There’s a paradox in Kenya’s economy that too few talk about: in many sectors, employees enjoy steadier, more predictable cash flows than the very business owners who create jobs. A worker on a monthly salary knows when the next paycheque arrives. The entrepreneur who supplied the goods or completed the contract often waits — and waits again — for payment. That mismatch is not a quirk; it’s a systemic problem with deep consequences for jobs, investment, and trust.

Small and medium enterprises (SMEs) are the backbone of Kenya’s economy, generating a large share of employment and economic activity. When those businesses cannot turn receivables into working capital, the entire engine of local growth stutters because SMEs lack the buffer that larger firms enjoy. The statistics from our national data and business surveys confirm how central MSMEs are to livelihoods and GDP, which means their distress is not micro; it is macroeconomic.

One of the most visible symptoms of the problem is the mountain of public and private arrears that slow cash circulation. Recent reporting has shown that penalties and interest on delayed state payments have climbed, and arrears to suppliers and contractors remain a persistent drain on supplier liquidity—translating directly into stalled projects, unpaid wages, and fewer new ventures. When the institution that should be the most reliable payer is late, the ripple effects are enormous.

Corruption and weak governance make these payment problems worse. Transparency International’s indices continue to flag governance weaknesses that corrode trust and efficiency. Where corruption, opacity, and clientelism dominate procurement and contracting, payments get delayed, invoices get contested, and honest suppliers get squeezed. This is not only unfair — it is economically destructive.

The everyday consequences for entrepreneurs are immediate and painful. A contractor who finished a road or a supplier who delivered goods might wait months for settlement. During that wait, suppliers must cover payroll, buy materials, pay rents, and service other creditors. The result: instead of reinvesting profits, they borrow. Instead of hiring, they freeze recruitment. Growth plans evaporate under the burden of unpaid invoices.

Delayed payments distort incentives across the private sector. If you cannot trust that you will be paid on time, you set higher prices to cover financing costs; you refuse contracts from clients with a history of late pay; you stop offering supplier credit. The market becomes blunted by precaution; commercial relationships grow cautious, and transaction costs rise.

For startups and small firms, the effect is existential. Cashflow — not profitability — is the most common reason SMEs fail. A business can be profitable on paper yet collapse because it cannot bridge the gap between outflows today and inflows tomorrow. That gap is precisely what unpaid invoices widen and what irregular public disbursements deepen.

Empirically, access to finance remains uneven. Surveys and central bank-aligned research show that MSME loan approval rates and the quality of financing available are still constrained; many SMEs either cannot access affordable credit or find the terms punitive. That makes dependence on receivables all the more acute — and late payments immediately crippling operations.

The knock-on effects touch employees too. Firms under cash strain delay salaries, shrink benefits, and freeze hiring. The safety net that steady employment once provided becomes unreliable. Ironically, the very people who receive the steady income are often victims of the small businesses that fail — fewer jobs, fewer opportunities, a weaker local economy.

There is also a psychological cost. Entrepreneurs endure stress, sleepless nights, and eroded personal savings while trying to keep a business alive. This mental load reduces creativity and increases risk-aversion, making it less likely for businesses to innovate or to scale when opportunities arise.

Payment delays also encourage risky financing behaviour. Firms resort to expensive short-term credit, float mobile loans at high interest rates, or put personal assets on the line. Over time, this increases default risk across the system and tightens lending conditions for everyone.

Part of the solution starts with market-level financial products that convert receivables into working capital. Banks and fintechs in Kenya now offer invoice discounting, factoring, and supply-chain finance tools that can bridge receivable gaps — allowing suppliers to get paid quickly (at a cost) while buyers keep their normal payment cycles. These are proven tools; their wider adoption could relieve thousands of businesses from cash flow crunches.

Reverse factoring and supply-chain finance — where a bank pays the supplier based on the buyer’s creditworthiness — are pragmatic extensions that large corporates and government agencies can deploy to stabilise their ecosystems. If big buyers help guarantee faster payment via these mechanisms, the entire chain benefits: suppliers have liquidity, banks reduce default risk, and projects move faster. Financial institutions in Kenya are already packaging such facilities; scaling them is a matter of awareness and policy support.

But private solutions alone are not enough. Government must stop being the primary source of payment risk. Prompt-payment legislation, strict enforcement of public procurement timelines, and transparent publication of supplier arrears are essential reforms. Where there are delays, the state should be required to disclose schedules and pay penalties automatically to affected suppliers — turning discretionary practice into an enforceable rule.

E-procurement and integrated financial management systems can help — when they work properly. Digital invoicing, centralised billing, and clear approval workflows reduce opportunities for discretionary delays and make audits faster. Countries that have digitised government payments see measurable improvements in supplier confidence and private sector investment.

Corporate culture matters immensely. Many large private companies profit by stretching payment terms to vendors. Ethical leadership — where payment discipline is treated as a core governance issue — must become a non-negotiable norm. Boards and CEOs should measure supplier-payment performance as part of ESG and operational KPIs.

