Here are 4 reasons as to why we at ZAOinvest started our Impact Investing journey in Kenya.
Stable diversified economy.
Kenya’s GDP growth is 6% solid across the last 10 years. In absolute numbers, Kenya’s GDP more than doubled from 2009 ($37B) to 2019 ($87B).
Nairobi is a major hub of the economy, being the home of numerous multinational Africa headquarters, such as Intel, IBM, Google, and the East African headquarters for MasterCard, Visa, Qualcomm, Cisco, to list just a few.
Kenya has a strong Agriculture industry (26% of the country’s GDP, employing 40% of the total population and more than 70% of Kenya’s rural people), a growing Tourism industry (travels and tourism accounted for 8.8% of country GDP in 2018). Not to forget that Kenya is also the home of M-PESA, a mobile money success.
Ease of doing business.
The world bank ranked 190 countries with respect to Ease of doing business ; only two countries in the Sub-Saharan Africa region are in the top third of the rankings: Rwanda (ranked #29), and Kenya (ranked #61).
Rwanda has advanced like crazy in just 20 years, however its economy is 9x times smaller compared to Kenya.
Across the last 5 years, Kenya is by far the “most Improved” country for “ease of doing business” in Sub-Saharan Africa, going from rank#136 in 2015 to rank#61 in 2019.
Maturing start-up ecosystem.
Kenya moved past the “over-hype” phase. Here is a snapshot of the $1M+ deals in 2018.
Early-stage and SMEs continue to be under-served.
There are two gaps in the market: the missing middle and the missing majority.
The missing middle is early-stage ventures. There are tens of accelerators to help entrepreneurs develop early idea and become more invest-able. And there many groups writing $300K+ checks.
But there are very few smaller deals in the middle: the $20K-$200K segment is largely under-served.
The missing majority are “silent but successful” Small and Medium Businesses (SMBs). These are longer-term firms that are very unlikely to have 20x potential (and thus will never attract Venture Capital attention), but could still do 5x in a 10 years horizon.
Often times, these SMBs are already profitable, hiring more workers, and yet lack growth or working capital.
Such SMBs make up the engine of the Kenyan economy, and yet they are massively under-served by banks.
At ZAOinvest, we are investing in both the missing middle and the missing majority.
We help build a more inclusive economy, contribute to growth, and create lasting impact sustainable jobs. We currently focus on the broader agriculture industry, as well as renewable energies.
Further readings: Kenya state of impact investing