Informal sector powering bottom-up jobs

Thirty-nine years ago, Sessional Paper No. 1 of 1986 noted that “the modern, urban industrial sector cannot be depended upon to employ much of the fast-growing workforce” and urged investment in agriculture and the informal economy. 

Its warning proved prescient: Kenya’s industry remains highly capital-intensive, requiring more than Sh1 million to create a single manufacturing job, whereas the informal sector needs only Sh120,000 to Sh240,000. Kenya Institute for Public Policy Research and Analysis research confirms the logic: four of the five value chains with the greatest employment impact are agricultural, and the sector still delivers the highest multiplier, spawning more jobs across the economy than any other.

In response to this logic; when the current administration unveiled its Bottom-Up Economic Transformation Agenda (BETA) in 2022, it promised to invest Sh500 billion over five years for small-holder agriculture and informal-sector micro, small and medium enterprises (MSMEs), including Sh50 billion a year in affordable credit. It framed the informal economy as its golden goose, which would create the most jobs. The government has followed that roadmap with surgical precision and it has paid off beyond expectations.

Scaling employment opportunities

Data from the Economic Survey shows that between 2022 and 2024, and following the governments increased investment and strategic interventions, jobs in the informal sector expanded from 15.96 million in June 2022 to 17.39 million in June 2024. Each year the sector has produced the overwhelming bulk of new opportunities, about 704,000 in 2024 representing 90 per cent of all jobs created. In other words, nine out of every ten additional livelihoods generated have been in the kiosks, Jua Kali workshops, boda bodas, mama mbogas and micro-workspaces that anchor the BETA.

This stellar performance stems from a deliberate strategy by the Kenya Kwanza government. Key interventions included the rollout of affordable credit tailored for MSMEs, establishment of shared industrial infrastructure, and development of aggregation centres equipped with value-addition equipment. These efforts have bolstered agro-industrial competitiveness, lifted farm incomes, improved productivity at the enterprise level, and enhanced the export potential of Kenyan goods. At the same time, comprehensive legal and policy reforms have decriminalised informal businesses, enabling smoother operations, formalisation and participation in national industrialization strategies.

A flagship financial instrument of this empowerment drive is the Hustler Fund. Since its inception, the Fund has disbursed more than Sh70 billion in micro-loans to 25 million Kenyans, with two-thirds being youth. It has also mobilized over Sh4 billion in mandatory and voluntary savings while building real-time credit profiles for borrowers previously outside the formal banking system. A second tranche in December 2024 introduced a behavioural credit-rating model that rewards disciplined borrowers with increased limits and longer repayment periods. Borrowers with strong repayment histories can now access bridge loans of up to Sh150,000 at only 8 per cent interest.

Simultaneously, skills and incubation programmes are being ramped up to complement financial interventions. The Youth Enterprise Development Fund, for instance, has disbursed Sh677 million to over 52,000 young entrepreneurs, facilitated trading spaces for nearly 5,000 and trained more than 318,000 youth in business development. New national initiatives like Nyota (National Youth Opportunities Towards Advancement) project and the KJET (Kenya Jobs and Economic Transformation) in 2024 are also scaling employment opportunities. 

Socio-economic transformation

In addition to these national programs, institutions like the Micro and Small Enterprises Authority (MSEA) and Kenya Industrial Estates (KIE) are playing pivotal roles. MSEA has facilitated market access for over 2,000 MSMEs, helped many through subcontracting arrangements, and facilitated participation in regional trade fairs. KIE has supported more than 20,000 linkages among MSMEs and between MSMEs and large enterprises.

The regulatory environment is also being progressively reformed to support startups and informal-sector transition. The Startup Bill 2024, passed by the National Assembly, formalises government support for startups by offering tax incentives, easier access to capital and incubator programmes. Importantly, the manifesto’s pledge to “end the criminalisation of work” is being realised through simplified business licensing including county-level unified business permits and registration of nearly 2.3 million micro-enterprises on eCitizen, complete with digital compliance certificates.

Infrastructure, too, has been a cornerstone of BETA. In Meru, Kisii and Nyandarua, cold-storage hubs are cutting post-harvest losses for more than 5,000 farmers and feeding into regional aggregation models. The County Aggregation and Industrial Parks initiative further amplifies this momentum. 

The convergence of policy, finance and infrastructure has created a powerful engine for inclusive growth. The informal economy once seen as peripheral is now firmly at the heart of its socio-economic transformation.

The writer is the Deputy Chief of Staff, Performance and Delivery Management in the Executive Office of The President.