4 Ways Platforms are Driving Financial and Economic Inclusion in Kenya

Jessica Osborn

There are hundreds of platforms operating across Africa. Some, like Jumia and OLX, connect providers and buyers of goods, others like Lynk and Hello Tractor connect providers and buyers of local services. There are platforms for online workers, such as KuHustle and Upwork, and there are platforms in the business of attention, like Facebook and Bonga. While at first glance they may seem somewhat unrelated to each other and to financial inclusion, a closer look reveals just how integral they are in changing the prospects for economic and financial inclusion for workers and small businesses.

In May 2019 the FiDA Partnership took a group from the Mastercard Foundation, our Portfolio Partners and companies from across Africa, to Kenya to meet with 15 platforms to learn more, first hand. Four key lessons stood out to us, with implications for platforms themselves as well as for organizations tackling financial inclusion.  

Platforms change opportunities for finding work and growing small businesses

Digital platforms are reducing inefficiency, creating work opportunities and increasing incomes, all while supporting their own business goals

We came across numerous examples of how platforms are improving livelihoods. Twiga Foods told us how their technology has helped farmers reduce post-harvest losses from 40% to just 5%, helping them to guarantee prices to farmers. Lynk Pros – Kenyan artisans who promote their goods and services on the platform – have cumulatively earned USD $2.5m working with Lynk. 1,000 of these Pros get jobs via the platform on a monthly basis. One of the Pros we met, Harrisson, told us how he gets 50% of his work through Lynk and it has helped him transition from one-off jobs to managing larger construction projects. Drivers delivering goods to shops ordering FMCG products through Sokowatch have increased their incomes from USD$80 to USD$250 per month, while the platform is helping store owners reduce the cost of stock by ~15%. Finally, Safeboda drivers’ incomes increased by 50% by working on the platform in Uganda. The company just set up shop in Kenya.

The group at a Sokowatch shop in Nairobi during the Kenya Live Learning

Jumia told us about their three pronged approach to job creation – directly through their 5,000+ employees across the continent, indirectly through vendors selling across their platform, and induced through additional economic activity stimulated by commerce across the platform. What we heard certainly reflects BCG’s recent prediction that 3 million new jobs will be created through e-commerce in Africa over the next few years.

The group visiting Jumia. One of their vendors, Nowri, told us how he has grown his business from selling a small stock of phone accessories to selling 20-30 phones per day and employing five people by selling on Jumia

Platforms increase work opportunity, but is supply matching demand?

The flexibility platforms afford are a great fit for a country where side hustles are ingrained into the working culture. However, for many workers, finding jobs across multiple platforms is in fact the only option because many Kenyan platforms lack customer demand to meet supply.  This fragmentation can be hard to manage. There are 18 ride-hailing companies in Kenya and we met drivers actively accepting jobs on four of them simultaneously in order to earn enough income. Ajira, a government-run effort to connect youth with digital jobs (online work) and digitally-enabled work (e-commerce, domestic service platforms, etc), warned that the importance of increasing jobs supply will only increase as more young people enter the workforce – 1 million youth enter the job market annually. Jobs site Kuhustle said they see this struggle play out on their platform, which has over 47,000 workers but only 1,000 jobs registered.

Newly registered drivers prepare for training by Safeboda, one of 18 ride-hailing companies competing in Kenya

Workers lack incentives to formalize

83% of Kenya’s population works informally today. By digitizing and standardizing transactions, platforms increase visibility into worker income. This raises questions about the role of digital marketplaces in enabling or ensuring formalization, for instance by insisting on business registration or executing tax deductions. The regulatory perspective on this remains unclear for now, but the topic was front and center for several platform leaders we met in Kenya. Given that formalization presents very few advantages – and several disadvantages – to small companies and entrepreneurs, it could actually damage platforms’ businesses. Ajira is trying to tackle this head on by lobbying for a blanket “Ajira Tax” for their registered online workers, to streamline the process and financial burden.

Platforms address skills and literacy gaps

Jane del Ser from FIBR speaking to a Lynk Pro about his experience using the platform

Training and upskilling workers is crucial to success, for everyone

Our visits with platforms and our ongoing research has made it clear that platforms recognise the importance of continuous support of their users through upskilling and reskilling to the success of themselves and their users. Training appears to fall into three broad categories: soft skills, technical skills and digital literacy skills, with intense (often in-person) training done during onboarding, typically followed up by other digital or non-digital upskilling nudges.

Safeboda puts their motorbike drivers through two days of training, one of which is focused purely on their core product offering of ride-hailing, and how to ensure safety on the bike. This is followed by a day learning soft skills, such as customer relations, and digital literacy skills such as how to navigate the Safeboda app. This all cumulates in a mock ride, where a Safeboda employee acts as a potential customer and rates the customer service provided throughout the journey. Similarly Sendy, a logistics and delivery platform, is setting up a Partner Training Center for their drivers to take courses on a variety of topics that will help them perform better on the platform as well as help them in other areas of their lives.

