Foster School of Business GBF Viewpoints on Africa

As a follow from our class this week, the first MFI (Micro Finance Institution) that Unitus has partnered with in Kenya is Jamii Bora. The swahili phrase, Jamii Bora, roughly translated means a community that is better off. The organization which in 2002 was serving 13,000 members now serves over 170,000 members.

The simple example from the Jamii Bora website illustrates how micro finance enables a street vendor to scale their small business.

 
Jamii Bora’s lending is concentrated on the needs of the members. Thus the majority of the loans are very small. The average loan size in 2003 was $90. Almost 80% of the loans were less than $150, many of them starter loans that could be as small as a $10.

The potato vendor in the example above would not have qualified for a loan from a tradition bank where the average loan sizes are over $1,000.

While MFI’s in Kenya are making headway in the densely populated urban areas, a major challenge, has been reaching the rural areas where roughly 80% of Kenya’s population lives. The rural areas are more sparsely populated and also often the poorest with many people making $2 or less a day. The lack of good transportation infrastructure makes these areas more difficult to access.

The article below from the New York Times speaks to how cell phone technology is enabling Jamii Bora and other MFI’s to extend their reach into the rural areas.

http://www.nytimes.com/2007/07/09/business/worldbusiness/09micro.html?_r=2&oref=slogin

While our class will broadly cover Africa and the Middle East, a region that spans about 67 different countries, the goal of this blog is switch gears from the wider view we cover in class to a more in-depth look at Eastern Africa with a focus on Kenya.

History and Quick Facts

Located in Eastern Africa, the Republic of Kenya was formed in 1964 after Kenya received its independence from the British … or roughly 200 years after the US received its independence from the British. The country size is slightly smaller than the State of Texas and has a population of 31 million. There are about 52 different ethnic groups in Kenya, with the largest 5 making up 75% of the population.

The equator passes through Kenya splitting it into almost into halves. The country is named after the snow capped Mt.Kenya, the second highest mountain in Africa at 17,000 ft.

The National language is Swahili and the Official language is English.

Nairobi

Nairobi is Kenya’s capital city and Africa’s 4th largest city. It is a cosmopolitan and multicultural city with a population of about 3 million. It is also the regional headquarters of several international companies and organizations including General Motors, Coca Cola, General Electric and Microsoft.  Nairobi is the headquarters for the United Nations Environmental Program (UNEP) which is the only UN organization headquartered in a developing country.

The city’s primary airport is Jomo Kenyatta International Airport which is also the hub for the national airline, Kenya Airways. Despite its proximity to the equator, its high altitude of 5,454 (200 feet higher than Denver) makes for a cool climate year round.

Mombasa

Mombasa is the second largest city in Kenya and is a major port. The Mombasa port serves not only Kenya but several of landlocked neighboring countries such as Uganda, Rwanda, and Burundi. Mombasa is a Sister City of Seattle, WA.

Economy

Kenya has the largest economy in the Eastern Africa, and the 5th largest in Sub-Saharan Africa. This is an  impressive feat considering its economy is not based on oil or minerals.

The country’s GDP is $27 billion, with a per capita of $780. The largest sectors in the economy are:

1. Service sector – contributes 63% to the GDP and is dominated by tourism. Other contributors to this sector are the financial sector.

2. Agricultural sector – employs 75% of the nation’s population. About half of agricultural produce is for subsistence purposes. The main cash crops are tea, coffee and horticultural produce (mainly flowers that are exported to Europe).

3. Forestry and fishing

Nairobi Stock Exchange

This is the countries only stock exchange and the 4th largest in Africa (in trading volumes) and with 58 companies listed. The largest public company is also Kenya’s largest mobile carrier, Safaricom. It is a joint venture between the Kenyan Government and Vodafone, PLC. Last year, its reported operating profits were about US $300 million. The largest public financial companies are, Barclays Bank of Kenya, the Kenya Commercial Bank and Standard Chartered Bank of Kenya.