Country: Kenya

Catalytic patient capital provided by FSD Africa Investments for climate venture building

Posted on by Kihingu Inc

Persistent raises $10 Million Equity Round led by Kyuden International and FSD Africa to grow climate venture building in Africa

New York, Nairobi, Tokyo: 12 July 2022 – Today, Persistent Energy Capital LLC announced that it has raised USD 10M in equity in its Series C round.  The raise, which was achieved with the support of two lead institutional investors, Kyuden International Corporation and FSD Africa Investments, will enable Persistent to continue to grow its successful climate venture building business in Africa.

The equity raise took the form of Series C Preferred Units of ownership in Persistent, giving Series C investors a seat on the Board of Directors. The largest investor of this Series C round, Kyuden International Corporation (“Kyuden”), is the overseas business arm of the Japanese Kyushu Electric Power Group. Kyuden has energy investment activities and consulting services across the world and shares with Persistent a strong commitment to renewable energy and building sustainable communities. Investing in Persistent represents a strategic move for Kyuden to expand their overseas business with an established partner in Africa, where the demand for clean power and electric mobility is growing dramatically. Persistent will benefit from the expertise, know-how, and network accumulated from domestic and overseas energy businesses of Kyuden around the globe.

This successful fundraise was also achieved thanks to the catalytic patient capital provided by Financial Sector Deepening Africa Investments Ltd.

We are delighted to support Persistent as it expands its innovative climate venture building model. We look forward to working with the Persistent team to accelerate the investment needed by African entrepreneurs in the nascent and fast-growing climate sectors. The combination of Persistent’s capabilities and approach, together with FSDAi’s expertise, patient capital and focus on green finance represents a very strong proposition in areas where innovation and early-stage equity capital are highly needed.
Anne-Marie Chidzero, CIO – FSD Africa Investments

FSD Africa Investments joins 2X Collaborative

Posted on by Kihingu Inc

Membership to 2X Collaborative paves way for FSD Africa’s participation in the co-creation of the 2X Certification mechanism and enhances FSD Africa Investment’s co-investment, networking and partnership opportunities on gender lens investing

Nairobi: 5th July 2022: FSD Africa Investments (FSDAi), the investment arm of FSD Africa has today joined the 2X Collaborative.  Launched at the UN Generation Equality Forum 2021 in partnership with GenderSmart and the Investor Leadership Network (ILN), the 2X Collaborative is a leading industry body for gender lens investing. Its mission is to convene and equip investors to increase the volume and impact of capital flowing towards women’s economic empowerment.

FSDAi’s membership to 2X Collaborative will provide access to peer learning networks, knowledge, co-investment platforms, partnership and training opportunities, and innovative investment tools.  These benefits are useful for FSDAi in applying a gender lens investing framework through its investments such as Nyala Venture which provides a facility for local capital providers that are mostly women-led or apply a gender lens in their approach.

There is a huge opportunity to finance inclusive and accelerated green growth in Africa by tapping into the economic participation of women. We are therefore delighted to join the 2X Collaborative and shine a light on GLI investing to advance innovations that demonstrate the investment case for gender smart finance.
Anne-Marie Chidzero, CIO – FSD Africa Investments

What financial services would you need if you found yourself as a refugee?

Posted on by Kihingu Inc

I often find it difficult for most people to relate to refugees. We seem to forget that we can be in the same situation depending on the circumstances around us. The happenings in Ukraine have shown just how delicate our stability status is, and that we can quickly be turned into forcibly displaced people overnight!

While conflict, war or persecution have been traditionally viewed as the main forces giving rise to refugees, natural disasters triggered by climate change among others are fast becoming a force to reckon with. The number of forcibly displaced people has now surpassed 100 million for the first time, fueled by the war in Ukraine and other ongoing conflicts around the globe.

