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Thinking out of the box to spur growth

By Mohamed Guleid | Jul 13th 2015 | 4 min read

Imagine you were an investor with some extra cash and lots of (good) ideas. Of course, one of them would be to put it in a bank to earn interest. Another would be to establish new businesses and thereby generate more money. Let us assume you go for the second option; Where would you go?

An ideal place would be the gleaming shopping malls coming up in Nairobi despite the high rent costs. Then maybe Mombasa or Kisumu or Eldoret.

Far-flung regions like North Eastern would most certainly be areas of last resort. The above analogy represents the sad predicament facing North Eastern. Often in a boardroom, the Northern region comes as an afterthought. In most cases, NEP has to make do with a raw deal. Yet it is foolhardy to imagine that the rest of Kenya can move on and leave the Northern Frontier behind.

There is proven evidence that lack of infrastructure, insecurity, the vastness of the area and the widespread sense of helplessness feeds off the systemic marginalisation of the region. And it is not only Government discrimination we are talking about, even the corporate world takes the region as a second option. Let us take banking, for example. The Government has interests in at least four of the major banks, yet it was not until recently that banks made forays into the Northern region.

Less than a decade ago, only 30 per cent of Kenyans had access to financial services. According to the Kenya National Bureau of Statistics, nearly half of Kenyans had access to banking services as at 2014, most of these in parts outside North Eastern Kenya.

Though such innovations like mobile banking, agency banking and an increased branch footprint which now stands at around 300 is good news, in the Northern region it is not hard to find a bank that is 300km away from the next branch. There are about 50 banks' branches in five Northern Kenya counties including Isiolo, Marsabit, Wajir, Garissa and Mandera, for example. And this for an area with land mass nearly half the size of Kenya.

Most of these are in the headquarters. No doubt, devolution has proved to be a catalyst of change in the last two years in the former forgotten lands, yet a lot still remains undone. Though most commerce happens in the towns, for economic growth to be spread around the hinterland, efforts must be made to have them connected to the monetary network.

Banks play a great role in this. Government plays a greater role. Cash transfers like those carried out by Equity Bank and the UK government to the 10 per cent of the poorest in these areas is encouraging. A lot more needs to be done.

Nationally, by lending to small-scale traders, banks spurred growth especially in the 10 years of former President Mwai Kibaki. A caution is needed here; it is never a case of one size fits all. The success of the banks and by the extension the people in the Northern Frontier zones will not follow the same script as the rest of the now banked zones. The former NEP faces challenges that are unique to the region. That therefore calls for solutions unique to the problem.

In other words, it is not a question of inventing the wheel, but rather of modifying the wheel. The main activity in this area is predominantly livestock and agricultural activity. In fact, most county governments' development blueprints are anchored on boosting agriculture and livestock rearing.

There is work in progress on how county governments (in partnership with private entrepreneurs and the banks) can spearhead a programme that makes the counties grow their volume of trade.

After a half a century of neglect, it is easy to understand why there is so much hype in the North Eastern region.

We are on the cusp of momentous change in the Northern region. That change will be accelerated, I believe, when the people get easy access to cash. But we have to surmount three daunting challenges: insecurity and cattle rustling, a hostile weather and poor infrastructure and to a large extent, religious beliefs.

A partnership between private investors and the county governments has been mooted to develop the infrastructure. Some county governments are even willing to give legal guarantees to the investors willing to move things.

County governments are coming together to create an atmosphere where shared resources such as pasture and water can be managed and limit the conflicts it triggers. Also, the governments will create jobs that make fighting unnecessary. Beyond that, the governments are exploring ways of addressing the land tenure system. Most of the land across the region is communal and no bank can lend money to a community?

A number of conventional banks are quickly adapting Islamic banking, in line with the religious beliefs of the locals. Yet the biggest of all the challenges is that the predominant economic activity is dealing with perishable goods. Most financial institutions shy away from lending to people engaged in this type of economic activity.

So if I had money somewhere, I would set up an investment that makes it possible to sell these products in a better form to withstand the vagaries of weather. What about you?

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