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Navigating challenges and opportunities for MSMEs in Kenya: Insights from the 13th Annual Banking Research Conference
October 29th, 2024
This year, I had the opportunity to attend the KBA 2024 Research Workshop themed ‘Banking sector resilience: Navigating macro-imbalances, responsiveness to evolving business landscape and driving sustainability’, an experience I embraced as a challenge to deepen my understanding of economics and its relevance to my work in inclusive finance.
For the past 21 years, I have primarily engaged with general quantitative analysis, often shying away from the complexities of economic theory. However, encouraged by my colleague and friend, David Muriithi, we co-authored a paper that motivated me to reflect on our findings as well as the broader research presented at the conference.
On the first day of the conference, during the tea break, I had the pleasure of meeting Adah Mukubi, the Communications and PR Lead at the Credit Information Sharing Association of Kenya. of comprehending some of the economic concepts being presented and my plans to simplify the messages through a blog. Coincidentally we shared the same sentiments. Adah enthusiastically agreed to collaborate, and we decided to start off by co-authoring an article and just like that, this blog was born.
Our aim is to share our key takeaways from the papers, conveying these in simple language applied to our work, without diluting the power of econometrics in research.
Econometrics provide a strong evidence base for policy and industry recommendations – so we respect the economists and statisticians! Indulge and feel free to share comments or more insights with us.
The Kenya Bankers’ Association (KBA) CEO Raimond Molenje set the tone for the conference by urging presenters to simplify their language. He encouraged attendees—many from the banking sector—to reflect on the sustainability of their ‘side hustles’ that many may be currently running. Once we leave employment, we will no longer be ‘attractive’ to financiers. Micro, Small and Medium Entreprises (MSMEs) are the backbone of our economy and have the potential to create employment. This was very much aligned with the conference theme.
Betty Korir, who is the Vice Chair of the KBA Governing Council Betty Korir, CEO, Credit Bank, brought it down to earth by using the Luyia phrase “vindu vi chenjanga’ which translates to “things change.” She reminded us that theoretical frameworks and research findings must align with the practical challenges we face in our sectors. She went ahead to speak on the changes that businesses experienced in the wake of Covid-19 and how businesses have continued to demonstrate resilience.
The conference was officially opened by Professor Victor Murinde, Executive Director of the African Economic Research Consortium (AERC), who shared a powerful insight: resources can either be a blessing or a curse. He illustrated this with the example of a picture showing oil discovery in Turkana, where multinationals and the government were celebrating the oil discovery, while local communities were holding out their containers asking for water, which was still their priority. His message to the banking sector was clear – with emerging opportunities such as, the FinTech revolution, banks becoming more pan-African and climate risk inclusion, how can banks leverage these developments for the benefit of both them and the broader economy?
Below, we summarise our key takeaways from the research papers presented and explore their applications to inclusive finance and credit information sharing. We have grouped papers with similar themes and provided definitions for some key terms.
The papers presented at the 13th Annual Banking Research Conference highlighted a range of challenges and opportunities in Kenya’s financial sector, particularly in relation to inclusive finance and credit information sharing. From the need to enhance MSMEs’ access to credit, to the risks posed by sovereign debt and macroeconomic imbalances, the findings call for more nuanced and balanced policy interventions. Moreover, promoting competition in the banking sector, addressing systemic risks, and supporting climate resilience through inclusive finance are critical for Kenya’s long-term economic sustainability.
Next year, Adah and I have challenged ourselves to write a paper that will demonstrate a better grasp of econometrics and how we can leverage the findings for our work!
KBA will publish the final papers on their website please indulge!
[1] Macro-imbalances refer to significant mismatches or disparities in a country’s overall economy. This can include things like too much debt compared to income, high unemployment rates, or imbalances in trade (importing much more than exporting). In simple terms, it means that different parts of the economy are not working well together, which can create problems for economic stability and growth.
[2] Fiscal Deficits: A fiscal deficit happens when a government spends more money than it earns in a certain period, usually a year. In simple terms, it means that the government’s expenses exceed its income, often leading to borrowing to cover the gap.
[3] Intermediation costs are the expenses that banks or financial institutions incur when they help people and businesses borrow and lend money. This includes costs like processing loans, managing accounts, and the risk of not getting paid back. In simple terms, it’s the cost of connecting savers with borrowers.
[4] Sovereign debt is the money that a country borrows from lenders, which can include other countries, banks, or international organizations. When a government needs funds for things like building roads, schools, or paying for services, it can issue bonds or take loans. This debt must eventually be paid back, usually with interest. In simple terms, it’s the money a government owes because it has borrowed to finance its activities.