This takes me back to a scenario in June 2018 when FSD Africa, FSD Uganda and BFA Global were conducting a design sprint with 6 Ugandan financial service providers (FSPs), to develop new ideas for financial products and services for refugees in the country. The 4-day event reached a phenomenal breakthrough when one of the participants posed: “What if something happened and we found ourselves in another country as refugees? What financial services would we need?” Those two questions opened the minds of the participants and ideas started flooding in. The design sprint was one of the 4 steps that FSD Africa has been following to develop financial inclusion for refugees (FI4R) projects. The other 3 are:

  1. Market assessments that capture the financial lives of refugees and show the potential of serving these populations.
  2. Innovation competitions where FSPs are invited to pitch ideas of how they would address refugee financial needs
  3. Financial support and technical assistance to FSPs to develop, pilot and roll-out financial solutions.

In Uganda, working with FSD Uganda, we identified Equity Bank Uganda Limited, VisionFund Uganda and Rural Finance Initiative to offer financial services in various refugee settlements from October 2019. While the project concluded in March 2022, these FSPs have continued operations as this turned out to be a viable business for them. The project engaged BFA Global as the learning and research partner. They undertook a baseline study in January 2020 and a series of 4 financial diaries (linked below) – capturing the financial needs and uses of refugee households.

The 4 financial diaries:

They then carried out an endline study in November 2021. The partners achieved the following results:

  • Over 26,300 customers accessed loans, with 73% being female
  • Cumulative loans amounted to £9 million ($2.7million)
  • 262 bank agents were recruited across the settlements, 15% of which were women
  • Over 93,300 households registered on Equity Bank Uganda’s digital platform
  • 65,484 households receiving digital payments as of March 2022.
  • The bank made payments worth UGX 10.8 Bn (£2.2m) during the first quarter of 2022
  • 8 humanitarian agencies used the Equity Bank Uganda platform for disbursements

Below is a summary of some of the different financial services offered by the FSPs:

Based on the end-line study findings, there is still work to be done to improve financial services for refugees in the following areas:

 

Financing for natural capital in Africa

Africa is highly exposed to risks associated with climate change and biodiversity loss.

In 2022, the IPCC reported with ‘high confidence’ that the continent is already experiencing significant changes from climate change and that future impact on the region will be ‘substantial’.

Effects include ongoing and accelerating changes in rainfall patterns, water availability and heatwaves with a sharp reduction in agricultural productivity – the mainstay of many African economies – and increased climate-related ill-health and mortality.

The economic consequences are likely to be severe. According to calculations by the African Climate Policy Centre are likely to be as much as a 12% contraction of Africa’s gross domestic product (GDP).

Furthermore, biodiversity loss of forests and coastal ecosystems threaten the environment and livelihoods in Africa and will contribute to an acceleration in global climate change.

Despite these risks, finance for the maintenance and enhancement of Africa’s natural capital is grossly insufficient. There is a financing gap in Africa of more than $100 billion annually. The biggest gap is in the sustainable management of landscapes and seascapes – a key area for Africa given the lower carbon intensity of its economies relative to developed countries.

Moreover, the limited finance that is available is from public sources. But domestic public budgets do not have the potential to increase sufficiently to close the financing gap by 2030.

Without a step-change in finance, we will witness an accelerated decline in biodiversity, the collapse of ecosystems and repeated climate disasters leading to the reversal of decades of poverty reduction and economic growth in the region as well as the acceleration of the global climate crisis.

Given these challenges, this study, commissioned together with ODI, suggests five key approaches to greater mobilisation of finance for biodiversity in the region:

Break the bias: Empowering women in Africa for prosperity

Posted on by Kihingu Inc

Worldwide, women’s access to finance is disproportionately low. Despite substantial overall progress—in 2017, the World Bank reported, 1.2 billion more people had bank accounts than in 2011—there is still a 9% gap between women’s and men’s access. In sub-Saharan Africa, only 37% of women have a bank account, compared with 48% of men, a gap that has only widened over the past several years.

