The world is still reeling from the effects of the various COVID-19 variants; socially and economically, things have dramatically changed in the last 2 years. In this article, we shall analyze the specific impact of coronavirus on employment, salaries &MSMEs in Kenya and how some MSMEs have coped.

Employment

Employment by private sector firms fell by 16% between March and April of 2020 as the Government enforced containment measures to stop the spread of the virus. Of all the big economic sectors in Kenya i.e manufacturing, trade, agriculture, finance, hospitality and transportation, the most severe impact has been felt in the hospitality and transportation sectors.

The private sector was first impacted by disruptions of the supply chain and trade with China in early 2020. The most significant logistical challenge reported by firms in a Kenya Association of Manufacturers’ report was an increase in sea freight costs followed by delays in the supply of imported raw and intermediate materials used in local production. The increased demand for imported goods by the United States economy, particularly from China meant supply chain processes elsewhere experienced significant delays and increased costs. This led to 41% of the surveyed KAM membership including Chief Executive Officers, Managing Directors, Chief Operating Officers, Operations and Finance Directors downsizing their workforce.

In mid-March, the Kenyan Government closed national borders, restricted domestic travel, banned public gatherings, closed schools, and later imposed a night-time curfew. Additionally, strict lockdown measures were put in place for the most at-risk counties in April.

By April 2020 overall formal employment fell by 16% and the overall payroll dropped by 10% between March and April 2020. After April, employment numbers in all sectors experienced a steady decline as the financial impact of Covid-19 was felt across most companies’ bottom lines.

Employment in the hospitality and tourism sector started to decline in March and by April 2020, employment levels across all sectors also dropped. Companies in accommodation, food services and tourism activities on average saw a decline in the number of employees of close to 10% in April 2020. By May 2021, the employment level in Kenyan hotels was at 57% of the number of employees in February 2020, when the level was at 100%.

Without international tourists due to travel restrictions the tourism sector mostly catered to domestic activity which was also limited as a result of lockdowns in the country and reduced appetite for luxury spending on non-essential items by most Kenyan families.

According to the Kenya National Bureau of Statistics (KNBS), 1.7 million jobs were lost in the formal sector in 2020. A year later, a May 2021 Federation of Kenyan Employer’s report found that over 5 million people lost their jobs in the informal sector. This growing statistic has been devastating for many households who have seen the primary bread-winner get laid off work.

Salaries

Companies raised average monthly pay by 3.82% to Sh67,490 in the year ended June 2020, a steep drop from the 8.16% raises to Sh65,006 the year before. That was the slowest rise in earnings since 2011 when firms raised average pay by 3.48% and nearly half the average 7.41% in the decade before last year.

Employers warn that it may take years for pay raises to return to pre-pandemic levels, with firms struggling with elevated costs largely due to uncertainties brought about by Covid-19. The Federation of Kenya Employers (FKE) said persisting instability in global supply chains and increasing global oil prices had saddled firms with a high cost of materials and further raised the cost of operation.

A survey, commissioned by the Kenya National Chamber of Commerce and Industry (KNCCI), suggests 67.2% of surveyed traders faced challenges in paying workers at the end of 2020 compared with 35.3% before the pandemic hit. Over 37.9% of small businesses were having trouble retaining workers at the end of 2020 compared with 20.9% at the beginning of the year.

The survey, done in partnership with the Center for International Private Enterprise (CIPE), is based on feedback from 153 businesses with monthly sales of between Sh500,000 and Sh5 million in 40 counties. Small businesses with a turnover of between Ksh500,000 and Sh5 million per month provide the majority of employment opportunities which keeps the cash flowing in all sectors. When these businesses are hurting, the impact is felt in all areas of the economy according to KNCCI president Richard Ngatia.

MSMEs

The MSME sector has been severely impacted by COVID-19 with early containment measures by the Government. Work has become quite difficult for people unable to perform their normal functions while abiding by social distancing and other public health practices. Small retailers who were unable to conduct business without the risk of exposure and infection faced reduced demand for their services and goods, shrinking the industry further. One of the biggest challenges of MSMEs was that most of their processes were manual and that employees were required to appear in person in their areas of work exposing themselves to the risk of covid.

