Big Four

How Insurance can drive the Big Four Agenda

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This article first appeared in my weekly column with the Business Daily on November 11, 2018

An interesting question that has been posed, is as to how the insurance sector in Kenya can play a role in the development of the country and the Big 4 Agenda. The focus sectors of the Big 4 are manufacturing, food security, universal health coverage and affordable housing. There are key actions insurance can play in each sector that can enable each sector to strengthen its role in the economy and contribute to the general welfare of Kenyans.

Insurance in Africa


The first step is for the insurance sector and companies to stop positioning themselves as being an option for ‘rich Africans’ to being a necessity required in a well-functioning economy. In the context of economic development of a young economy like Kenya, insurance has two important roles. The first is as a stabilising presence that signals that certain business activities are deemed credible. The second role of insurance in this context is as a risk management strategy. If the private sector in Kenya and Africa at large seeks to position itself as a safe bet for investors, insurance plays a key role in risk management. There is a need to manage risks linked to agriculture and climate change; risks associated with manufacturing in Africa; securing the health of a large and growing population and providing dignified housing for a significant portion of the population. Thus, in the African context, insurance is a risk management tool.

But there is a more innovative role that insurance can have in catalysing economic development in Africa and each of the Big 4 sectors in specific. In terms of manufacturing, a current pitfall is the lack of a comprehensive insurance package for manufacturers, and in terms of health, insurance is not deemed affordable by most Africans. With regards to agriculture, insurance for small holder farmers who are the custodians of food security, is largely deemed to be uneconomical where payments made are not commensurate to losses incurred in the context of extreme weather conditions or pest damage for example. And in terms of health insurance, that is deemed as a luxury for the rich in Africa.

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But insurance can be a risk management tool by for example, giving manufacturers an insurance bouquet that enables them to manage all their key risks at once. Insurance, through micro-insurance can allow Kenyans and Africans to pay small amounts to secure their health and homes. And for small holder farmers, insurance can play a key role in farmers recovering from unforeseen by bundling insurance with government agricultural credit lines.

In short, the role of insurance in the Kenyan and African economy is undermined because its risk mitigation qualities are underappreciated. Insurance is still seen as an option for ‘rich Africans’. This must change as insurance is a key element of a sustainable African economy rooted in secured long term growth.

Anzetse Were is a development economist;


Factors to Consider in Affordable Housing Scheme

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This article first appeared in my weekly column with the Business Daily on April 22, 2018

The government recently announced that it seeks to develop 500,000 units of affordable housing as part of the Big Four agenda. Government also announced that it seeks to extend affordable mortgages for as low as 7 percent, facilitated by the Kenya Mortgage Refinancing Company (KMRC). Reports indicate that KMRC has secured financing from the World Bank and the African Development Bank which have allocated KES 16.1 billion and KES 15 billion respectively.

Several factors ought to be considered if the affordable housing intent is to translate into home ownership for low-income earners (this piece draws from an article by Dr Mbui Wagacha in the Business Daily on April 4, 2018).

An informal settlement in Nairobi. FILE PHOTO | NMG


Firstly, the criteria of who qualifies for affordable housing and related loans needs to be crystal clear. It is important that government present granular details of and rationale for the specific criteria that need to be met to be eligible for the scheme. Ideally, the target should be low-income households currently living in informal settlements. Once the criteria is established, government should develop a database of all individuals who qualify for the scheme. A system can then be set up where once housing is available, individuals are randomly chosen from the database and granted the houses and linked loan facilities. This can be coordinated through an Affordable Housing Authority.

Secondly, government needs to invest in both sides of the housing market. The demand side is being addressed through the creation of KMRC and subsidised mortgages. Finding the right financial partners to deploy the mortgages will be crucial and here, Savings and Credit Cooperative Organisation(SACCOs) ought to be brought in strategically. SACCOs and cooperative networks currently already provide 90 percent of mortgages in the Kenyan housing market, invariably at more affordable rates than commercial banks. Government should actively pull in and incentivise SACCOs to deploy the subsidised loans, and in doing so, leverage the latter’s knowledge of lending to the housing market affordably and thereby penetrate lower income markets. Linked to this, there ought to be a strategy to finance the construction of affordable homes. This can also be deployed through SACCOS, so that the interest charged on construction loans remains at manageable levels and does not push up home purchase prices. Further, domestic firms ought to be actively engaged to bid for construction tenders, and requisite support to ensure project by domestic firms is prioritised.

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Thirdly, an affordability strategy ought to be developed to comprehensively address the issue of land prices. Land currently constitutes the lion’s share of home prices especially in urban and peri-urban areas, which is where most of the affordable housing ought to be constructed. Government can provide the land at no cost as part of the scheme such that the prices of homes only feature the cost of construction; this will drastically bring down prices.

Finally, conditions of resale of affordable houses have to be specific and stringent. If individuals in the scheme seek to sell their house, they can only sell back to the housing scheme itself; no third party ought to be allowed to buy the affordable homes. If these measures are not taken, unscrupulous investors will target the affordable homes, offer individuals great deals and mop up all the houses through re-sale, thereby defeating the intent of the scheme in the first place.