Africa’s gender gap in access to finance can have a dramatic impact on social and economic progress. Women today dominate African agriculture, the continent’s most important sector. When women farmers lack access to financial services, their ability to invest in modern technologies to raise their productivity is limited. They cannot diversify their farms. They cannot grow high-value crops and invest in assets such as livestock. And they cannot invest in better nutrition for their children.

Sub-Saharan Africa is the only region in the world where more women than men become entrepreneurs. But when it comes to tal, the situation looks less rosy. There is an estimated USD 42 billion financing gap for women in Africa today[1]. As a result, many female-owned businesses do not actualize their potential; and many investors miss profitable investment opportunities.

On average, women in Africa own fewer assets than men, often due to discriminations encoded in property laws, and so they lack the collateral necessary to secure larger loans. And women are sometimes required to present more significant collateral for the same size loan, further inhibiting their access to capital.

Inclusive Finance

Each year, the world comes together for International Women’s Day to renew the push for gender equality. At FSD Africa, we’re working to make equality a reality in Africa by breaking the economic bias against women, through the power of inclusive finance.

Two strategies are spearheading our mission: gender bonds and gender-lens investing. Both have the potential to make a real impact, by helping to fund women-led businesses and elevating the role of women in the economies of Africa.

Gender bonds

Gender bonds are an asset class with a specific purpose: to support gender equity and the empowerment of women.

They do this by creating proceeds that are used exclusively to finance women-owned and women-led businesses.

Although 89% of women in sub-Saharan Africa are in the informal sector, their businesses historically struggle to access finance. These businesses were severely impacted by the Covid pandemic.

Gender bonds are a way of addressing this inequality, and with our projects at the forefront, they’re breaking new ground in Africa.

Our projects in Morocco and Tanzania

FSD Africa began by working with UN Women to analyse the global market for gender bonds and assess how corporate gender bonds in sub-Saharan Africa could help to empower women.

Following this research, we partnered with Morocco’s capital market regulator to publish guidelines on issuing gender bonds – the first development of its kind in North Africa.

Later that year, we supported the issuance of North Africa’s first gender bond: the Banque Centrale Populaire Gender Bond in Morocco.  Approximately USD 21 million was raised by way of private placement.

We also helped to develop the Jasiri Gender Bond Framework in Tanzania and provided support for the second party opinion.  This led, in February 2022, to the issuance of NMB Bank’s Jasiri Bond: the first gender bond in East Africa.  The offer closes on 21st March 2022 and NMB aims to raise approximately USD 17.2 Million.

<i”alignnone size-full wp-image-6055″ src=”https://fsdafrica.org/wp-content/uploads/2022/02/calin-stan-7a_PHX91su8-unsplash.jpg” alt=”” width=”640″ height=”402″ />

Gender-lens investing

Gender-lens investing is a term for investment strategies that are built around empowering women – while also aiming to generate return for investors.

Our investment arm, FSD Africa Investments, is focusing on gender-lens investing as a way of supporting our work towards equality.

They’re doing this in three ways: by applying a gender lens across their investments; by boosting gender diversity within FSD Africa Investments itself; and, by providing capital to existing investments that promote the role of women.

Bridging the financing gap

One route through which we aim to provide gender-lens capital is by directly investing in funds.

We will soon be announcing a partnership with a financing facility to support the growth of small, women-led businesses by providing funds and capacity-building to local capital providers. These providers, rooted in the local market, are best placed to serve the needs of small and growing businesses.

Creating real impact for women

We’re closely monitoring the impact of our gender bonds and gender-lens investing programmes as they progress. This will help us to grow and evolve our approach, to make sure we achieve real impact for women across Africa.

As we move forward, we’re more committed than ever to breaking the bias and making gender equality a reality.

To find out more about our work, get in touch: mary@fsdafrica.org

[1] AfDB

Youth enterprise grants (YEG) for the informal economy: report on findings

From 2018 to 2020, FSD Africa ran the Youth Enterprise Grant, a pilot project for young people in one of Nairobi’s largest slums. Over 1,000 micro-entrepreneurs were given access to a smartphone and provided with cash grants.

