Majority of Micro and Small Enterprises (MSEs) have stated that their businesses did not feel any direct impact of government interventions that would have shielded them from severe impact of COVID-19.
According to FinAccess MSE COVID-19 Tracker Survey by the Central Bank of Kenya (CBK) which received responses from 442 businesses in Wave 2 from a sample size of 603 in wave 1, 73% of MSEs stated that they did not benefit from any direct government interventions.
However, 19% said they had benefited from National Treasury interventions which saw Value Added Tax (VAT) reduced from a rate of 16% to 14% as government sought to ease the cost of living between March and December 2020.
The move by treasury to further cut turnover tax of Micro, Small and Medium Enterprises from 3% to 1% as as well as an increase in the cap for those liable to pay the turnover tax from Ksh. 5 million to Ksh. 50 million per year was only felt by 18% of the respondents.
About 73% of businesses indicated that they did not receive any direct government support. This may be due to the fact that these businesses are too micro and informal to benefit from government support, which mainly targeted more formal and relatively large businesses,” CBK stated in the survey.
According to the survey, only 8% of the respondents benefited from the suspension of Credit Reference Bureau reporting.
While direct support by government was largely missing among the small businesses, friends and family came in handy during the tough economic times as 54% of the respondents received support from this group during lockdown, 19% from Saccos, 7% had no support at all while 5% of support came from other business entities.
While the establishment of the MSME Credit Guarantee Scheme has been lauded as a right move to support MSMEs impacted by the pandemic, CBK says majority might to be left out as possible as beneficiaries.
“Micro firms are largely outside the purview of these measures due to their informality and size. While the Government recognizes the importance of micro firms as a distinct business segment, the difficulty of capturing data on these firms makes it challenging to put in place alternative measures that will help them to recover and rebuild.”
Challenges facing small businesses
Despite the easing of stricter COVID-19 measures,majority of Micro, Small Enterprises (MSEs) have cited customer sales as the biggest impediment to their recovery.
Customer sales is the biggest threat to recovery at 44% followed by access to credit at 11% and business expenses 9%.
Unpaid customer credit, accessing supplies and paying rent came in at 8%, 7% and 7% respectively according to the FinAccess MSE COVID-19 Tracker Survey.