Policy Brief No. 07 of 2023-2024 on Enhancing Utilization of External Business Financing in Kenya’s Arid and Semi-Arid Lands

Abstract

Access to finance is essential in fostering business growth, and enhancing access to financial markets is crucial in supporting and expanding entrepreneurial activities beyond mere subsistence levels. One of the key drivers of development in ASALs is entrepreneurship, especially through startups and small businesses. The FinAccess Household Survey 2021 revealed that wholesale and retail is the most prevalent sector in ASALs, constituting 41.81 per cent and 44.12 per cent of economic activities in arid and semi-arid regions, respectively. However, there is a significant gap in financial inclusion between ASALs and non-ASALs, as only 64.4 per cent of adults in ASALs have access to formal financial services, compared to 86.8 per cent in non-ASALs.