The project has provided vital insights into how urban youth in Africa manage micro-businesses, how they endure challenges both sudden and long-term, and the importance of digital connectivity. You can now download the full report and the summary of the research findings.

You can also learn more about the research from our blogs: smartphones and Nairobi’s entrepreneurs and the resilience of micro-entrepreneurs in the face of Covid.

Long-term debt financing in Africa is a problem…and an opportunity

Posted on by Kihingu Inc
Long-term debt in Africa

Financial sector assets in Africa are heavily concentrated in banking, according to the latest research by the Africa Long-term Finance Initiative (LTF). Taken together, insurance company and pension fund assets represented less than 40% of GDP on average in 2019 across the continent, against an average of almost 100% of GDP for commercial banks. No surprises, then, that the largest providers of long-term debt in Africa are banks.

Why the lack of diversity in domestic sources of long-term debt? In part, it comes down to the risk aversion of fund trustees: most institutional investors in Africa prefer to invest in government securities and real estate rather than taking on project risks with which they are unfamiliar.

Instead of investing long-term saving commitments in long-term investments, institutional investors hold a significant portion of their assets as term and savings deposits with banks. This upends the maturity transformation role often viewed as the core purpose of financial intermediation – that is, meeting the needs of lenders and borrowers by taking short-term sources of finance and turning them into long-term borrowings.

Where institutional investors have been willing to take on project risk, their investment has been limited to brownfield infrastructure – projects that are already constructed with regular income streams from delivery of services, where the risks are much lower than in the greenfield construction phase. Even here, institutional investors typically lean on Development Finance Institutions (DFI)s to provide first loss-guarantees.

Turning to the role of commercial banks, a disproportionate share of bank lending is allocated to the public sector. The deepest segment of most capital markets in Africa is the market for government securities (mostly short-term): the volume of outstanding government bonds represents, on average, some 20% of GDP across the continent. By contrast, most African countries do not have a market for corporate bonds. Wher exists, the market represents less than 5% of GDP in most cases. This imbalance between deep sovereign debt markets and shallow corporate debt markets is exacerbated by the high concentration of liquidity in just a few capital centres south of the Sahara: Lagos, Nairobi, and Johannesburg.

Government securities are attractive to banks as they represent ‘risk-free’ assets and do not encumber banks in terms of capital adequacy. Conservative culture or ‘career risk’ also plays a role: as one bank executive in our network observed, “nobody worries about losing their job for buying yet more T-bills”. In some cases, as government spending ballooned in response to COVID-19, and credit risk associated with lending to the private sector increased, top-tier domestic banks have seen the purchase of government securities as a welcome “safe-haven”..

From the perspective of users of debt finance, although traditional banking products are available to most formal enterprises, they often come at a high costernative formal sources of finance only play a marginal role on the continent, access to long term finance is often constrained. Likewise, lending to the housing sector is very modest – the average percentage of adults with loans for home purchase across the continent was around 5% in 2017.

Not only are domestic markets for private debt constrained – we could say “crowded out” – by the borrowing needs of the public sector, foreign borrowing is also limited, and entails foreign exchange risk that increases its cost. This underscores the pressing need to deepen domestic debt markets for the private sector (both enterprises and households) across the continent.

The importance of long-term debt

Long-term debt is essential to sustainable development, in particular because it allows investments to be financed over their active lifetime, thus matching the liquidity needs of the investment project. Debt is also generally less costly than other forms of finance, such as equity, dueniority, its payment structure (regular installments) and (re)financing flexibility.

Depth of the financial system (2016[1], % of GDP)

The depth of the financial systems depicted in the figure below for a selection of African countries is gauged by commercial banks’ assets, government bond market capitalisation, corporate bond market capitalisation, and stock market capitalisation. The figure shows, for each indicator, the average across the continent in 2016 and the percentage for each country in the same year, scaled by GDP.