In the wake of increasing financial difficulties faced by MSMEs in accessing credit and keeping business afloat, the Central Bank of Kenya stepped in to provide borrowers with various restructuring options including extensions of the repayment period, a moratorium on principal or interest and waivers on interest or fees. These provided space to borrowers to ride through the pandemic, mitigate job losses and pivot their business models to the new normal.

44% of the 2,739 respondents in a Georgetown University survey reported that someone in their household had lost a job due to the pandemic. Of these, two-thirds reported the loss as temporary, while one-third said the loss was permanent. 86% of the retailers reported that the curfew had affected their source of income because they were forced to close their shops early or open later than normal.

65% of respondents reported that cessation of movement had negatively affected their commercial operations. The impact of the pandemic was felt in households across the country as nearly half of the respondents reported small increases and an additional 9% reported large increases to prices of essential commodities. 38% of retailers reported having taken out formal loans from financial institutions, while 29% accessed informal loans from relatives and friends to deal with the effects of the pandemic. 18% of respondents took out both informal and formal loans with the credit crunch biting most MSMEs. Very few families received any form of relief from the government with measures like tax relief for individuals earning a gross monthly income of up to KSh 24,000, a reduction in personal income tax rate from 30 to 25% and a reduction in the corporate income tax rate from 30 to 25% not impacting most MSMEs.

NGOs, religious organizations, family or friends and private individuals supplemented efforts by the Government to give cash relief bailouts by buying household commodities for affected communities.

Braving the Storm

Kenyan MSMEs showcased their resilience and innovation by making use of digital technology to survive and thrive in the tough business environment caused by the pandemic. MSMEs with higher digital maturity reflected lower levels of negative impact on income. The use of fintech has been key for marketing products and services, development of products and services, procurement, financial management and customer care. The use of tools such as social media, e-commerce platforms and websites have enabled MSMEs to access wider markets.

Covid fatigue has affected many people in Kenya over the last two years with doom and gloom being the only outlook but hope is on the way. The World Bank predicts that the Kenyan economy could grow by 5% by the end of last year. This projection is based on firms boosting industrial production and investments as lockdown measures are lifted, a slight recovery in the services sector due to vaccinations, and adequate crop harvests. Kenyans are resilient people and though knocked down, we are not knocked out. We look forward to a brighter 2022 and hopefully an end to the Covid pandemic.

The post The Effects Of Covid-19 On Employment, Salaries & MSMEs In Kenya appeared first on PesaKit.

Unsurprisingly, we expect mobile money agents to remain operational and continue catering to our needs. The agents are central to our economy and to enabling the nation to turn to cashless transactions, but as consumers what can we do to ensure that agents are also protected?

For the week, East Africa’s largest Mobile Network Operator, Safaricom, has supported the uptake of cashless transactions by waiving charges on person-to-person transfers for transactions worth KSh 1,000 and below for the next three months. While transactions below KSh 100 have enjoyed a similar waiver for a longer period, transactions ranging between Ksh 100 and Ksh 1,000 have attracted a transaction fee ranging between KSh 11 and KSh 15. In talks with the Central Bank of Kenya, this waiver has been targeted to reduce the need for physical cash transfers from one person to another as a means of stemming the spread of COVID-19. Similarly, banks in the Kenyan economy have followed suit in a similar fashion to waive bank to mobile money wallet and vice versa transfer charges.

Nearly all bank accounts in Kenya have deposits of less than KSh 1 million, Central Bank of Kenya revealed that 99.3 percent of bank accounts in Kenya have deposits of less than KSh 1 million. Only 0.7 percent of accounts have deposits of more than KSh 1 million. 97 percent of bank accounts in Kenya have less than KSh 100,000. The CBK data also offers a sneak peek at Kenya’s growing income inequality problem where wealth remains concentrated in the hands of a small segment of the population.

More cash needs to be digitized, especially by low income earners and Kenyans at the bottom of the pyramid, and will likely be done through agents.

“Mobile money agents have 7x more reach than ATMs and 20x more reach than bank branches”

As we appreciate and rely on mobile money agents, the question remains, how can we protect our local agents in these uncertain times? Below I share four ideas on how I believe we can achieve this:

1.Wash your hands thoroughly before giving your agent your physical cash.

