As Covid-19 battered their businesses and access to credit that could have cushioned them against a hard fall kept spiralling out of reach, many women in the informal sector in Nairobi refused to give up.
Some 12 per cent of them were forced to take credit from shylocks at exorbitant rates. Odds were stacked against them and societal responsibilities increased in the pandemic’s wake, with financial aid not forthcoming - the relief government extended hardly reached these women. To survive, they resorted to making difficult choices to see their families through the period.
A 2023 International Centre for Research on Women (ICRW) study, which considered 384 informal-sector woman workers (IWWs) in Dagoretti South, Embakasi East, Embakasi West, Kamukunji, Kibera, Starehe and Westlands sub-counties of Nairobi found that they struggled to keep their heads, and their families’, above surging currents that torpedoed many businesses, and that they just about managed.
Less work, failing business
At the time the pandemic was wreaking havoc across the country, 30.7 per cent of these women could not work because their places of work were temporarily closed, 29.5 per cent of those in business decried supply chain issues, and 15.1 per cent lost their jobs.
8.9 per cent said their businesses, or where they worked, were closed permanently, and 0.3 per cent cited illness as their impediment to work.
The study also showed 95 per cent of IWWs in the informal food and trading sub-sectors reported that the pandemic significantly impacted their financial well-being.
At this instance, they needed financial aid to keep going. But support from public and private sector was not forthcoming despite the government’s best efforts. The stimulus package and other fiscal and monetary policies to safeguard businesses “had little benefit to women in the informal sector since the conditions to access the stimulus favored the formal businesses,” the report indicates.
Credit has always been hard to come by for these informal sector businesses, with informal sources of lending the only readily available options. They are not the safest, neither are they the most reliable.
The MSE Covid-19 Tracker Survey by the Central Bank of Kenya (CBK) indicated that during that period, the biggest challenge facing businesses has been suppressed customer demand at 44 percent, followed by access to credit at 11 percent.
“63 per cent of businesses did not increase their prices for customers. In addition, they shouldered a 15 per cent increase in credit outstanding,” CBK said. It was a double whammy for businesses, worse for those in informal sector.
“A little less than one-third” of women in these informal sectors save within saving groups (women collectives), which also become the most common source of credit for IWWs (38 per cent), followed by digital lenders (35 per cent). 21 per cent had no access to savings channels.
“These observations demonstrate the relevance and importance of savings groups in boosting women’s informal businesses,” the report indicated. Credit from microfinance institutions was also significant, with 14 percent of the participants reporting having received credit from these.
Hard-pressed, shylocks (also referred to as loan sharks) were attractive to these women in rural areas as well as in urban informal settings, with their loans widely available and their terms heavily influenced by lenders’ conditions.
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“Borrowers usually have to provide a guarantor or security to obtain these loans, which are considered most expensive forms of credit. Because of high interest rates and the requirement for collateral, shylock financing is unfavorable in the context of a business enterprise,” the ICRW indicated.
Recognising the ill-health of businesses teetering on the brink of collapse due to the pandemic, the government rushed to help those who had secured loans to prevent further slowdown.
“Recognising the role the financial sector can play in providing solutions, the government established the MSME Credit Guarantee Scheme (CGS) to support access to finance for MSMEs impacted by the pandemic,” noted the Central Bank of Kenya. “The CGS has entered into a risk-sharing agreement with Participating Financial Institutions (PFIs) to cover 50% of potential losses associated with MSME loans with a maximum exposure of 25% of the original loan amount. The Scheme aims to stabilize the market and protect jobs, maintaining current access to finance for MSMEs that have been disproportionately impacted by the pandemic.”
As the businesses sank, these women took credit from the informal sector even for basic needs, which were becoming increasingly hard to fulfil. Buying food on credit (85 per cent) and reducing meal frequency (72 per cent), spending savings (54 per cent), selling household property (51 per cent), and moving (43 per cent) were reported as coping strategies.
The Kenya Poverty Report, based on the 2021 Kenya Continuous Household Survey, shows that nationally, the main source of food consumed was from purchases, accounting for 80.2 percent of total food consumed, with a heavy burden at the time of the pandemic on women in these informal businesses, with nearly half of them single, divorced, separated, or widowed and acting as the heads of their households, and nearly half of the interviewed having children under five years old.
The Kenya Poverty Report also indicated that nationally, 40.3 per cent of children live in a poor household, while 30.5 per cent of those aged 0-17 years were food poor. The pandemic exacerbated an already dire situation and the little available credit was redirected to funding survival.
With the ICRW reports showing the continued suffering of these women in the informal urban sector and consistent inaction to address their plight, Peggy Clark, the CEO and President of ICRW, calls for “gender-responsive policies to support workers who are often overlooked and undervalued”.
If they easily secured credit, which is one of small businesses’ biggest pain points, their businesses would probably have fared better during and after the pandemic, and ICRW calls upon the government and microfinance institutions in Kenya to provide affordable credit to IWWs to enable them to restart their businesses and at least restore their livelihoods to pre-Covid-19 levels.
It will get easier, and more convenient for the women, if the government supports all possible platforms for the IWWs to access business credit, including mobile money, Chamas, savings and credit cooperative organisations, and savings and lending association platforms, ICRW says. Government support could take the form of conducive legal frameworks and policies to increase participation of women in the information sector.
“Some of the measures include the stimulus package and other fiscal and monetary policies to safeguard businesses. Despite the government’s stimulus package to support businesses following the pandemic, the initiative had little benefit to women in the informal sector since the conditions to access the stimulus favored the formal businesses,” ICRW suggests.
In this study, only 24 per cent of IWWs interviewed believed their lives (and their households’ lives) would bounce back after Covid-19.