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Workers pile up loans, raid life savings to stay afloat

By Frankline Sunday | July 18th 2020


Jua kali artisan chisels metal sheets in the scorching sun of Kibuye Market, Kisumu county. [Collins Oduor, Standard]

More than a quarter of Kenyans dipped into their savings to meet living expenses as the coronavirus pandemic disrupted economic activities for millions of workers in the country.

This is according to a new study by research firm, GeoPoll, that paints a grim picture of the economic hardships facing workers in both the formal and informal sectors.

“A majority 60 per cent of those who were employed from January to March 2020 say that Covid-19 has stopped them from being able to work,” said the report that surveyed workers in Kenya, Nigeria, South Africa, Mozambique and Cote d’Ivoire.

In Kenya, 60 per cent of workers reported having their jobs disrupted by Covid-19 with 26 per cent saying they had dipped into their savings to cover the shortfall in earnings.

Strapped for cash

Another 36 per cent said they resorted to credit, with mobile loans and digital lending apps gaining popularity among low-income earners strapped for cash.

The study was conducted on a sample of 2,500 randomly selected respondents from the five countries and administered through SMS.

“In addition to the inability for many to work, we found that almost half (49 per cent), stated that their income had ‘decreased a lot’ since Covid-19, and an additional 27 per cent stated that their income had ‘decreased a bit’,” said GeoPoll in the study report.

Majority of those working in farming, informal retail and service sectors reported a decrease in income, while just five per cent reported an increase in incomes during the period under review.

Low-income Kenyans and those working in the informal sector appeared more agile to adjust to the economic disruption from the pandemic, compared to their counterparts in formal employment.

“Income level had a slight impact on likelihood of being able to work, but this varied by country and did not always show a linear trend,” said the study findings.

“For example, in Kenya, those in the lowest income bracket (0 –10,000 shillings per month) were more likely to report they were still able to work than the next income bracket (0 – 20,000 shillings per month).” 

The study, however, indicated high degrees of optimism among workers in the five countries, with half of the respondents saying they believed they have a job to return to once Covid-19 restrictions were lifted and 85 per cent saying they believed the economic disruption was temporary. The study tallies with another survey by the Kenya National Bureau of Statistics (KNBS) released last month that found 61 per cent of individuals reported being out of work due to the virus, an increase from 50 per cent in May. However, of the individuals out of work, 77.8 per cent reported being unsure when they would resume.

“Nationally, 37 per cent of households indicated that they were unable to pay rent for May 2020, while 31.6 per cent reported having paid the rent on time,” said KNBS. 

Only 0.7 per cent of households in rented dwellings had received rent waivers from their landlords and 30 per cent of households did not report having any coping mechanism to counter the effect of Covid-19 on their ability to pay rent.

The new findings underline the financial distress facing millions of households that have been forced to eat into their savings, leaving little to live off on retirement.

According to data from the 2019 FinaAccess report, 53 per cent of Kenyans in the formal sector used mobile money to save, while another 25 per cent cited they had bank savings accounts - with some of this linked to their mobile wallets. 

Covid 19 Time Series


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