While there are several measures recommended by the World Health Organization in protecting yourself from COVID-19 and curbing the spread to other people. One of the most important one is regular and safe hand hygiene. Below is a step-by-step guide to good hand-washing practices:

i. The process should take between 20 to 30 seconds.

ii. First, wet your hand in their entirety with water.

iii. Apply soap and ensure the hands are entirely covered.

iv. Rub your palms thoroughly together.

v. Put your right palm over your left hands, interlace the fingers taking time on each finger. Do the same with the left palm over your right hand.

vi. Interlace your fingers with palm to palm.

vii. Put the back of your fingers facing the opposing palm, and don’t forget the nails too.

viii. Use rotational rubbing for both thumbs.

ix. Rotational rubbing, backwards and forwards with clasped fingers of right hand in left palm and vice versa.

x. Rinse your hands thoroughly with water.

xi. Once dry, your hands are safe.

2.Keep safe distance as your agent caters to your deposit or withdrawal needs.

Maintain a reasonable distance from your agent by increasing the physical space. Staying at least six feet away from your agent lessens your chances of catching or spreading COVID-19. We all are working our best to ensure that we are adequately prepared to end this pandemic, so maintain your social distance at all times.

3.Don’t touch the agent’s booth, wood frame or metal bars.

More and more people are staying indoors to avoid contact with either people or surfaces potentially infected by COVID-19. But since we have established that we need to visit our local agents to get access to digital finance, avoid at all cost touching the agent’s booth, wood frame, or metal bars. There is a good reason for this, a study has shown that COVID-19 can last on copper for up to four hours, on cardboard for up to twenty-four hours, and on steel and plastic for up to seventy-two hours. Clearly, touching any surface unnecessarily should be avoided at all cost.

4.Don’t take longer than necessary at the agent shop.

Avoiding crowds is a sure way to maintain social distancing. As different people also rely on your preferred agent for deposit and withdrawal needs, taking long periods at your agent’s shop will only lead to more people crowding at that location. Once the agent has completed your transaction and now that you are well-equipped with digital finance, go home and order for your groceries from the comfort of your home.

Let us follow the simple guidelines as this will aid in stemming the spread of COVID-19 and we will for sure win the fight together.

Paul Muriithi — Chief Information Officer at PesaKit.

The post How do we protect mobile money agents from COVID-19 as we turn to them for digital finance? appeared first on PesaKit.

Mobile money agents provide an essential service

Mobile money agents have been instrumental in enabling populations to convert physical money to digital value particularly in emerging markets. For more than a decade, agents have been at the center of mobile money services onboarding, training, and supporting end consumers on a daily basis. Agents are the face of mobile money services, and as such, they are the first point of contact between providers and the end consumers. Resultantly, more people have been included in the digital financial economy improving livelihoods and catalyzing entrepreneurship for groups that have otherwise been excluded. The GSMA reports that with more than one billion mobile money accounts globally, more women are accessing and using financial services, low-income households are accessing essential utility services and payment remittances, and groups such as smallholder farmers are getting paid more safely, quickly, and conveniently.

For many governments, the effectiveness of agents is key to undertaking measures to support the populations through cash payments and for the populations to turn to digital finance. Governments across emerging markets have identified CICO agents as essential service providers increasing the daily cash limits to enable high-value transactions as a means of supporting the uptake of digital finance as witnessed in Kenya.

But mobile money agents are vulnerable to infection and unwittingly spreading the virus

The World Bank reports that 66% of adults in Sub-Saharan Africa do not have access to traditional financial services such as a bank account. Consequently, a large section of the population rely on the services of mobile money agents for CICO needs, more so, as people turn to digital finance. Even though the importance of agents has categorically been felt across the globe, with the current crisis, Mobile Network Operators (MNOs) and governments have done little to educate them on best practices on handling physical money, hygiene, and social distancing at the shops. Agents are at a higher risk of contracting COVID-19 due to their very nature of physically handling money which essentially brings them into contact with banknotes that have been potentially handled by thousands of people, some of whom may have the virus without their knowledge. The World Health Organization has flagged cash transfers from one person to another as one of the ways that COVID-19 could easily spread rapidly.

“The importance of agents in emerging markets has also meant that with the spread of COVID-19, their services thrust them to become frontline workers as governments seek mechanisms to stem the spread of the virus.”

While agents shops do present a solution to supporting government initiatives such as the call by the Kenyan Government to turn to digital finance as a mechanism to curb the spread of COVID-19, they may also pose a potential danger to further worsening the crisis due to the flow of physical money from one person to another.

