Discussion Paper No. 264 of 2021 on Assessment of Factors Influencing Participation in Domestic Trade by Female- and Male-Owned Firms in Kenya

Abstract

This paper sought to assess how firm-specific factors—size, regulatory factors— tax obligation, licensing requirements, and registration requirements, support factors—access to credit, piped water, electricity, mobile money platforms, Internet, on-job-training, road status, trade associations, and nature of trading premises, owner-specific factors—gender, and education attainment, and geographical factors—county economic blocs, influence domestic-trade participation by female-and male-owned firms in Kenya as an avenue for accelerated income generation, job creation, poverty alleviation, and economic growth and development as enshrined in the "Big Four" Agenda and the Kenya Vision 2030. Cross-sectional data obtained from the 2016 MSMEs Survey was used to undertake empirical analysis. Domestic trade participation was measured as a categorical variable identifying the main buyer of goods and services—MSMEs, non-MSMEs, government, and individual consumers. Estimation was done using multinomial logit. Gender, level of education attainment, tax obligation, licensing regulations, registration requirements, access to credit, access to mobile money platforms, nature of trading structure, on-job-training, membership to trade associations, status of roads, access to Internet and electricity, firm size, and regional county economic blocs were found to have statistically significant effect on various outcome categories of domestic trade participation. The findings point towards a need to undertake legislation to accord the regional county economic blocs legal and institutional status for ease of operationalization and administration, need to mainstream gender in domestic trade policy making and implementation with targeted incentives for women-owned firms especially in taxation, licensing, registration requirements, need to enforce legal provisions according women equal access to credit, land, and property, and fast-tracking implementation of the Land Laws (Amendment) Act, 2016 to unlock access to land property, which is an important collateral in accessing credit among women in Kenya for enhanced domestic trade participation. Reviewing the Micro and Small Enterprises Act (MSEA) 2012 to provide incentives to firms within the micro and small classification to have membership with the authority could enhance capacity building of firms while accumulating social capital,x which is important in accessing markets. Access to incubation and capacity building support for growth, specialization, and knowledge accumulation could enhance domestic trade participation.