1. Background and Context
Small and Medium Enterprises (SMEs) form the backbone of Kenya’s economy,
contributing approximately 33% of GDP and employing over 80% of the workforce outside
the agricultural sector. Despite this significance, SMEs remain disproportionately exposed
to commercial disputes that are costly, protracted, and frequently unresolved through
formal judicial channels.
The Chartered Institute of Arbitrators (Ciarb) Kenya Branch convened a multi-stakeholder
roundtable to interrogate the landscape of dispute resolution for SMEs, assess the efficacy
of existing mechanisms, and identify entry points for scalable Alternative Dispute
Resolution (ADR) interventions. The roundtable convened representatives from the Micro
and Small Enterprise Authority (MSEA), the Judiciary, the Kenya National Chamber of
Commerce and Industry (KNCCI), the financial sector, the insurance industry, and the
youth entrepreneurship ecosystem.
This report summarises the deliberations and perspectives presented by each
stakeholder group, and distills shared conclusions, identified gaps, and proposed areas of
partnership.
| 2. Micro and Small Enterprise Authority (MSEA) — Perspective |
Presenters: Maureen Gachogo- Registrar.
:Agnes Thiong’o- Senior legal officer.
2.1 Nature and Typology of Disputes in the SME Sector
MSEA’s frontline engagement with the SME ecosystem reveals that disputes within this
sector are diverse in character and frequently multi-layered. The Authority identified three
principal categories of disputes commonly encountered:
•Governance disputes: These arise within SME structures, particularly cooperatives,
chamas, and registered business associations, where disagreements over
leadership, profit-sharing, decision-making authority, and member obligations
create internal fractures. Such disputes, if unresolved, often result in enterprise
dissolution or significant productive loss.
•Resource disputes – Land use: A recurring category of disputes involves access to
and use of land for business operations. These disputes frequently involve
competing claims among traders, landlords, county governments, and community
groups, particularly in the context of informal markets and open-air trading zones.
The intersection of customary land tenure and formal title documentation renders
these disputes complex and resistant to standard adjudicative processes.
•Association and umbrella organisation disputes: SMEs affiliated with trade
associations or apex bodies frequently experience disputes arising from
membership obligations, levy allocation, and representational authority. These
disputes tend to have sector-wide implications where the umbrella body exercises
regulatory or quasi-regulatory functions.
2.2 Existing Dispute Handling Mechanisms
MSEA noted that original jurisdiction over SME disputes is constitutionally and statutorily
vested in the MSE Tribunal, established under the Micro and Small Enterprises Act, 2012. The
Tribunal’s dispute resolution framework operates as follows:
•The Registrar of MSEs issues formal invitations to the disputing parties, initiating the
process without requiring legal representation.
•Upon receipt of the matter, the Tribunal establishes rules of engagement tailored
to the nature and complexity of the dispute.
•The Tribunal assists parties in arriving at resolutions that account for both short-
term needs (such as immediate injunctive relief or interim agreements) and long-
term commercial sustainability.
A notable feature of the Tribunal’s process is the statutory 30-day timeframe for
resolution, which aligns with the commercial realities and cash flow sensitivities of SME
operators. This expedited mechanism represents a significant advantage over
conventional court processes, which can extend over years.
Notwithstanding the Tribunal’s mandate, MSEA acknowledged systemic limitations
including limited geographic reach, low public awareness of the Tribunal’s jurisdiction,
and institutional capacity constraints that impede the full realisation of the 30-day
resolution target.
| 3. Judiciary — Perspective |
Presenter: Hon. Zacharia Kiongo. Small claims court margistrate.
3.1 Evolution of Judicial Approach to ADR: Pre- and Post-2010
Hon. Kiongo offered a historical framing of the Judiciary’s engagement with ADR, drawing
a clear distinction between the pre-2010 and post-2010 constitutional era. Prior to the
promulgation of the Constitution of Kenya 2010, the formal justice system operated
predominantly on an adversarial litigation model, with limited institutional support for ADR.
The Constitution of Kenya 2010 fundamentally reoriented this position, with Article
159(2)(c) expressly directing courts and tribunals to promote alternative forms of dispute
resolution, including reconciliation, mediation, arbitration, and traditional dispute
resolution mechanisms.
