The roughly seven million non-agricultural MSMEs in Kenya are a critical part of the national economy, employing some 15 million people and accounting for around 30% of the Kenyan GDP.1 Many stakeholders are rightfully concerned about this segment given the current economic uncertainty wrought by the coronavirus pandemic, as these MSMEs are largely informal (80% are unlicensed), small (92% are <10 employees) and young (66% in our study have been in business for less than 2 years), making them especially vulnerable and more difficult to support.
One potential bright spot is MSME’s increasing use of digital platforms to facilitate business. E-commerce platforms such as Jumia or Jiji (née OLX) often steal the headlines, but almost all small businesses in Kenya are using digital platforms of some kind.
In an analysis for the Mastercard Foundation’s FiDA Partnership, Caribou Data found that 92% of micro-entrepreneurs in Kenya used social or messaging apps such as Facebook, WhatsApp, YouTube, or Instagram to enable business functions. Not only is use of digital channels prevalent, but it also corresponds with healthier businesses longer-term: those in our study who used the highest number of digital platforms were twice as likely to report their business as being in good health.
This “social commerce” takes advantage of the built-in social networks and communications capability inherent in these consumer apps, and appropriates it for commercial use. Micro-entrepreneurs advertise their products, coordinate logistics, communicate with customers, learn new skills, and more through social platforms. Because these platforms are free to use and fairly flexible, micro-entrepreneurs can adapt them to fit their needs, without worrying about fees, commissions, or formal requirements such as having a business license.
Unsurprisingly, the two most popular platforms in general, Facebook and WhatsApp, are also the most likely to be used for business, and they are used across multiple business functions, including advertising, communications, and training/inspiration. While Facebook has continued to add functionality that helps all kinds of organizations engage with audiences over the years, WhatsApp has remained purposefully streamlined and consumer-focused. WhatsApp also requires more ingenuity by micro-entrepreneurs to unlock commercial use cases. For example, many entrepreneurs take advantage of their status photo to advertise products, and they use WhatsApp groups to coordinate joint purchases.
Of course, “social commerce” is not a single model but a range of digital tools and use cases that can be combined in different configurations of varying complexity. Everyone uses WhatsApp to communicate with customers, but that, in and of itself, isn’t remarkable given that everyone uses WhatsApp anyway. More advanced micro-entrepreneurs might build up storefronts in Instagram and Facebook with video depictions and reviews of their products, set up a dedicated WhatsApp business line for communications, and/or use a ride-sharing app for delivery.
While many MSMEs are accustomed to using social and messaging apps in their day-to-day life, appropriating these apps for business use requires additional knowledge and skills, especially for those who are less digitally savvy. Not only do MSMEs need digital skills to navigate the array of applications on offer, they also need a broader set of soft skills, general financial management, and business planning. It’s this blend of “Skills for a Digital Age” that gives MSMEs a deeper understanding of how to navigate the risks and opportunities of social commerce, while creating a sustainable business in the process.
To help improve the capacity of MSMEs to leverage these tools, training is key. Social media platforms already offer a range of online and offline (pre-COVID) upskilling opportunities. These platform-led upskilling initiatives are increasingly important as COVID-19 pushes more MSMEs onto digital, particularly social, platforms to keep their businesses alive. It’s crucial that training across these platforms doesn’t just focus on upskilling the more advanced micro-entrepreneurs who are already maximizing the potential of these platforms, particularly given a majority of young MSEs whose businesses are at their most nascent point. Training opportunities also need to account for those who have lower digital access and understanding of how to navigate the complexity of social commerce.
The accessibility of social media and communication apps allows even the smallest and most informal businesses to take advantage of the reach and network effects afforded by digital platforms. There is great potential for building capacity among the most vulnerable MSMEs, but that is contingent on ensuring that those micro-entrepreneurs have the technical and soft skills required to make the most productive use of these tools. Otherwise, the benefits of social commerce will flow primarily to those micro-entrepreneurs with the highest levels of education and wealth, exacerbating inequalities instead of closing them.