria, Uganda, Ethiopia, Indonesia, Fiji and Colombia. The study aims to improve the understanding of how small businesses can overcome the barriers they face in order to prosper in the modern economy, and thus contribute to reducing poverty.

In each country, a team of field researchers visited a sample of small business owners in low-income neighborhoods weekly for one year to collect quantitative and qualitative data on their financial flows. This information shed light on the economic decision-making, strategies, and constraints of small businesses as they navigate uncertain situations.

Financial Sector Deepening (FSD) Kenya and the Financial Access Initiative (FAI) research center of New York University anticipate that these results will inform the design of future development policies, financial services and tools to help small businesses and their employees to prosper.

The study was funded by the Argidius Foundation, the Aspen Network of Development Entrepreneurs (ANDE), the Bill & Melinda Gates Foundation, Financial Sector Deepening Kenya, and the Mastercard Center for Inclusive Growth. 

Results from the Kenya Small Firm diaries study

In Kenya, the research was carried out in Kisumu, Kwale and Nairobi counties between October 2021 and October 2022.

The study found that although the Kenya sample has the largest group of firms that have been open for 7 years or more compared to other countries, it is in the middle of the pack in terms of monthly revenue, with 75% of the firms making less than KShs 240,000. This level of revenue affects the quality of life for employees, with approximately two thirds of staff interviewed reporting struggling to have enough money to obtain necessary items for their families.

  • Financial inclusion: Approximately 60% of small firm owners in Kenya have bank accounts which they use for business purposes. However, usage of accounts is uneven with the majority of these firms moving less than a quarter of their transactions through bank accounts.
  • Mobile money: Kenya is a large positive outlier in mobile wallet ownership with nearly 70% of the respondents stating they use a mobile money account for their businesses . However, usage is still low, with the majority of these firms using their accounts for a small percentage of their overall transaction value.
  • Variety of sectors: The study was focused on three industries – light manufacturing, agri-processing, and services – which all play a vital role in Kenya’s economic development and sustainability. Half the firms in the Kenyan sample are engaged in small-scale manufacturing such as carpentry, metal work, and construction; 20% in services such as printing, car and bike repair and maintenance; and 26% in agri-processing industries such as meat and fish preservation and food preparation. Small firms play a critical role in these sectors, unlocking value for local economies.
  • Business stability: Like those in the global sample, Kenyan firms experience volatile earnings. Revenue and expenses fluctuate in unpredictable and hard to manage ways from month-to-month. However, despite access to finance being the third-largest barrier to firm owners’ vision for success, many firm owners from the global sample, including those in Kenya, say they “rarely” or “never” need a loan.
  • Credit life: When requesting loans, the firms analysed say that working capital is a bigger need than investment capital. They frequently look to sources other than banks, such as their own suppliers, for loans, and rarely take any operating risk that could result in negative monthly cash flow. These facts help confirm their need for working capital to cover liquidity needs.
  • Job security: Kenyan firms seem to offer a bit more stability of employment to key employees compared to firms in other countries. Still, only half of the small firm employees got paid 8 months or more in a 10-month period; a quarter of employees worked at the same firm for fewer than 5 months of that period.

In general, the study concluded that stability and growth is a priority for the entrepreneurs interviewed. According to the research, these companies face high volatility in their income and expenses.  They cited “rising costs and supply problems” as the main barrier to achieving their vision of growth and stability.

More details about the Kenya Small Firm Diaries study, are in the publications and videos below. For more information about the  global Small Firm Diaries study, visit the small firm diaries website.


1. A new perspective on small firms in Kenya – A summary slide deck of key findings from the Small Firm Diaries

2. Kenya country data overview – Data from the Small Firm Diaries

3. Financial services: How small firms in Kenya manage their finances

4. Summary of key findings from the Small Firm Diaries


1. Meet the Firms: Sardine Processors in Vanga, Kwale County 

But the study finds that small firms face challenges that impede their ability to grow and reduce their value in the economy. Their employees, for instance, face precarious conditions. Employed mainly on casual and piecemeal terms, many do not get work for the full year and two thirds claimed their families had gone hungry at some point over the past year.

2. Video recording of the launch event




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