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Why Many Kenyans Are Working For Free- CBK Report

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The statistics obtained in March 2021 showed that nearly 27 percent of staff in the SME sector, which makes up for a majority of Kenyans employed in the country, were working without receiving any pay as compensation.

A report released on Friday, June 25 by the Central Bank of Kenya (CBK) has exposed a worrying trend in which more than one-quarter of Kenyans employed in small and medium enterprises are forced to work for free.

The statistics obtained in March 2021 showed that nearly 27 percent of staff in the SME sector, which makes up for a majority of Kenyans employed in the country, were working without receiving any pay as compensation.

This is even though many businesses had recorded economic resurgence amidst the crisis which had been caused by the COVID-19 pandemic.

Central Bank of Kenya headquarters in Nairobi. /FILE

It also represents an increase from 9 percent in 2020 when the country recorded the first case of COVID-19, which then prompted the government to impose restrictions.

“A larger share of employment was unpaid, indicating a reduction in the quality of jobs,” CBK noted in a survey that had a sample size of 1,610 respondents derived from different parts of the country.

The month of March 2021 saw Kenyans go home with nothing in their pockets despite the hard work they put into the enterprises. In the same month, President Uhuru Kenyatta, alongside private sector players and officials from the Ministry of Health, imposed partial lockdowns on Nairobi, Nakuru, Machakos, Kiambu, and Kajiado, increased curfew hours, banned social gatherings of whatever nature, and did not implement the emergency measures as he did at that point in 2020 which included tax reliefs meant to cushion Kenyans from the adverse effects of COVID-19.

The measures put in place by the government harmed the operating hours of most businesses, thus the SMEs could not generate substantial income.

The data also showed that sales recorded by SMEs during this period had dropped to nearly half compared to the pre-COVID-19 period, an indication of how much the SME sector has been stretched to its limits.

Businesses then implemented salary cuts and sent employees on unpaid leave while others closed down completely highlighting just how much government restrictions had hurt the SME industry which is the country’s biggest employer.

Most of the staff who were working without pay were reduced to being friends and family members to survive.

The CBK report added that 54 percent of those affected were getting financial assistance from the two aforementioned categories, while 19 percent relied on Saccos as banks looked away from SMEs, hurting their chances to get loans.

The sector has been one of the most affected by the impact of COVID-19. Despite the state lifting some of the restrictions, recovery will be estimated to take a period of time.

A large proportion of businesses had depleted their savings during the lockdown period. By March 2021, only 37 percent of businesses reported having some savings compared to 60 percent during the pre-COVID-19 period, implying increased risks to business resilience.

Depleted resilience has also rebounded on business households as well, with food insecurity rising from 14 percent to 61 percent during the 2020 lockdown.

About 45 percent of businesses had loans outstanding in November 2020, mainly from mobile banks and saccos. Many of them did not benefit from the loan restructuring since they do not rely on bank loans.

Only 2 percent reported restructuring their loans. By March 2021, there was a significant decline in digital loans. Only 36 percent of borrowers had mobile banking loans in March 2021, down from 45 percent in November 2020, while 2 percent of respondents had digital app loans down from 10 percent during the pre-COVID-19 period.

Businesses’ optimism improved in November 2020, with 55 percent of the respondents anticipating a better economic outlook in 2021.

Kenyans lining up outside an office. /STANDARD DIGITAL



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Marvin Chege
About author: Digital journalist and managing director with a passion for writing captivating stories. Marvin is a young scribe, a social media, sports, gaming junkie and realist who specialises in viral news, multimedia and investigative storytelling.

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