Small and Medium Enterprises (SMEs) form the backbone of Kenya's economy, contributing significantly to its GDP. However, despite their crucial role, many SMEs face challenges when it comes to accessing financing. This is where financial inclusion steps in, offering a potential solution that can unlock growth for these businesses.

Financial inclusion refers to the effective access by individuals and entities to appropriate financial products and services they require at affordable costs to build resilience, reduce vulnerabilities, and improve their livelihoods. In the context of SMEs, it means having access to banking services, credit facilities, and digital payment systems that facilitate smooth operations.

According to a report by the World Bank, only 24% of adults in Kenya have an account at a formal financial institution. This means a substantial number of SMEs are left out from accessing crucial financial services that could boost their operations and growth.

The impact of financial exclusion on SMEs can be profound. A lack of access to credit, for instance, makes it difficult for businesses to invest in new equipment or expand operations. Moreover, the reliance on cash-based transactions can lead to inefficiencies and increased risks.

Fortunately, technology is transforming the financial landscape in Kenya. Digital platforms are making it easier for SMEs to access financial services. For example, Lipabiz Technologies Ltd offers a business management platform and payments platform that helps businesses manage their finances more effectively.

By leveraging these digital solutions, SMEs can streamline their financial operations, reduce transaction costs, and improve cash flow management. This not only makes them more resilient but also positions them for growth.

One success story is that of M-Shwari, a mobile-based bank account offered by Safaricom in partnership with Commercial Bank of Africa. The service has reached over 20 million users since its launch, providing a significant portion of the unbanked population with access to savings and loans.

To capitalize on the benefits of financial inclusion, SMEs should consider adopting digital payment solutions and exploring partnerships with financial institutions that cater to their needs. By doing so, they can bridge the gap between where they are now and their future growth potential.