Our Responses to COVID-19

PesaKit recognizes the fundamental importance of mobile money agents to the economy and the livelihoods of the population in Kenya. The continuity of mobile money agency businesses, not only means continued generation of income for the more than 200,000 agents in Kenya, but also a means through which the Kenyan economy will recover once the crisis has passed.

In the past month, Kenyan agent businesses have adversely felt the impacts of COVID-19 with a majority of our agents reporting in a recent survey a 70% decrease in revenue, decreased footfall, and increased challenges in managing liquidity at their shops. Agents feel the biggest risk they face is getting infected with COVID-19 even as they incur costs to put in safety measures best as they can.

As the Kenyan society continually adapts to the rising COVID-19 numbers, agents have been forced to close their shops earlier than usual to beat the 7 pm to 5 am curfew and they have had to adapt to reduced banking hours affecting their income drastically, especially in the case of urban agents. If the situation continues as is, the agents we surveyed fear having to go out of business as the lockdown will become untenable for their shops.

As a means to support agent businesses and ensure that they are well prepared to protect themselves and their customers from the spread of the virus, we have come up with the following responses:

COVID-19 Safety & Misinformation Campaign

According to the Kenyan government through the Ministry of Health, Kenya has 582 confirmed COVID-19 cases and 26 fatalities as of May 06, 2020. While the government has taken initiatives such as the 7 pm-5 am curfew and the lockdown of high-risk regions such as the Nairobi Metropolitan area to stem the spread of the virus, mobile money agents remain at risk of infection as they continually serve millions of Kenyans seeking to cash in or cash out at their shops.

PesaKit Safety Campaign educates mobile money agents on best practices at their shop to prevent the spread of COVID-19 while combating misinformation through the following themes:

1. Best hygiene practices
2. Best practices in handling physical cash
3. Best practices in hand washing
4. Social distancing
5. Symptoms
6. Safety and prevention

By providing information and preparation, the PesaKit Safety Campaign seeks to support mobile money agents’ business continuity, prevent the spread of COVID-19 at an agent location, and ensure that Kenyans continually access digital finance at safe and secure locations.

PesaKit Float Exchange

Mobile money agents frequently visit bank outlets to purchase float and rebalance liquidity at their shops. With the spread of COVID-19, reduced banking hours, and the need to maintain social distance to curb the spread of the virus, agents are unable to maintain efficiency in managing their till and effectively losing valuable customers in a time when CICO transactions have drastically declined.

PesaKit Float Exchange solves this problem by enabling M-Pesa agents to access e-float through digitized PesaKit agents in select towns across Kenya. An M-Pesa agent registers with PesaKit, provides their agency details, and PesaKit loads the agent’s till whenever requested. Through our digitized agents, we are able to securely and remotely enable the rebalancing of liquidity at an agent’s shop without the need to go to the bank.

PesaKit Float Exchange is a free, secure, time-saving, and affordable liquidity rebalancing mechanism helping agents meet their customers’ CICO needs while curbing the spread of COVID-19.

COVID-19 Insurance Cover

While mobile money agents may have not yet have come into contact with COVID-19 at the moment, each day the number of cases in Kenya rises thereby increasing their risk of infection particularly those serving areas deemed as epicenters, such as Nairobi. A high number of agents do not hold a health insurance policy to act as a safety net in the case they are quarantined, hospitalized, or incapacitated from opening their shops, on which their livelihoods depend.

PesaKit COVID-19 insurance cover is a 12-month hospitalization insurance cover that provides agents with an income safety net whilst testing positive, quarantining, or being admitted to a hospital due to COVID-19. Our agents can access the health insurance policies for as low as Ksh 1,000 (US$10) per annum, protecting themselves and their loved ones.

AtPesaKit, we are continually innovating solutions to support and empower mobile money agents during the crisis to cope and ensure their businesses stay open, such that our agents are well-prepared for any eventualities, and that our communities are able to access essential CICO services at safe locations.

During the pandemic and beyond, mobile money agents will continue to be hubs for essential and value-added services and Pesakit will be there to bolster their survival and growth.

Follow our developments by visiting our COVID-19 information website at covid19.pesakit.co.ke

The post PesaKit insights and responses to COVID-19 appeared first on PesaKit.

