MSME Access to Public Procurement in Kenya: Evidence Ten Years After the AGPO Policy
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Micro, Small, and Medium Enterprises (MSMEs) play a critical role in economic development, employment creation, and innovation in developing economies. Public procurement has increasingly been recognized as an important policy instrument for promoting inclusive economic growth by expanding business opportunities for MSMEs. In Kenya, procurement reforms such as the Access to Government Procurement Opportunities (AGPO) initiative and provisions under the Public Procurement and Asset Disposal Act were introduced to enhance MSME participation in government contracting. Despite these reforms, many MSMEs continue to face structural barriers that limit their effective participation in public procurement markets. This study examines the determinants of MSME participation in public procurement by focusing on access to procurement information, financial capacity, and digital procurement adoption. Guided by the Resource-Based View (RBV) and Institutional Theory, the study analyzes how institutional factors and firm-level capabilities influence MSME engagement in procurement markets. Data were collected from 305 MSMEs registered under the AGPO program in Kenya and analyzed using Structural Equation Modeling (SEM). The results indicate that access to procurement information has the strongest positive influence on MSME participation (β = 0.41, p < 0.001), followed by financial capacity (β = 0.33, p < 0.001) and digital procurement adoption (β = 0.29, p < 0.001). The structural model explains 58% of the variance in MSME participation (R² = 0.58), indicating strong explanatory power of the proposed determinants. The measurement model demonstrates satisfactory reliability and validity, while the overall model fit indices confirm an acceptable model fit (CFI = 0.95, TLI = 0.94, RMSEA = 0.046, SRMR = 0.041). The study contributes to procurement literature by applying SEM to evaluate MSME participation in public procurement, integrating institutional and firm-level determinants within a unified analytical framework, and providing updated empirical evidence from Kenya more than a decade after the introduction of procurement reforms. The findings offer important policy insights for strengthening procurement transparency, expanding MSME access to procurement financing, and enhancing the effectiveness of digital procurement systems to support inclusive participation in public procurement markets.
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