The post-2010 judiciary has accordingly pursued a multi-door approach to justice
delivery, integrating social transformation objectives alongside conventional adjudicative
functions. The Small Claims Court Act, 2016 and the subsequent operationalisation of
Small Claims Courts in Kenya’s major urban centres represent a landmark institutional
development in this trajectory.
3.2 The Multi-Door Approach and Access to Justice
The roundtable presentation outlined four principal pillars of the Judiciary’s reformed
dispute resolution architecture:
•Social transformation through social justice: The Judiciary recognises that access
to justice is a social equity issue. For SME litigants, cost and procedural complexity
remain the most significant barriers. Judicial reforms have sought to lower these
barriers through simplified procedure, fee waivers, and plain-language pleadings.
•ADR integration: Court-annexed mediation and court-referred arbitration have
been institutionalised within the formal court structure, enabling judges to divert
matters to appropriate ADR pathways prior to full hearing. This integration has
significantly reduced the court backlog in commercial divisions.
•Alternative Justice Systems (AJS): The AJS Policy Framework recognises
community-based and customary dispute resolution mechanisms as valid
components of the national justice system. For SMEs operating in informal or peri-
urban settings, AJS provides a culturally appropriate and cost-effective first port of
call.
•Small Claims Court: The Small Claims Court operates on an inquisitorial rather
than adversarial model, a deliberate design choice to accommodate non-
represented litigants. Magistrates are empowered to actively manage
proceedings, elicit facts from parties, and arrive at just determinations without the
formality of full legal argument. This model is particularly responsive to the needs
of SME proprietors who lack the resources for legal representation.
3.3 Key Performance Indicators and Incentive Structures
Hon. Kiongo highlighted the importance of institutionalising ADR performance metrics
within the judicial system. There is an emerging policy consensus that KPIs for magistrates
and judges should include ADR referral rates, mediation uptake, and settlement rates in
Small Claims matters, not merely case disposal numbers. Embedding ADR outcomes
within judicial performance frameworks would create systemic incentives to use non-
adjudicative pathways where appropriate, rather than defaulting to full hearings.
This approach also addresses a structural disincentive: under current KPI structures,
referral of a matter to ADR may not count toward a judicial officer’s disposal statistics,
inadvertently discouraging the very behaviour the multi-door framework seeks to
promote.
| 4. Kenya National Chamber of Commerce and Industry (KNCCI) — Perspective |
Presenter: Dr. Juliet Kimemia. Head of trade and investment, KNCCI.
4.1 Dispute Landscape Across KNCCI’s Membership
Dr. Juliet presented KNCCI’s perspective as an apex body representing commercial
interests across Kenya’s formal and informal business sectors. The KNCCI membership
spans micro-enterprises to large corporates, giving the organisation a panoramic view of
commercial disputes across the economy.
Three dispute categories were specifically highlighted:
•Government and informal businesses: Disputes between government entities or
agencies and informal traders represent a persistent and high-volume category. A
case study was presented involving Githurai informal traders and the Kenya
National Highways Authority (KeNHA), wherein SME operators were displaced from
roadside trading sites to facilitate infrastructure works without adequate notice,
compensation, or relocation. The case illustrates the asymmetry of power between
state actors and informal SME operators, and the inadequacy of existing
mechanisms to protect SME interests in such situations. ADR, in the form of
structured mediation, could have facilitated an agreed timeline, alternative site
provision, and compensation framework.
•Corporate disputes: Intra-business disputes between SME partners, between SMEs
and larger corporate counterparties, or arising from franchise and supply chain
arrangements are frequently unresolved due to the prohibitive cost and delay of
commercial litigation. Arbitration, particularly fast-track arbitration under
institutional rules, offers a commercially appropriate and confidential alternative.
•Cross-border disputes: Kenya’s position as a regional trade hub generates
significant cross-border commercial disputes. A case study involving Kenyan tea
exporters and Pakistani importers was presented, illustrating the challenges of
enforcing contractual obligations across jurisdictions without recourse to
institutional arbitration. The absence of an agreed dispute resolution clause in
export contracts was identified as a key vulnerability. KNCCI and CIArb Kenya have
a shared interest in promoting model ADR clauses for cross-border SME trade.