COVID-19 is driving a major shift in customer behaviours in Africa as in the rest of the World — with a rapid increase in the use of digital payment models, and online product and service channels. It has also shifted how businesses operate, with many of them accelerating investments in digital channels and related enablers in order to meet customer needs.

Meet Grace

Grace has been a loyal PesaKit customer for over a year. Like many of our customers, Grace experienced ~50% decline in her agency business due to the curfew, lock down and other losses associated with Covid-19 between April and June 2020.

Mobile money agents such as Grace represent the physical backbone and face of the mobile money industry. To ensure that they recover in the post-COVID era many factors need to fall into place. Insufficient consumer protection, lack of financial and digital literacy, unequal access to digital infrastructure, and data biases need to be curbed to attain an inclusive recovery. Therefore, it is of utmost importance that we support our customers in minimizing the negative economic impact and emerge stronger from this pandemic.

Our COVID-19 Response for mobile money agents

We stepped up our efforts to help our customers protect themselves and navigate this difficult period in ways that secures their income, boosts their financial resilience and helps them sustain their businesses.

Our responses included:

1. A Safety & Anti-misinformation Campaign
2. COVID-19 Hospital Cash Insurance
3. Float Exchange

To learn more about PesaKit’s Covid-19 responses visit our COVID-19 subsite covid-19.pesakit.co.ke

The PesaKit Strategy

The COVID-19 pandemic prompted us to accelerate our product roadmap which aims to serve mobile money agents and transform last mile digital commerce. Our target was to become a digital-first and data driven business within 6 months, and we achieved it.

Mobile money is the most popular financial service in Sub Saharan Africa. In Kenya, the mobile money transaction volume constitutes nearly 50% of our GDP. As the uptake of mobile money services and e-commerce continues to grow, the expansion and evolution of the agent network becomes all the more critical to ensuring high quality services. Winning and retaining the trust of customers, including those who are low income earners or new to the technology is central to the success of all stakeholders.

There is a mobile money agent for approximately every 231 people in Kenya, a country of ~ 12 million households. These agents are able to reach large volumes of the population via a real human touchpoint, at a scale no other organizations can compete with. However, customer expectations are evolving regularly. Instant gratification has become the norm due to enhanced internet penetration and customers now expect companies to anticipate their needs.

Unfortunately, individual agents like Grace often struggle to adequately meet customer demands for withdrawals or deposits due to lack of cash on hand and/or e-float. As such, they miss opportunities to earn commissions and to serve their customers.

At PesaKit, our mission is to empower Grace and other mobile money agents throughout Africa and the communities they serve to grow and prosper. The PesaKit platform therefore equips agents with the right financial tools, technology and data insights required to rebuild their businesses and thrive in this ‘new normal’.

We focus our efforts on improving the financial health of agents and customers they serve thereby fostering financial and digital inclusion.

The New PesaKit App

The recently launched PesaKit app will help over 200,000 mobile money agents in Kenya access digital financial services and unlock access for millions of customers that are currently underserved and unserved.

The app increases the number and variety of financial services that Kenyans living in peri-urban and rural areas can access via their local trusted agents. We enable mobile money agents to grow their business, better manage their liquidity, increase revenue, and with time improve their overall financial health.

Our supply-side intelligent platform creates new markets for financial and ecommerce service providers. It enables them to expand their reach, consumer base and expand last mile distribution through our API.

Through our platform we continue to support Grace and other micro entrepreneurs, thus making them reliable and efficient last-mile access points for financial services and digital commerce in Africa.

With the launch of our new app, we are getting closer to revolutionizing last-mile access to financial services and digital commerce for everyone, everywhere through mobile money agents.

And to all fellow entrepreneurs; Be nimble, keep innovating and trust the process. ‘New normal’, new rules?

To learn more about PesaKit, visit https://www.pesakit.co.kehttps://cdn.embedly.com/widgets/media.html?src=https%3A%2F%2Fwww.youtube.com%2Fembed%2FzS4wRHzercI%3Ffeature%3Doembed&display_name=YouTube&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DzS4wRHzercI&image=https%3A%2F%2Fi.ytimg.com%2Fvi%2FzS4wRHzercI%2Fhqdefault.jpg&key=a19fcc184b9711e1b4764040d3dc5c07&type=text%2Fhtml&schema=youtubeAn introduction bout the PesaKit Platform

The post How do we succeed in the ‘new normal’? appeared first on PesaKit.