Kakuma as a Marketplace

John Kluge, Timothy Docking, and Joanne Ke Edelman

Refugee Investment Network (RIN), October 2018

https://www.refugeeinvestments.org/paradigmshift/

Review

This report aims to understand Kakuma as a potential market and identify business opportunities and challenges for the private sector, including commercial firms, social enterprises and local entrepreneurs. Based on a survey of 1,400 households in the refugee camp (home to 160,000 refugees from South Sudan, Somalia, Ethiopia, Burundi, DRC, and Sudan) and neighboring Kakuma town (with a population of 60,000, mainly ethnic Turkana people), the study finds:

  • There is already a thriving informal economy in Kakuma. 12 percent of refugee respondents identify as business owners or self-employed, and 39 percent of respondents in Kakuma town own businesses. Most run “dukas” (small general stores), which account for 33 percent of businesses in the camp and 31 percent of businesses in town. Other common businesses are grocery stores, food stalls, restaurants/cafes, and M-Pesa kiosks. 38 percent of respondents in the camp and 51 percent in town have registered their businesses (but it is unclear whether businesses are legally registered or respondents believe payments to local authorities to be registration).
  • Education is positively correlated with employment status, business ownership, and income.
  • Refugees and town residents face several impediments to starting a business. 99 percent of respondents in town and 95 percent of respondents in the camp lack capital to start a business. Refugees are also constrained by high rental charges, movement restrictions, lack of premises to rent, lack of support from camp administration, and time required to obtain a travel pass.
  • Women in the camp are less likely to be entrepreneurs than men (7 percent versus 23 percent of men), and their businesses are more likely to be informal (22 percent registered versus 49 percent for men) and women typically have less invested in their businesses. This is not the case in Kakuma town where 39 percent of women own businesses compared to 40 percent of men.
  • Levels of employment and income are lower in the camp due to impediments faced by refugees, including legal restrictions, poor educational attainment, insufficient skills/capital to start a business, lack of formal job opportunities, and limited access to external markets. Consequently unemployment is higher in the camp than in the town (27 percent versus 14 percent), and refugee households are less likely to have a regular income (73 percent of households in the camp have a regular income compared to 84 percent of households in town). Refugee income includes Bamba Chakula e-vouchers (57 percent), salaries/business earnings (27 percent), proceeds from selling rations (12 percent), and remittances (11 percent), whereas most town residents earn salary income (72 percent). The average monthly income in the camp is about one-third of that in the town (KES 5,597 compared to KES 15,863). Only three percent of refugee households earn more than the minimum wage.
  • Formal jobs in Kakuma town are generally based on the local economy, while salaried jobs in the camp depend on NGOs. 79 percent of Kakuma town residents are employed in the local economy as drivers, duka employees, barbers, and house cleaners. 58 percent of refugees are employed by NGOs as teachers, guards, translators, and community mobilizers.
  • Total annual consumption of Kakuma is conservatively estimated to be $56 million, with the camp contributing $16.5 million ($94 per capita) and the town contributing $39.7 million ($602 per capita). This lags behind national consumption in Kenya ($800 per capita).
  • Almost half of consumption is in the consumer goods market, which is valued at $26.2 million. The largest components of the consumer goods market are rice/pasta, ugali flour, and milk powder. People also consume household goods (TV, motorbikes, solar panels and power generators). The most common consumable nonfood items are cooking fuel and charcoal, electricity, loan repayments, airtime, and mobile phone charging. Although fragmented, spending on energy-related products (generation, charging, fuel) would be substantial if combined.
  • Mobile phone penetration is high (69 percent of households heads in the camp and 85 percent in town), making it a potentially attractive market for mobile banking. 86 percent of respondents in the town use their phone/SIM for mobile banking or money transfers, while only 31 percent do so in the camp. There is significant opportunity to increase penetration in the camp, which would depend on improving refugees’ financial literacy and access to Alien ID cards (required to register with M-Pesa).
  • The Kakuma market has potential to grow. Demand for financial services is high and likely to grow (currently only 54 percent of respondents in the town and 10 percent in the camp have a bank account). UNHCR is transitioning to unconditional cash transfers, which will increase liquidity. Residents in both locations are willing to pay for improved energy, housing, and sanitation services.
  • There are several challenges to private sector investment: (a) legal limitations (refugees do not have property rights, and there are practical impediments to exercising legal rights to employment and freedom of movement); (b) high levels of informality; (c) low educational attainment (50 percent of refugees and 33 percent of town residents have no schooling); (d) limited access to markets due to poor road connections and absence of a commercial airport; (e) lack of capital to start a business; (f) low financial literacy (73 percent of respondents in the camp and 45 percent in town have no information on financial matters); (g) low savings; and (h) high cost of doing business.

The report notes the significant benefits of private sector engagement for both refugees and host communities including expanded job opportunities, improved services, greater choice, reduced prices, improved self-reliance, and enhanced socioeconomic integration. Private sector engagement would require: (1) attracting private businesses to enter the market and providing opportunities to scale up enterprises already in the market; (b) developing refugee and host communities’ entrepreneurship potential, with a focus on youth and women, by supporting their businesses to grow and providing vocational skills training, business development services, and microfinance opportunities; and (c) supporting policy dialogue and advocacy focused on creating a more conducive business environment.

Year:

2018