4.2 KNCCI’s Role in ADR Promotion
KNCCI’s county-level structure positions it as a natural partner for grassroots ADR
awareness and uptake. Dr. Juliet noted ongoing discussions around embedding ADR
awareness into KNCCI’s business registration and member onboarding processes, as well
as the potential for KNCCI to serve as a nominating authority for arbitrators and mediators
in SME disputes.
| 5. Financial Sector — Perspective |
Presenter: Karumba Kinyua. Managing partner, Pinehill Consultancy.
5.1 The Cost of Dispute Resolution for SMEs
The financial sector perspective centred on the economic dimension of dispute resolution
for SMEs. Karumba Kinyua provided a rigorous cost-benefit framing that contextualised
ADR as not merely a legal option, but a critical business continuity tool.
Two principal cost categories were identified:
•Litigation fees: Commercial litigation in Kenya involves court filing fees, legal
representation costs, expert witness fees, and enforcement costs that frequently
exceed the value of the underlying dispute for SMEs. A typical commercial case in
the High Court may cost between KES 300,000 and KES 1,000,000 in legal fees alone,
before disbursements, over a lifecycle of three to seven years. For an SME with a
turnover of KES 5 million, this represents an existential financial risk.
•Facilitation fees and delay tactics: The presenter highlighted the use of procedural
delay tactics — adjournments, interlocutory applications, and dilatory service — by
larger, better-resourced counterparties as a deliberate litigation strategy to
exhaust SME claimants. Each adjournment translates into additional facilitation
costs, opportunity costs, and management bandwidth diverted from productive
activity.
5.2 Key Issues Identified
Karumba Kinyua enumerated the following issues as particularly acute for the SME
financial ecosystem:
•Expedition as a cost-saving mechanism: The judicial system’s failure to deliver
timely resolution imposes direct financial costs on SMEs through frozen receivables,
unenforceable judgments, and disrupted cash flow cycles. Fast-track ADR
mechanisms directly address this by compressing the dispute resolution timeline
from years to weeks.
•Time and capital lock-up: Disputes, particularly those involving unpaid invoices or
contract terminations, lock up SME working capital for extended periods. Access to
interim relief through ADR, including emergency arbitrator mechanisms, could
mitigate this challenge.
•Investment and entrepreneurial contracts: Venture and growth-stage SMEs enter
into investor agreements, shareholder agreements, and joint venture contracts
that frequently lack adequate dispute resolution provisions. When disputes arise,
the absence of a pre-agreed ADR mechanism results in protracted legal battles
that destroy enterprise value.
•Exiting entrepreneurship contracts: Disputes arising from franchise exits,
partnership dissolutions, and business sales are a growing category. ADR provides
a structured mechanism for orderly commercial exit that protects the interests of
all parties without recourse to adversarial litigation.
•Staff and employment disputes: Employee disputes, including unlawful termination
claims and wage disputes, impose significant costs on SMEs disproportionate to
the amounts in dispute. Court-annexed mediation in employment matters offers a
cost-effective and relationship-preserving alternative.
•Fraud: Commercial fraud targeting SMEs — including invoice fraud, identity fraud,
and supply chain fraud — generates complex disputes involving evidentiary and
enforcement challenges. Specialised arbitral panels with forensic expertise
represent a potential avenue for more effective resolution.
| 6. Insurance Sector — Perspective |
Presenter: Peter Kagia. Chairperson, Insurance Institute of Kenya
6.1 Risk Management and the Insurance-SME Interface
Peter Kagia presented the insurance sector perspective, framing the discussion around
the intersection of risk management, SME vulnerability, and dispute resolution. Insurance is
a critical risk transfer mechanism for SMEs, yet disputes between SME policyholders and
insurance providers remain a significant and under-addressed category of commercial
conflict.
The presenter identified the following core dispute drivers:
•Service and turnaround time for payment and restoration: The most common
source of policyholder dissatisfaction is delays in claims assessment and
payment. For an SME that has suffered a fire, flood, or business interruption event, a
protracted claims process can be catastrophic. The Insurance Regulatory
Authority’s (IRA) prescribed turnaround standards are frequently unmet in
practice, with no accessible redress mechanism for SME policyholders short of
formal litigation.
•Payment of premiums and policy disputes: Disputes also arise from disagreements
over premium calculations, policy renewals, retroactive exclusions, and mid-term
cancellations. SME policyholders, lacking the legal capacity to scrutinise policy
terms, are frequently disadvantaged by information asymmetry.