Anzetse Were is a development economist;

Three Options for Fiscal Policy

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This article first appeared in my weekly column with the Business Daily on March 4, 2018

The Cabinet Secretary of Treasury, Henry Rotich, it putting together the budget for 2018/19, the first in the second era of devolution, being developed in a context where a second Eurobond has been issued and there is growing concern about the sustainability of Kenya’s debt. This is also the first budget in the second and last term for President Kenyatta and thus can give an insight into the type of fiscal legacy the president intends to leave. Fiscal policy over Kenyatta’s first term has been defined by three main features. The first is subpar revenue generation; while revenue generation has been growing, revenue targets are often not met, and revenue is not growing at a rate that can effectively fund expenditure. The second feature is aggressive growth in expenditure where the 2018/19 budget looks to be about KES 2.5 trillion, up from KES 1.6 trillion in 2013/14. This has led to the final feature of fiscal policy which is an expanding appetite for debt. Rotich has three main options for fiscal policy the 2018/19 financial year.

Treasury CS Henry Rotich can change tack and truly implement aggressive austerity measures. file photo | nmg


Firstly, the budget can be more or less what has been done in the past. And if one looks at the February 2018 Budget Policy Statement (BPS), it seems as though this year’s budget will be more of the same. Allocations to dockets are within similar ranges as in the past, expenditure has grown aggressively and the aggressive appetite for debt continues. Should Rotich choose to stick to this fiscal path, concerns over the country debt growth will continue to be voiced as it is precisely this fiscal path that has gotten Kenya to the stage at which we are now.

Secondly however, Rotich can change tact and truly implement aggressive austerity measures in the context of fiscal consolidation where concrete policies are created to reduce government deficits and debt accumulation and results tracked. Several bodies have called for fiscal consolidation and thus it would be prudent for the Treasury to heed that call. The concern with previous budgets is that Treasury asserts that austerity measures will be implemented and spending cut, but budget implementation indicates that this does not actually happen. Rotich has a chance to make significant cuts in unnecessary spending, enforce fiscal discipline, allocate more money to development spending and implement measures to ensure development funds are absorbed.

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The final path is one where Rotich puts significant funds into President Kenyatta’s Big Four and uses expenditure to finance the sectors of health, industrialisation, housing and agriculture in order to catalyse economic growth, create jobs and reduce poverty. Rotich can present the argument that prudent and disciplined spending targeting the four dockets will put Kenya on a growth path where the country hits the Vision 2030 growth rate of 10 percent. Sadly, however, there is no indication of notable fiscal support to the Big Four in the February BPS. There is a section dedicated to the Big Four in the BPS but if one takes a close look at allocations, one finds no difference in allocation patterns that would indicate that the fiscal process is focused on the Big Four.

In short, the budget for 2018/19 will set the tone of fiscal policy making for the next four years and let Kenyans and the world know, the extent to which government will leverage fiscal policy to put the country on a dynamic growth path that is fiscally sustainable and catalytic.

Anzetse Were is a development economist;


Time to Catalyse Micro and Small Enterprise

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This article first appeared in my weekly column with the Business Daily on February 18, 2018

The informal economy consists of micro and small enterprises (MSEs) that are the source of income for 90 percent of employed Kenyans as well as an important economic engine of the country. Indeed, late last year, the Central Bank of Kenya Governor Patrick Njoroge credited small businesses with keeping the economy afloat terming them the backbone of the economy’s resilience in a difficult year.

Despite their importance, MSEs are neglected and economically under-leveraged. The first step to directing MSEs towards optimal performance and strengthened growth is data collection. There is currently no single repository with detailed information on the number, size, geographical footprint, sector composition of MSEs and MSE associations in the country. There should be a drive to register all MSEs and collect data through the registration process. What must be made clear during the registration process is that it will not be used to tax MSEs. If a sense develops that the aim of registration is to put businesses into the Kenya Revenue Authority (KRA) database for taxation purposes, MSEs will not show up for the exercise. Registration ought to be incentivised such that it is linked to financial and non-financial support organised and deployed by government. Indeed, only registered MSEs should be allowed to qualify for government support.

A Jua Kali artisan. Despite their importance, small businesses are neglected by the government. file PHOTO | NMG


The second stage is to develop a fund focused on MSEs; this could fall under the Biashara bank that is being developed by government. The main point is that there should be a facility focused on MSEs. MSE sector organisations and associations should be represented on the board of the fund such that the needs and priorities of the sector inform how the funding is structured and deployed. Through working with MSE sector leaders, the process of developing criteria for qualification of financing can begin such that funds are absorbed and effectively used. Government ought to learn from the challenges faced in the Uwezo, Women and Youth Funds such that the same mistakes are not repeated. Further, there is a need to classify the MSEs such that they align with the Big Four and prepare them to benefit from initiatives in the Big Four sectors of health, manufacturing, agriculture and housing.

A reality that ought to be considered is that there will likely be early stage MSEs that are not ready for debt financing and have to be graduated from grant financing into debt. The financial packages deployed thus can consist of grant and debt as well a blend of both. The crucial element is that financing alone will not suffice. There ought to be deliberate coordination between financial and non-financial interventions such that support sophisticates as MSEs graduate into mainstream debt.

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The bouquet of support linked to financing should include technical training which trains MSEs on up-to-date technical skills of the sector; technology upgrades that modernise technology used by MSEs and train them on their use; and physical Infrastructure upgrades that improve the physical locations in which MSEs operate including ensuring access to water and sanitation facilities as well as electricity. Finally, MSEs should be trained in basic business management training to help them better manage and plan for their business growth and possible expansion. This training must be partnered with business mentorship such that training and upgrades are effectively used.

Anzetse Were is a development economist;


TV Interview: Is President Kenyatta’s ‘Big Four’ supported by the proposed Budget?

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On February 11, 2018, I was part of a panel discussing President Kenyatta’s ‘Big Four’ Priority Agenda