Sources: World Bank (World Development Indicators) and BIS, supplemented by the LTF Survey

In developed economies, long-term debt finance is used by governments, enterprises, and households alike. For governments, debt is the only alternative to tax revenues when raising capital for investment. Enterprises find debt the most advantageous form of finance because it has a low cost of capital, often provides tax shields, plays a disciplinary role for managers and avoids diluting founders’ control. Households also find debt to be useful in alleviating liquidity constraints and thereby allowing them to smooth their income over the life cycle, opening up possibilities for purposes such as finance of housing, education and retirement.

Lack of data creates higher risk perception

In developed capital markets, the amount of long-term debt provided to the different sectors of the economy is well-balanced. Banks have a broad portfolio of loans that includes both public and privateending, and well-diversified institutional investors allocate their capital to both governments and corporates.

However, when data is not readily available to market participants, lenders tend to restrict their lending due to higher perceived risk. For example, solid and reliable credit history registries reduce these “information asymmetries”, allowing borrowers to have easier access to long-term finance.

Valid data on debt under the Long Term Finance (LTF) scoreboard

By improving market intelligence through data collection, the LTF initiative seeks to deepen markets for long-term finance in Africa by reducing information asymmetries. Governments can use this data not only to benchmark but also to improve their debt management practices, enabling productive financing that yields return better than the cost of debt itself. Likewise, private sector stakeholders stand to benefit from being able to better manage the risks associated with their investment in local African capital markets.

Coordinated efforts need to be made by a range of stakeholders – private investors, public investors, concessionary lenders, and expert providers of technical assistance – to increase the deployment and investment of domestic sources of long-term finance in productive assets, especially those resources available for long-term investment by pension funds and patient capital investors.  As we’ve outlined in this short blog post, the pis information asymmetry made worse by an inertia that comes from traditional over-reliance on government securities. For innovators, it is a status quo replete with opportunity.

Investment in productive assets like infrastructure will create a ripple effect on economic expansion over time. As economies expand, more capital for growth and scale-up is needed, which will attract larger foreign investment flows into Africa. This in turn will create job opportunities, higher disposable incomes and household savings, and – ultimately – inclusive economic growth.

[1] Data on government and corporate bonds are only available until 2016.

Covid lockdowns just another crisis : the resilience of Nairobi s micro-entrepreneurs

Posted on by Kihingu Inc

In March 2020 when the first wave of Covid-19 hit, countries around the world introduced stringent public health measures. Kenya was no exception. Schools were shut, government and office workers were encouraged to work at home, markets were closed, curfews were introduced and movement in and out of Nairobi was banned.

Although these measures reduced the spread of the virus, their economic impact was swift and damaging. Millions of people’s livelihoods disappeared overnight. For those working in the informal sector in Kenya, which accounts for up to 77% of all employment,[1] days without income quickly became days without food. As the lockdown continued, the World Bank and others predicted dire consequences for long-term economic growth and poverty reduction targets.

Today, although the Covid-19 and macro-economic outlooks remain unclear, recent research undertaken by FSD Africa in Mathare, one of Nairobi’s largest slums, indicates that Covid is only the tip of the iceberg. The pandemic is potentially diverting attention away from the underlying drivers that make or break the livelihoods of Mathare’s inhabitants.

The Youth Enterprise Grant project

Over the last two years, FSD Africa has been studying over 1,000 youth living in Mathare as part of the Youth Enterprise Grant project. Starting at the end of 2018, young people aged 18–35 were given a smartphone and an enterprise grant totalling $1,200. Half of the participants received the grant in three lump-sum payments at the beginning of the programme, while the other half received a monthly stif $50 over two years.

The project was implemented by cash transfer specialists GiveDirectly, with funding from the MasterCard Foundation, FSD Africa and the Google Impact Challenge Fund. Ongoing research over the period sought to ascertain how the youth used the money and the phone to improve their lives and livelihoods.