6.2 Specific Dispute Categories
The following dispute categories were identified as particularly prevalent in the SME-
insurance space:
•No clear definition of loss: A recurring challenge is the absence of clear, objective
criteria for assessing losses, particularly in the context of business interruption
insurance. Disputes frequently arise from divergent valuations of loss between the
insured and the insurer, with no neutral mechanism for resolution.
•Contractual disclosures: Disputes arising from alleged non-disclosure or
misrepresentation by the insured at the policy inception stage are a significant
category. SME owners, who are not always legally sophisticated, may inadvertently
fail to disclose material facts, resulting in disputed claims or policy avoidance.
6.3 Dispute Handling Mechanisms in the Insurance Sector
The existing dispute resolution framework in the insurance sector provides that:
•Primary handling authority is the Insurance Regulatory Authority (IRA) Directorate,
as mandated under the Insurance Act (Cap. 487). The IRA exercises a quasi-
judicial function in resolving policyholder complaints.
•Appeals from IRA determinations lie to a separate appellate authority, creating a
two-tier administrative dispute resolution process prior to judicial intervention.
The presenter noted that while this framework provides a structured pathway, it lacks the
specialisation, speed, and flexibility that sector-specific ADR mechanisms could offer. A
dedicated insurance arbitration panel, with adjudicators conversant in insurance law and
loss assessment, would significantly improve outcomes for SME policyholders.
| 7. Cross-Cutting Themes and Stakeholder Submissions |
7.1 Bridging the Gap: Institutional Partnerships and Capacity Building
A recurring theme across all presentations was the gap between the availability of ADR
mechanisms and their uptake by SMEs. Several bridging strategies were identified:
•MSEA: Community engagement programmes to disseminate awareness of ADR
options and the MSE Tribunal’s jurisdiction. Capacity building through MOUs with
Ciarb Kenya to train MSEA staff as accredited mediators and to embed ADR
training within MSEA’s enterprise development curriculum. Policy advocacy to
strengthen the statutory framework for SME dispute resolution.
•KNCCI: Leveraging government procurement frameworks to require ADR clauses in
SME government contracts. Embedding ADR awareness and model clauses within
the Chamber’s member services and trade facilitation functions.
7.2 Enforceability and Cost: The Core Tension
A substantive discussion emerged around the cost-enforceability dynamic in ADR for
SMEs:
•Is arbitration cheaper than litigation for SMEs? The consensus was nuanced:
arbitration in its institutional form carries administrative and arbitrator fees that
may be prohibitive for low-value SME disputes. However, fast-track, simplified
arbitration procedures, such as those available under CIArb Kenya’s Dispute
Appointment Service (DAS), can be significantly more cost-effective. The critical
variable is the value and complexity of the dispute.
•Enforceability: Arbitral awards are enforceable as judgments of the High Court
under the Arbitration Act (Cap. 49). This enforceability advantage is particularly
significant in matters involving construction, contractual performance, and debt
recovery, where SMEs require a binding resolution they can act upon without
further litigation.
•Court-annexed mediation: While mediation is generally the most cost-effective
ADR mechanism, its efficacy in a court-annexed context is contingent on both
parties’ willingness to participate. Sustainment of court-annexed mediation
programmes requires institutional commitment, trained mediators, and adequate
resourcing.
7.3 Insurance Sector – IIK Submissions
The Insurance Institute of Kenya (IIK) underscored the need for sector-specific ADR
mechanisms tailored to the unique characteristics of insurance disputes. Key themes
included:
•The definition and quantification of SME losses as a recurring point of contention
between insurers and policyholders.
•Building trust in the insurance sector through structured capacity building for SME
policyholders, enabling informed engagement with policy terms and claims
processes.
7.4 Young Arbitrators Society (YAS)
The YAS inquiries: Affordable costs in ADR for SMEs
•Fast-track arbitration for low-value SME disputes was identified as a priority
mechanism. A streamlined, document-only arbitration process with a fixed-fee
structure would significantly lower the cost barrier.
What MSEA is doing in promotion of ADR awareness in SMEs:
• MSEA was identified as a key partnership opportunity for tailored dispute
resolution mechanisms specifically designed for micro and small enterprises.
