Informal economy: How Kenyan Youth Are Shaping the Economy Despite Challenges?

Although national figures indicate widespread economic growth in Kenya from 2015 to 2019, the adverse effects of the COVID-19 pandemic have not spared the country, with GDP growth projections around 5.2%. Some reports suggest that the proportion of people living in extreme poverty has decreased, from 37% in 2015 to 34% in 2019. However, this statistic masks a darker reality experienced by many young Kenyans.

In fact, the total number of people living below the poverty line has increased, from 17.8 million in 2015 to 18.9 million in 2021, representing an increase of 1.1 million people falling into poverty in just six years.

Faced with financial insecurity, an entire generation has had to mobilize to support their families and maintain their standard of living. To date, nearly 47% of young people aged 15 to 24 report having to work to cover or supplement their expenses. These young people have had to adapt and find solutions to economic instability, often within the informal economy.

According to the World Bank, nearly one million people are expected to enter the job market in Kenya next year. However, a study by Shujaaz Inc reveals that only 5% of young people aged 15 to 24 find work in the formal sector, while 95% are integrated into the country’s dynamic informal economy. For this generation, the informal has become the new formal.

About 11.6 million young Kenyans, divided into four categories—from occasional workers to full-time entrepreneurs—inject $539 million into the economy each month. However, they feel a lack of support in their efforts. Minor interventions, such as inspiration from successful role models, peer training, or access to micro-loans, could help them become full-time entrepreneurs. This shift to stable entrepreneurship would have positive repercussions, including increased use of financial services and a significant social contribution in their communities.

Young “hustlas” in survival mode and startup are often just a few steps away from becoming full-time and prosperous entrepreneurs with a regular income. Small interventions—such as listening to stories of inspiring models or advice, participating in peer-to-peer training, or accessing a microcredit—can provide the boost needed to commit full-time to their activities.

Research by Shujaaz Inc shows that full-time entrepreneurs and “startup hustlas” are more likely on average to use financial services, resort to contraception, and vote than their peers. Those earning more than 12,000 KES ($103) per month also create job and income opportunities for members of their community.

Currently, this generation keeps Kenya afloat. But with a few targeted interventions, it could propel Kenya towards a better future.

© Source: Kenya Youth Trend