Digital literacy training is perhaps the biggest challenge. When we visited an Ajira hub, a group of students were being trained on how to open Gmail and social media accounts. Ajira has identified training as a key pillar of their digital jobs initiative, and emphasized how basic the entry-level digital literacy training needs to be for many Kenyan youth.

Ajira students receiving training on basic digital literacy, such as opening Gmail accounts

Some platforms are also upskilling customers

While most platform training focuses on those that deliver, rather than receive, a service, some are recognising that their customers need upskilling too. Sendy not only trains their drivers, they also offer courses on pricing and marketing to social commerce merchants who use Sendy to deliver their products to buyers. Digifarm delivers training to farmers through an interactive SMS chatbot, affectionately called ‘Mama Arifu’ by power users, and partly credits this for reducing their non-performing loans from 35% to 13%. Sokowatch leverages their drivers to help train shop owners on digital literacy, inventory management and business performance tracking.

This year we at the FiDA Partnership are delving deeper into this topic of upskilling by conducting research to understand how and why platforms deliver training, and the challenges they face in doing this.

African digital platforms are not just about the tech

Platforms start technology-focused, but often end up with a heavy, last-mile physical presence

It seems that many platforms started with a pure technology play, but had to pivot to a more vertically integrated, asset-heavy model when the lack of suitable infrastructure to support their businesses became apparent. Sokowatch, Twiga and Jumia run their own fleets of delivery drivers owing to the lack of third-party logistics providers and Lynk is entering into vocational training. While technology is the driver of platformization, in Africa, filling infrastructure gaps becomes key to many platform business models and important differentiators.  

Tech and Touch: the blurring of online and offline worlds

Despite the increased digitization of almost every sector of the economy, there is no bright line between the online and offline worlds. What our trip to Kenya really enforced is this blend of tech and touch when looking at platform use.

For Twiga Foods, touch is vital for both farmers and vendors who rely on Twiga sales agents to sell their produce or buy stock through the Twiga platform. The Twiga app is an internal tool for the field team and although they plan to roll out an e-commerce app for vendors, currently neither farmers nor vendors have any interaction with Twiga’s platform apart from receiving SMS notifications of transactions and payments. Sokowatch, despite having strong app uptake among shop owners, still see immense value in the interaction between them and the Sokowatch delivery agents, to the extent that they want to ensure that this offline interaction occurs weekly.

For many, touch is also integral for upskilling; while digital tools are used to send tips, offline training still plays an important role. For example, Digifarm relies heavily on field staff for uptake and usage of the platform, and Jumia have introduced a catalogue system enabling less digitally savvy consumers to buy offline through an agent.

And while cash may still be king for some, even in Kenya – the home of M-Pesa – we saw touch playing a role in moving transactions from cash to digital. Jumia is probably the best example: they promote their cash-on-delivery option, but use delivery agents to promote their digital wallet with customers upon delivery.

Financial inclusion is good for platform business

Layered financial services are a leading value proposition for platform users

One of the key value propositions platforms can offer users is access to financial services. Rarely do you find a platform offering one product or service, but often a bundle of technical and financial offerings.

Digifarm offers smallholder farmers discounted quality inputs, a savings and loan service, an open marketplace for agricultural products and an adaptive learning system. The smallholder farmers then have an incentive to continue working on the Digifarm platform. Sokowatch offers a revolving credit product which has increased user loyalty. It drives 3x more orders on the platform so beyond loyalty, it also increases revenue. Similarly, Twiga Food’s in-kind loan products for vendors has resulted in a 30% increase in sales associated with them. Lynk shared that they are trialling a loan product to determine if it drives higher platform productivity for Pros. Jumia’s loans offered to vendors help generate more sales while Sendy’s savings product for its drivers is important for driver loyalty.

Safeboda, a traditional ride-hailing service on first glance, is morphing into a super-app, with fintech services becoming an increasingly important part of their business. From their pre-paid Safeboda wallet to loan packages for drivers, in-app savings and freemium life insurance, the company appears to be going down the route of Indonesia’s super app, Go-Jek, which is no surprise given Go-Jek’s recent investment in Safeboda.

FiDA Partnership has researched how financial services are good for platform users and platforms themselves.

Partnerships are a challenge

Platforms are offering financial services without partnerships with financial services providers. For instance Sokowatch and Twiga Food’s credit products are actually delayed payments arrangements rather than loan products. Sendy explained how finding potential partners for financial services offerings is not difficult, but negotiating fair terms is a challenge. Platforms offer large de-risked user bases to providers, who are reluctant to honor this with favorable terms. This is something we hear again and again, and have written about in more depth before.

One of our biggest takeaways from this trip is how important it is to go in-market to understand the trends and their implications on financial and economic inclusion. It was invaluable for us to be able to speak directly with 15 platforms operating at the frontier of financial and economic inclusion in Africa, and getting their first hand take on how platformization is shaping the digital economy in the markets in which we work. We’ve explored other markets before for lessons African players can use, but having a deep understanding of our own context is necessary to fully utilize lessons learned outside of the continent. We’re excited to continue exploration at the intersection of platforms, financial inclusion, and meaningful work. We suspect markets such as Indonesia and India have a lot to teach us. Stay tuned.