Insurance in Risk allocation and insurance awareness:
•IIK was identified as foundational issues: many SME operators enter into contracts
without adequate understanding of risk transfer and dispute resolution obligations.
General:
●Enforceability of ADR awards was highlighted as a confidence-building issue.
Greater awareness of the legal enforceability of arbitral awards and mediated
settlement agreements would increase SME willingness to opt for ADR over
litigation.
| 8. Roundtable Observations and Shared Conclusions |
The following shared observations emerged from the roundtable deliberations:
•There is a clear and urgent demand for SME-appropriate ADR mechanisms that
are fast, affordable, and enforceable. Existing mechanisms, including the MSE
Tribunal, the Small Claims Court, and court-annexed mediation, represent
significant assets but suffer from limited awareness, geographic concentration,
and institutional capacity constraints.
•The multi-door approach of the Judiciary aligns well with the heterogeneity of SME
disputes: different categories of disputes — governance, resource, contractual,
insurance, cross-border — require different ADR modalities, and no single
mechanism is universally appropriate.
•ADR awareness and literacy among SME operators is critically low. Across all
sectors represented, low awareness of available mechanisms, eligibility criteria,
and enforcement outcomes was identified as a primary barrier to ADR uptake.
•Institutional partnerships are the most viable route to scale. CIArb Kenya is well-
positioned to serve as a technical and institutional anchor for ADR capacity
building across the SME ecosystem, working through MSEA, KNCCI, IIK, and other
stakeholder bodies.
•Policy alignment is necessary but insufficient. Legislative and regulatory
frameworks for SME ADR exist in Kenya but require coherent implementation,
adequate resourcing, and inter-agency coordination to achieve their intended
impact.
| 9. Recommendations |
Based on the foregoing, the roundtable proposes the following recommendations for
stakeholder action:
•CIArb Kenya and MSEA should formalise a partnership to embed ADR training
within MSEA’s enterprise development programmes and to establish a referral
pathway from the MSE Tribunal to CIArb Kenya’s Dispute Appointment Service for
matters requiring arbitral resolution. On the same, to establish a partnership to
train members (County level heads), on mediation as an ADR mechanism and
accredit them. A proposal to be sent to the authority.
•CIArb Kenya and KNCCI should develop and disseminate model ADR clauses for
SME commercial contracts, with specific provisions for domestic, cross-border, and
government procurement contexts. To create a Memorandum of Understanding to
mark a strategic partnership between KNCCI and CIArb, for trainings and
accreditation.
•The Judiciary, in collaboration with CIArb Kenya, should advocate for the revision of
judicial KPI frameworks to include ADR referral and settlement rates as
performance indicators, thereby incentivising multi-door utilisation.
•The Insurance Regulatory Authority and the Insurance Institute of Kenya should
explore the establishment of a dedicated insurance ADR panel, with CIArb Kenya
as the appointing authority, to address the specialised nature of insurance
disputes.
•A fast-track arbitration pilot should be designed and implemented for SME
disputes below a prescribed threshold value, with a fixed-fee structure, document-
only procedure, and a 30-day resolution timeline, aligned with the MSE Tribunal’s
existing framework.
•All stakeholder bodies should commit to structured public awareness campaigns
on ADR, using MSEA’s community engagement networks, KNCCI’s county
chambers, and digital media channels to reach SME operators at the grassroots
level.
| 10. Conclusion |
The roundtable affirmed that ADR is not merely a procedural alternative to litigation for
SMEs, it is a strategic enabler of enterprise sustainability, economic inclusion, and
commercial justice. Kenya’s SME sector operates in a complex and often adversarial
environment in which disputes are inevitable. The question is not whether SMEs will face
disputes, but whether the mechanisms available to resolve those disputes are adequate,
accessible, and trustworthy.
The perspectives presented by MSEA, the Judiciary, KNCCI, the financial sector, and the
insurance industry converge on a shared diagnosis: the infrastructure for SME ADR in
Kenya exists but is fragmented, under-resourced, and insufficiently known. The path
forward lies in institutional collaboration, targeted capacity building, policy coherence,
and the development of ADR products specifically designed for the scale and character of
SME commercial activity.
CIArb Kenya stands ready to contribute its expertise, institutional networks, and convening
authority to this agenda, and looks forward to deepening its partnerships with all
roundtable stakeholders in the period ahead.
