FSD Kenya, which aims to create value through financial inclusion, have just released their 2017 Annual Report which contains findings from ongoing research projects around Kenya.
- The unregulated digital credit space in Kenya, mainly phone loans, has overtaken other forms of credit in the country with 19% paying digital loans, much more than 17% repaying family/friends or 14% paying shopkeepers for goods taken on credit.
- 45% of borrowers through mobile phones are now female. Usage has shifted from day-to-day to investing in businesses, but 14% are (900,000 individual) are juggling multiple loans, and half have defaulted or delayed loan repayment.
- Tweaking Agri-Finance: There is lack of access of credit to agriculture which receives just 4% of banking credit. This could be partly due to lack of data so they are partnering with M-Kopa Labs to research other models. Hall of M-Kopa customers make money from agriculture and buy solar products so the research aims to see of if the pay-as-you-go model can be applied to other products like farm inputs, water tanks, fertilizer, animal feed etc.
- Youth Finance products: 40% of the population is under 15 years but youth are underserved by the banking sector. They see money as a means of survival and savings as being for buying something not long-term or unanticipated needs. There is a lack of appropriate financial products for the youth, and this could be because older adults are the ones developing financial solution for the youth. One outcome of this research, funded by Funded by SIDA and the Bill and Melinda Gates Foundation could be a new class of lending to the youth, a development by FSD Kenya and the Kenya Bankers Association.
- They are also involved in the Kenya Hunger Safety Net program in which the government transfers Kshs 20 billion ($200 million) a year to people over 70 years.
- Visiting economist John Kay gave a lecture where he advised that Kenya should develop local financial solution and not adopt western financial models.
- Smartphone uptake still low, but USSD is how Kenyans can access robust banking services with cheap handsets.
The International Trade Center (ITC) has launched a women-economic empowerment program for female entrepreneurs to be able to trade across borders.
“SheTrades” aims to grow one million female entrepreneurs, and is starting with Kenya, Ghana, Nigeria and Bangladesh, in export-ready fields of apparel (textiles), agriculture (tea, coffee, avocado) and services (ICT, tourism). The program will offer training, capacity building and support to enable women, entrepreneurs to be more competitive, and prepare their companies for export markets such as through obtaining certifications, connecting to buyers and being able to talk they way into deals.
The SheTrades program is based on seven principle of quality data, fair policies, public procurement, striking business deals, enabling market access, unlocking financial services, and securing ownership rights. Kenya is acknowledging for having female supportive laws such as setting aside 30% of government procurement for women, youth and persons with disabilities, though the uptake of this has lagged. It also has some women-focused funding initiatives while Barclays Kenya has a program with ITC to increase women’s access to international trade opportunities.
SheTrades is funded by the UK’S DFID and the SheTrades Commonwealth Kenya initiative is open to companies that are at least 30% female-owned and female-managed are eligible for sign up on the SheTrades website.
WDR2017, the World Development Report from the World Bank for 2017, looks at governance and the rule of law around the world and how they can impact countries and economic development.
Illustrative pic from the Star Newspaper to show what a large sum of cash will look like
- Elections alone are not enough to bring change – even when citizens manage to remove politicians whose performance is poor or diverges from their preferences, elections alone offer no credible guarantee that, once elected, new leaders will not shirk their electoral promises and credibly commit to citizens’ demands.
- Local elites can capture public spending despite participatory programs; as they can disproportionately sway expenditure decisions
- Inequality begets inequality In societies in which inequality is high as the effectiveness of governance to deliver on equity outcomes can be weakened structurally because those at the top of the income ladder not only have control over a disproportionate amount of wealth and resources, but also have a disproportionate ability to influence the policy process.
- Devolve: By multiplying the number of more or less autonomous arenas within which public authority is exercised, decentralization increases the opportunities for policy innovations and the emergence of effective leaders. Often these innovations are spurred by political outsiders, who may not have access to the national policy arena but are more likely to acquire citizen support locally and spur local institutional reforms.
- Female leaders are less prone to patronage politics and corruption.
- Media content is often defined by elites leading to a bias, but new media can counteract this.
- Political parties are on average the least-trusted political institution worldwide
- Politically connected firms gain undue advantage in countries through using market regulations to favor firms, granting import licenses to favored firms, and diverting credit.
- Land redistribution policies often fail due to transaction costs, incomplete contracts, and political agreements.
- The Panama Papers highlighted legal and illegal ways in which assets found their way to 40 countries: Funds are legally earned through tax evasion and evading currency controls and shifting profits, but also illegally by exploiting natural resources, violating intellectual property rights, corruption, embezzlement, drug trafficking, and human smuggling etc.
See the 2016 WDR report.
Today, it became news that the government would no longer extends funds to youth and women programs. So far, the government has distributed more than Kshs 10 billion (~$10 million) to youths and Kshs 7 billion (~$70 million) to women.
The ending was not really new as a previous report released by the Central Bank of Kenya in 2015 noted that “the intention was not for the Government to lend, but to create an incentive for banks to engage with SMEs”.
Looking at financial results of two banks that had bond issues in 2015, and for which they released detailed information memorandums (IM’s), these show the flat or declining status of the youth and women fund programs. Both Chase, and Family, banks were intermediaries in the incentives by the Youth Enterprise Fund and the Women Enterprise Fund to advance funds to the respective target groups.
Family Bank Youth & Women Funds
That does not mean that the Kenya government has stopped supporting entrepreneurs in the sectors, as there’s now the Access to Government Procurement Opportunities (AGPO) initiative under which the government aims to allow 30% procurement contracts to be given to the youth, women and persons with disability without competition from established firms.