Covid-19 strikes

One year into the project, the research showed several promising findings, such as the proportion of youth describing themselves as ‘self-employed’ – running their own business – increasing from 34% to 67%. Data also showed that a third of all transfers were being spent on new or existing business investments, with a further 13% of transfers spent on education. There was practically no evidence that funds were being misused.

But during the second year of the project, the Covid-19 pandemic struck. Researchers feared its impact would undermine the business investments and other gains reported up to that point. It was felt that the lump sum recipients, whose grant payments had finished approximately one year before, would be particularly affected.

The results of the project were therefore awaited with some caution. This included the responses to post-payment telephone surveys with monthly recipients, a final telephone survey of all YEG recipients and several longitudinal case studies.

But these findings, shortly to be releasedAfrica in the project’s final report, provide a more nuanced picture than expected of the economic impact of Covid-19 on micro-business and survival in the Nairobi slums.

The mixed impact of Covid

There is no doubt that lockdown affected the livelihoods of the YEG youth. Teresia, age 29, explained:

“Before Covid, I was working several days a week cleaning in the house of a Chinese businessman. When lockdown came he told me to stay away as he didn’t want people coming into his house. I didn’t get paid when I didn’t work.”

Many others reported similar stories, and in the endline survey, carried out in January 2021, 90% of respondents said their income had decreased substantially during lockdown.

Nonetheless, the broader research findings indicate that the impact of Covid-19 as a whole was temporary, and limited largely to the initial lockdown period. Analysis of other questions posed in the endline survey shows that most respondents, including those that received lump-sum payments nearly a year before pandemic, emerged in a better financial situation than at the beginning of the project.

Micro-entrepreneurs were resilient

All youth reported sustained positive perceptions of their financial situation at the end of the project compared with the start, with a marked increase in those feeling they could meet all their daily needs on most days.

The shift to self-employmalso sustained, with the majority of youth (79%) describing themselves as self-employed and 68% describing self-employment as their main source of income. The figures show little difference between lump sum and monthly payment recipients, indicating that business investments made with transfers at the beginning of the project survived.

Interviews held after lockdown revealed that although most participants experienced reduced or suspended business activity and income, Covid-19 had not caused any participant’s business to fail outright. While five of the nine interviewees said their businesses were directly affected by Covid, they tended to describe them as being ‘on hold’ during lockdown, rather than ‘failed’.

All felt these business ventures were restarting as demand picked up. This was especially true of skills-based businesses, like hairdressing, construction and cleaning, which are relatively easy to restart once demand increases.

A couple of businesses even grew during the lockdown. One yout in a modem to sell wifi connections to households in his area, which increased in demand as more people (including school children) were forced to work at home.

Covid was one issue among many

All of this challenged researchers’ initial concern that the Covid-19 crisis would be such a significant shock it would wipe out any economic gains arising from the project. Instead, the YEG research found that although Covid-19 was a major shock, its impact in Mathare was no greater than that of many other issues affecting micro-business operators.

Four interviewees, for example, reported businesses that had failed for reasons unrelated to Covid. Only one of these was due to poor business skills. The other three reflected the highly precarious nature of operating a business in informal settlements: they were due to livestock disease, police raids and medical expenses.

The challenges of running a micro-business

These issues echo comments made in focus groups when participants were asked about the chlenges of running their businesses. Rather than emphasising lack of skills, they cited a litany of other obstacles in operating in a place like Mathare:

“So I bought hair braids with the money. After that, it’s like thieves realized we have been given the money and they came and stole from me. They took everything.”

“You know we don’t have title deeds here so we are just risking, anytime we can be kicked out and I lose my rentals. Also, because we hear about slum upgrading so we must feel insecure about our business.”

“Personally, I have a small kiosk, there are people who come to me pretending they are city askaris but they just want money, the chief, people just wanting to disturb you and your business.”

In several cases, medical costs and funeral expenses had wiped out participants’ savings or undermined their ability to keep businesses afloat. Other challenges related to the unreliability of basic services:

“Challenges are like: when we don’t havey; you find that no money will come in [to the bio-block] that day. Also, when there is no power our video business suffers.”

