Business licence reform in Kenya and its impact on small enterprises

Abstract

Kenya has pursued a business deregulation programme as part of a wider policy of liberalizing the economy and encouraging enterprise development. One component of this deregulation programme has been a transition from a system requiring enterprises to hold multiple business licences covering each of an enterprise's activities to a simplified system under which each enterprise requires only a Single Business Permit (SBP). This article reports the findings from a study of the impact of the transition. Interviews with over 300 enterprises, split between local authorities which had already made the move to SBP and authorities still using the old system, generated a substantial sample including over 200 microenterprises and small businesses (MSEs). We estimate the compliance cost savings for this sample of the transition and compare these savings with changes in licence fees occurring over the same period. The reform has reduced the costs to small enterprises in Kenya of complying with the licence process, but at least in some areas these savings are more than offset by an increase in the licence fees charged. The move to simplifying business licensing has been to some degree undermined by a parallel effort to revitalize local authority finances.