Community-level solutions have a role too. Chamas, Saccos, and community savings groups can provide liquidity buffers for small suppliers, enabling them to smooth cash flows even as systemic reforms lag. These instruments are familiar to Kenyan entrepreneurs and can be adapted to pool receivables or pre-finance contracts for members.

Banks and regulators should incentivise SME-friendly products: longer working-capital lines tailored to invoice cycles, lower rates for receivable-backed lending, and technical assistance for modern financial management. Public–private partnerships can de-risk early adoption of invoice-discounting platforms by providing first-loss guarantees or matching capital.

Justice and contract enforcement remain central. Courts and arbitration mechanisms must be accessible and speedy. When payment disputes drag on for years, the cost to business is more than legal fees — it’s foregone opportunity and lost livelihoods. Fast-track commercial courts and alternative dispute resolution mechanisms for payment disputes can change that calculus.

Transparency weakens corruption. Publicizing procurement awards, contracts, and payment timelines in open data formats makes it harder for patronage to delay payments. Civil society and investigative media play a watchdog role here — exposing the anomalies that allow payments to be weaponised.

Education and capacity building are practical, low-cost interventions. Many small firms lack robust invoicing practices or legal clauses ensuring interest on late payments. Training SMEs on contract design — clear payment milestones, retention clauses, and penalty provisions — can reduce vulnerability.

Policymakers also need to rethink the incentives that keep payments slow. For instance, if ministries or agencies are rewarded for low spending rather than effective project completion, they will withhold payments to show budget prudence. KPIs must be restructured to reward timely payment as evidence of efficient service delivery.

There are successful templates in other markets. Governments that adopt prompt-payment acts and tie procurement performance to official credit ratings see improved supplier confidence. Kenya can borrow from global best practices and adapt reforms to local institutional realities.

Fintech innovation should be harnessed aggressively. Automated invoice-to-funding platforms, embedded finance solutions within procurement portals, and blockchain-enabled transparent ledgers can all make payment flows faster and more trustworthy — provided regulation supports experimentation and scale.

For entrepreneurs, practical steps are also essential. Tighten invoice terms, demand staged payments for large contracts, include late-payment interest clauses, and vet the payment history of large clients before extending credit or delivering expensive work. Small changes in contract hygiene can mean the difference between solvency and collapse.

Cash reserves act as a buffer; building them requires discipline and sometimes painful trade-offs. Entrepreneurs should aim for a minimum operating liquidity cushion, even if it means slower expansion in the short term. That resilience buys time to pursue legal or financing remedies when a big payer is late.

Collective bargaining can help. Sector associations can negotiate standard payment terms with large buyers and lobby for enforcement. A credible association that monitors compliance and publishes scorecards can pressure laggard payers to reform.

The macro benefit of fixing payment flows is profound. When suppliers get paid on time, they hire more, invest in equipment, take on new contracts, and generate tax revenue. The multiplier effect of timely payments unlocks growth — and importantly, it creates political capital for leaders who deliver these fixes.

Political leadership must step up because delayed payments are as much a governance failure as an economic one. Fixing this requires cross-ministerial coordination: Treasury, Public Procurement, ICT, and Finance need to act in concert. A national prompt-payment task force with private-sector representation could jumpstart reforms.

Business leadership must complement politics. CEOs and boards should adopt prompt-payment charters, publish supplier-payment times, and adopt supplier finance solutions that stabilise their value chains. Company reputations will accrue value when they’re known as reliable payers.

Civil society, unions, and media must keep pressure on. Exposing egregious cases — where suppliers are unpaid while projects remain incomplete — galvanizes public demand for action. Transparency breeds accountability, and accountability reduces delays.

The cost of inaction is high: stunted entrepreneurial ecosystems, rising informal employment, lower tax revenues, and an economy that prioritizes fleeting gains over sustainable prosperity. Conversely, action yields jobs, investment, and an environment where small firms can scale.

There is a solution, and it is practical: combine prompt-payment laws, digital procurement and e-invoicing, SME-friendly financing (such as invoice discounting and supply-chain finance), stronger contract enforcement, and a political will to end the practice of weaponizing payments. Paired with cultural change in corporate ethics and community financial buffers, this package can shift cash flow dynamics within a few years.

Entrepreneurs, investors, and civic leaders must insist on change — not as an abstract ideal but as a concrete policy and operational agenda. Audit your client base, demand stronger payment clauses, adopt receivable-financing tools, and join industry coalitions pushing for system-wide reform.

If Kenya wants an economy where entrepreneurs are the engine — not perpetual creditors — we must realign incentives so that payments are predictable, transparent, and fair. That requires the right political leadership, business stewardship, and a regulatory framework that protects suppliers.

Fixing the cashflow imbalance is a governance and growth imperative. It is not only about making life easier for business owners; it is about unlocking a more resilient, inclusive, and productive economy. Leaders who deliver timely payments will leave a lasting legacy of jobs and trust.

If you’re an entrepreneur: tighten contracts, protect margins, and explore receivables financing. If you’re a corporate leader: commit to prompt payment and deploy supply-chain finance. If you’re a policymaker: pass enforceable prompt-payment rules and digitize procurement. Do these things together, and the country’s entrepreneurs will stop waiting to be paid and start building the Kenya we all want.