Unlocking the potential of e-commerce and digital financial services in Kenya

Kenya’s e-commerce and digital financial services are increasing in size and scale, but regulatory and infrastructural gaps remain. The Community of Practice on Digital Skills and Jobs gathered to discuss approaches to unlock the potential of e-commerce and make digital financial services available to all.

News | 30 October 2023
Nairobi, KENYA (ILO News) – Technological change and the emergence of innovative business model are reshaping the traditional commerce and financial services landscape in Kenya. Against this rapid transformation, the Community of Practice on Digital Skills and Jobs (CoP) hosted its third thematic discussion on E-commerce, digital financial services, and digital platforms on October 30, 2023.

Kicking off the discussion, Humphrey Njogu, Head of the Department of Infrastructure and Economic Services at the Kenya Institute for Public Policy Research and Analysis (KIPPRA), set the stage by highlighting the pivotal role of data in tracking e-commerce transactions and digital platforms. "E-commerce in Kenya is still developing with opportunities for growth. The country is ranked third in Africa on internet quality and the national digital economy is expected to reach US$ 180 billion by 2025." Njogu also stressed that persistent challenges that constrain the ability to scale it up, including the lack of data, inadequate logistics and infrastructure, and the crucial need for trust among companies, and consumer protection.

Participants, COP Third Thematic Discussion

Finding pathways to expand the e-commerce ecosystem in Kenya

The first panel gathered industry leaders and experts to dissect the opportunities and challenges within Kenya's e-commerce ecosystem. Jane Otoko, Deputy Director of E-Commerce and Entrepreneurship at the Ministry of Information, Communication and Digital Economy, emphasized the importance of regulatory flexibility and user experience optimization to boost e-commerce. She indicated, “National policy frameworks should address existing challenges such as compliance issues, gaps in laws related to e-commerce, awareness of existing laws, and the need for amendments to acts such as the Consumer Protection Act, 2012 (No. 46), and the Data Protection Act, 2019 (No. 24)."

Fridah Ichonga, an e-commerce Advisor from the Tony Blair Institute, underscored that given the dynamism of the e-commerce landscape, entrepreneurs can benefit from collaboration with partners who have access to consumer data to understand market trends. She also emphasized the need of staying updated on policy changes and participating in industry associations, especially on compliance with data protection policies. Her sentiment resonated with others, with the consensus being that collaboration between different stakeholders in e-commerce is vital for creating an enabling environment.

Priscilla Muhiu, the Country Director at MYDAWA, Kenya’s First Registered Online Pharmacy, shared this perspective using the pharmaceutical industry, as an example where collaboration is vital for scaling e-commerce business models, especially to facilitate the physical delivery of products. "Players like the postal service, communication authorities, and e-commerce ventures should partner for synergies. More research, innovation, and funding should target the sector", she pondered.

Expanding e-commerce and digital financial services and inclusion

Elvin Amugu, Head of ICT Infrastructure & Network Quality Services at the Postal Corporation of Kenya, argued that addressing issues like device access and strengthening local manufacturing are essential for inclusive growth in the sector. He listed the critical elements required to foster trust in e-commerce, ranging from improved logistics and last-mile delivery of products, to digital skills for businesses and consumers. "Access to electronic devices and affordable smartphones is a key challenge for small entrepreneurs and clients alike, and efforts are being made to make devices accessible, especially in rural areas", highlighted Amugu.

Isaac Gachugu, M-PESA Payments Tribe Lead at Safaricom, emphasized the impressive advancements in financial inclusion within Kenya. “Over 85 per cent of the population now enjoys access to digital financial services, predominantly through the ubiquitous mobile money platform, M-Pesa. Beyond this, Safaricom has an unwavering commitment to innovation with a focus on introducing cutting-edge products and services aimed at enhancing financial inclusion.”

Expanding on the need for inclusion, Gachugu, from Safaricom, articulated the importance of considering refugees' unique circumstances and emphasized that addressing their integration into e-commerce and digital financial services is paramount. Challenges surrounding accessibility for refugees were mentioned such as the difficulties of buying a SIM card or use mobile money. “We have to make sure these populations affected by forced displacement are not left behind in a digital economy in full swing”, he added.
 
In the grander scheme of these discussions, it became evident that government actors must play a pivotal role in addressing these issues, especially concerning underserved and marginalized populations left behind in the digital landscape.

Panelists, COP Third Thematic Discussion

Growing SME capacity by fostering innovation and trust

Innovation goes beyond policymaking as Fidelis Muia, representing the Kenya Bankers Association, unveiled. The association focuses on cultivating a digital financial ecosystem that facilitates electronic commerce and digital transactions, ensuring the accessibility and interoperability of digital payments and banking services for seamless transactions across various payment systems and banks. Muia explained, “Interoperability is key and we are achieving this through a series of partnerships with fin-techs; we support them through Application Programming Interfaces (APIs), allowing them to operate while avoiding substantial investment in payment systems.” He explained that this system, coupled with the existing 45 commercial banks in Kenya and the granularity allowed by digital channels, ensures that banking can be accessible throughout the nation.

Innovation comes with responsibilities and several panelists highlighted the importance of data privacy and data protection in their transactions. Gachugu, from Safaricom, in particular, was vocal about the company’s commitment to transparency, data privacy, and ethical data use. “We always make sure that the data collected is used for its intended purposes and that consumers are well-informed regarding data usage”, he added. Muia agreed with the importance of data management, stating that “We have trained 240 institutions within the financial ecosystem on the provisions of the Data Protection Act to ensure that everybody is aware of what their roles are in handling consumer data and managing data to in way that no one is the weak link in the chain.”

As the discussions drew to a close, consensus emerged about the importance of adopting a holistic approach to e-commerce policymaking, cutting across policy areas like consumer protection and security of digital transactions, data privacy and tax policies. One participant added that trust seals, or badges, are also part of the solution to increase trust in the sector, and they are the result of partnerships between actors like Chambers of Commerce and private organizations. Collaboration to foster trust and consistency is a key factor for unlocking the full potential of e-commerce for all.


The CoP is facilitated by the PROSPECTS programme in Kenya and the Opportunity Fund project on the Promotion, inclusion and protection of refugees and host communities in the gig economy , with the generous funding of the Kingdom of the Netherlands.