The 2025 Country Economic Transformation Outlook by Kenya Institute of Public Policy and Research Analysis (KIPPRA) says most small businesses in the manufacturing sector are focused on domestic and regional markets rather than tapping into direct exports.
The report further says while Export Processing Zones have enhanced production capacity, diversification of products and markets remains limited.
According to the KIPPRA report, manufacturing activity in Kenya remains concentrated in low value added goods and is geographically limited to a few counties, mainly due to infrastructure gaps, market access challenges, and shortages of skilled labor.
High operational costs further hinder product innovation and export competitiveness.
While digital innovation has advanced, progress is slowed by an unfriendly business climate, limited financing options, and constrained market reach.
High input costs, regulatory hurdles, and complex licensing requirements continue to pose barriers, especially for small businesses.
Existing support programs are insufficient, and KIPPRA recommends targeted interventions such as establishing county level one-stop shops for MSME licensing, reforming microfinance to offer low-interest loans, and developing digital platforms to provide real time business information.
To boost women entrepreneurs, the report suggests mentorship through role models, peer learning opportunities, financial support, and temporary regulatory relief especially for digital startups.
Many firms lack basic worker protections, such as safe work environments, maternity or paternity leave, anti-harassment protocols, labor rights enforcement, and minimum wage compliance.
Female employees, in particular, face cultural biases, delayed payments, and exploitative practices.
