Why Digital Inclusion Matters Now, More than Ever
Authored by: Enock Wangila — Partnership Engagement Analyst, Youth Impact Labs
State of the Digital economy
Digitization is growing rapidly around the world as technology adoption continues to disrupt industries and economies. The World Economic Forum estimates that by 2022, 60% of global GDP will be digitized. As a result of the COVID-19 pandemic, it is expected that this digital transformation will accelerate rapidly. Already, consumers across Europe, Asia, and the Americas, have all expressed an intent to shop more online though in varying degrees. Locally, online retail sales have skyrocketed and internet usage has soared′.
Kenya has long been a frontier for technology innovation in Sub-Saharan Africa. The transformation in the country’s financial sector best depicts this. A mix of private sector innovation and a favorable policy environment saw Kenya pioneer mobile money that has now more than tripled the rate of formal financial inclusion in just over a decade. Complete financial exclusion has fallen three-folds. This transformation in the rate of financial inclusion points to the promise that digital innovation holds for the economy.
Kenya has made great strides in improving digital connectivity as evidenced by high mobile and internet penetration. Mobile penetration currently stands at ninety-one percent of the population while internet penetration is at eighty-four percent, mostly mobile. The increased connectivity has been one of the critical drivers in growing the ecommerce space and driving the adoption of innovative solutions in the transport and logistics sector in Kenya.
Currently, mobile money payments account for the largest share of e-commerce transaction payments6. The COVID-19 pandemic has also reaffirmed the value of digital connectivity and innovation as well, evidenced by the role played by delivery service platforms. These platforms have well-served consumer needs and helped many abide by health regulation by providing relatively safer access to markets, essential products and services.
The Digital Divide
Connectivity in Kenya is unevenly spread. There exists large disparities between rural and urban areas. Given that Kenya’s population is primarily rural, roughly 70% of the population, this digital divide threatens to exclude a majority of the population from reaping from the promise of a digitized economy. Disparities exist in internet penetration, device ownership, and in digital literacy and are witnessed in the disparities between the number of rural and urban-focused digital platforms in e-commerce and logistics and the prevalent use of USSD for ag-tech based innovations targeted at a large base of the rural population: smallholder farmers.
Internet penetration in rural areas in Kenya is half the rate of internet penetration in urban areas. Thirty-four percent of the rural population have access to the internet relative to sixty-eight percent of the urban population7. This means that more than two-thirds of the rural population has almost no avenue to participate in the digital economy as online gig workers.
Internet access in Kenya is primarily through mobile devices. Mobile internet access accounts for ninety-nine percent of the entire internet penetration in Kenya6. Fixed broadband internet, which provides access to faster internet speeds and critical for the growth of the digital economy, only accounts for about 2%. This variance is even wider in rural areas as the necessary infrastructure has not been laid out by service providers.
Ownership of digital devices is critical to participation in the digital economy. While mobile penetration is high in Kenya, there are stark discrepancies between urban and rural areas in the ownership of smartphones, tablets, laptops and computer devices. Only five percent of the rural population own a tablet, laptop or computer relative to twenty-two percent of the urban population7. Given that upskilling of digital skills and the uptake of highly sophisticated online professional work is heavily dependent on the availability of these devices, people living in rural areas are at a significant disadvantage from fully benefitting from digital work opportunities in the digital economy.
Ownership of digital devices has a close correlation to the digital literacy of a population which in turn affects participation in the digital economy. In rural Kenya, digital literacy is low. Further, the opportunities to upskill even through publicly available digital resources are constrained by the low ownership of computers, laptops or availability of sufficient, well equipped, digital public libraries.
Why Inclusion Matters?
Technology is cutting across every industry and driving digital transformation. Consequently, the future of work is changing. The skills needed for work in the future will differ starkly to the skills needed in the past. Digital skills will become a basic skill requirement and gig work will become the new normal. The COVID-19 pandemic will only accelerate this shift as people, organizations and countries alike appreciate the role of technology in building resilience to shocks more so in people’s ability to work, run businesses and learn. As this transformation happens, without an inclusion lens, we risk leaving behind a significant section of the population and locking them out from the gains of a digitized economy.
In Kenya, limited employment opportunities in the formal sector and the need for independent and flexible work is driving up the gig economy. The informal sector accounts for roughly 83% of the country’s labor force and makes up about 90% of all new jobs created annually. Unemployment, which is especially high amongst young people — 39%, will be exacerbated by COVID-19, pushing a larger proportion of people to explore non-traditional forms of employment. Already, some estimates put the number of jobs lost in Kenya due to COVID-19 at over 1 million. Mercy Corps’ report on gig work in Kenya, Towards a Digital Workforce: Understanding the Building Blocks of Kenya’s Gig Economy, estimates that online gig work in Kenya will grow by 33% annually over the next 5 years. The digital economy has the potential to formalize informal sectors, streamline value chains and provide greater value to all players in the value chain, more so smallholder farmers. As evidenced by Twiga Foods, an innovative supply chain platform, digital innovation can increase transparency & efficiency along the value chain while proving higher prices for smallholders and traceable, quality and affordable products for consumers.
Need for Action
To build an inclusive digital economy, all stakeholders need to pull in to achieve this. However, the government has an expanded responsibility in building up the necessary infrastructure and policy environment for the digital economy to thrive. Kenya has already launched a number of policy initiatives to position her as a digital leader in the region. These include the: Digital Economy Blueprint, Digital Literacy Program, the National Broadband Strategy and the National ICT Policy, to name a few. While the objectives of these policy initiatives are noble, more needs to be done to fast track these policies to ensure that the committed resources and policy objectives are duly met.
The government needs to put additional investments in building the infrastructure in rural areas and lowering the cost of digital devices. Great strides are being made with increased investment in expanding the national fiber network as seen through the increased budgetary allocation in 2020. With increased investment and government incentives, increased private sector investments will follow, layering on the de-risked landscape. Additionally, non-governmental organizations need to invest in upskilling the rural population on digital skills and provide pathways to participation in the digital economy.
About Mercy Corps Youth Impact Labs
Catalyzed by funding from Google.org, Mercy Corps’ Youth Impact Labs (YIL) identifies and tests creative, technology-enabled solutions to tackle global youth unemployment, accelerating job creation, so every young person has the opportunity for dignified, purposeful work. In Kenya, YIL focuses on digital marketplaces and platforms that offer services to micro and small businesses; agricultural supply chain management; and digital work.
The program supports these enterprises through financial and technical support, issued in the form of milestone-based grants. Through our post-investment support, on-boarded partners also get access to advisory services to support the development of technology solutions and tailored business support service to actualize scale.