Issues around crime, theft and corruption are not easy to resolve. Indeed, some informal income-generating activities are based on illicit operations, such as selling water or electricity by tapping into mains supplies. YEG interviewees described efforts to obtain official meters, permits or licences – to legalise their operations – as being expensive, bureaucratic and ultimately futile. So instead, they continue operating in the knowledge they are running on borrowed time until they are shut down.

Structural problems must be addressed

These findings should challenge policymakers to think about what micro-entrepreneurs really need to run sustainable businesses in informal settlements like Mathare. The YEG project shows that youth were enthusiastic in their use of the capital (and the phones) provided by the programme to start and grow businesses, but long-term stability, and growth, are reliant on a range of wider factors – particularly investment in public goods.

Reliable, affordable basic services, universal healthcare, secure property rights and security are all essential for micro-entrepreneurs to succeed but are hardly ever included as elements of urban livelihood programmes. Instead, there is a fixation on loans and business training, which will have limited impact unless underlying structural factors are re-oriented to support the needs of lower-income households and businesses. Unsurprisingly, the project found YEG participants less concerned about the role of their business skills in their success than the research team were.

Mathare’s micro-entrepreneurs have proved their capacity for survival in the face of so many continuous challenges, and the pandemic was simply seen as one more to tackle. While a significant shock like Covid-19 was an unexpected element oe YEG project, it has helped magnify the underlying factors that make or break the livelihoods of youth living in informal settlements.

————————————

[1] IEA, Informal Sector and Taxation in Kenya, 2012.

Smartphones and micro-entrepreneurs in Nairobi’s informal settlemen

Posted on by Kihingu Inc

In the space of two decades, the smartphone has revolutionised communication and enabled millions to access the internet. This is particularly true in Africa, where it is estimated more households now own a mobile phone than have access to electricity or clean water.

Within Africa, Kenya is one of the most digitally connected countries, with more mobile phone registrations than people.[1] An estimated 96% of internet users gain access via a mobile device,[2] and Kenya also leads the world in the adoption of mobile money services, with over 79% of adults holding a mobile money account.

Nairobi is one of Africa’s most vibrant and connected cities. As the continent urbanises and more young people enter urban job markets, understanding how Nairobi’s micro-entrepreneurs operate in the digital age offers useful insights for cities across Africa.

Much has been written on the digital dividend that internet connectivity can bring in terms of accelerating growth, creating opportunities and delivering financial services. But it is difficult to know whether this dividend pays out to poorer households, who may be the last to own mobile phones and less able to afford access to the internet.

These were the issues explored by FSD Africa as part of the Youth Enterprise Grant, an innovative pilot project that provided smartphones and enterprise grants to 1,000 youth in Mathare, one of Nairobi’s largest slums.

The Youth Enterprise Grant

The YEG project ratwo years, starting at the end of 2018. All participants lived in Mathare, with most aged 18–35. The project provided each participant with a smartphone and an enterprise grant totalling $1,200. Some received the money in three lump-sum payments at the start of the programme, while others received a monthly stipend of $50 over two years.

The project was implemented by cash transfer specialists GiveDirectly, who helped FSD Africa assess if and how young people used the money and the phone to improve their livelihoods. The research sought to ascertain the value of digital technology in building business skills and knowledge, money management and financial literacy.

The smartphones were pre-loaded with several apps. These included Facebook and M-PESA, the mobile money service via which the grants were paid. The phones were also loaded with Touch Doh, a money management app that uses animated characters, speaking in Sheng (Swahili street slang), to help users with budgeting. On Facebook, participants were held to set up a profile (if they did not already have one) and become a member of the Hustle Fiti page, a business advice and chat group operated by Shujaaz Inc.

—————-

[1] https://data.worldbank.org/indicator/IT.CEL.SETS.P2?locations=KE

[2] https://datareportal.com/reports/digital-2021-kenya