September 8th, 2021

The creative sector sub-sectors such as crafts, design, film/ motion picture, music/sound recording, Kenyan market hosts a vibrant, varied with creatives in multiple performance arts, photography, visual art among others. Creative enterprises play a unique role in building cultural cohesion, expressing cultural identity, as well as being an important source of jobs and export earnings. Creative enterprises in Kenya are primarily informal with little incentive to register their operations.

Most creatives participate in smaller value chains where payments can be made in cash or through mobile money. Additionally, entrepreneurs within the creative sector typically lack business and entrepreneurial skills, which reinforces the tendency towards informality. This is demonstrated in survey results as well, where only 12% of respondents reported having registered their business. Using a combination of secondary sources, we have estimated that there are 275,375 creative enterprises in Kenya. Of these, 44,614 are registered, translating to a formalisation rate of approximately 16%.

The three largest components of this estimated market sizing are the crafts sub-sector, the music/sound recording sub-sector and the fashion design sector. Survey results indicate that lack of access to finance is the biggest challenge faced by creative enterprises, followed by lack of access to market and low levels of support from the government. Although many creatives cite access to finance as a challenge, few of them believe their businesses have the steady cash flows required to pay back debt. Primary data research reveals creative enterprises largely rely on informal sources for funding such as loans from family or friends.

Some creative enterprises rely on digital loans from MPESA loan services as well as digital lending applications. It is worth noting that none of the survey respondents reported using a credit product, despite 64% of respondents having a personal/business bank account for their enterprise. Many respondents open bank accounts primarily to secure contracts with corporate clients and not as a means of securing financing from banks. Survey results indicate that 55% of creative enterprises require between KES 100,000 and KES 1,000,000, an amount generally exceeding the maximum allowable loan amount by most digital lending services.

Generally, stakeholders complain of limited support from the government as well as relevant associations. Most creative entrepreneurs are unaware of any government initiatives aimed at driving growth within their sectors, with fewer still participating in any such government initiatives. Only 3% of respondents within the survey reported benefiting from government initiatives. In as much as creatives clearly need financial solutions tailored to their needs, there is an even greater need to address the market development and institutional constraints that impede growth of the market. These interventions regard training and skills development, industry development initiatives and grants, improvement in copyright and royalty management. Potential financial solutions may need to be focused around incorporating the widely-adopted MPESA platform, using targeted banking products, investing in the arts as part of banking activities and partnerships with development partners. National initiatives such as the national credit guarantee scheme need to be modified to specifically target creative enterprises as well.

Download Report – New Business Models for Financing the Creative Sector Research

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