Small and medium enterprises (SME) contribute significantly to job creation, economic growth and development. They boost innovation and competitiveness, and harness the entrepreneurial spirit of Kenyans.

Over 7.4 million SMEs employ 14.9 million people in various sectors, proving just how important small businesses are to the national economy. Therefore, the revelation that SMEs are facing closure over the government’s nearly Sh525 billion debts is a major source of concern.

The SMEs sector is reeling under a serious financial squeeze due to unpaid bills by the national government. Controller of Budget Margaret Nyakang’o says the debts rose from Sh516.27 billion last year to Sh524.84 billion as of June 30.

The piling up of pending bills has hampered cash flow in the economy, particularly for these SMEs, with a looming threat of business closures, job losses and additional government costs through penalties, interest charges and reduced private sector trust.

Of the pending bills, Sh404.33 billion, or 77 per cent, is owed by State corporations mainly in contractor payments, supplier arrears and statutory deductions, including pension contributions. The ministries, departments and agencies owe Sh120.51 billion, or 23 per cent, including old bills under recurrent and development expenditure.

Many of the enterprises have been forced to borrow from commercial banks at higher interest rates. Some have had their properties attached for the non-repayment of loans, with disastrous consequences, including some contractors and suppliers collapsing and dying.

Dr Nyakang’o wants the National Treasury to fast-track the verification and settlement of eligible pending bills to ease the pressure on these small enterprises. Indeed, the government should speed up the scrutiny of pending bills and clear the genuine ones. Otherwise, the collapse of SMEs will cause job losses, plunge many of the enterprises into financial distress, and hurt the economy.