September 2020 THE GIG ECONOMY IN EAST A gateway to the financial mainstream FOREWORD A commitment to making a positive difference

With about 40% of US and European workers expected to be independent contractors by 2020 [1], the term ‘gig economy’ may bring to mind the image of millennials zipping about on ride shares balancing contract jobs with a rich social life. However, the reality is that it has been the single most significant source of financial independence for many people who have tapped into its potential across the world.

In East Africa, for instance, the informal sector has long assumed economic importance due to the sheer number of people who are a part of it. For instance, it was responsible for about 90% of all new jobs created in 2018. [2]

For the average gig worker, a mobile phone becomes the most effective means of entering this sector digitally, paving the way for an entry into the workforce. It enables youth to utilize economic opportunities, become entrepreneurs, and do flexi-work. The result is not just improved work-life balance but improved living standards as access to gigs provides a stable income.

In this context, digital inclusion, powered by connected devices, has emerged as a vehicle for inclusion and development. Bridging divides between urban and rural, rich and poor, it facilitates the connection of individuals with peers, information, opportunities, and services.

To better understand the drivers and impact of the gig economy, especially in countries and regions where its socio-economic benefits are needed most, Mastercard commissioned a survey of gig workers in in January 2020. The outcomes of the survey corroborate some of the assumptions related to jua khali, as the informal sector is referred to in Kenya. More importantly, however, it underscores the immense need for upgrading physical and social infrastructure that supports and strengthens this sector in order to improve lives and livelihoods.

For many of the workers who agreed to be interviewed for the survey, gig work is the first point of entry into the workforce after completing high school or higher education. It provides them with an income of anywhere between $100 and $300 a month. This becomes dependent on several factors along the jua khali value chain – ranging from the affordability of smart devices to availability of work and the assurance of full and on-time payments.

While Kenya’s gig economy is nascent, buoyant and continues to grow with more than 60% of gig workers entering the ecosystem between 2017 and 2019, uncertainty of gigs and irregularity of income also

2 The Gig Economy in East Africa: A gateway to the financial mainstream excludes such workers from the financial mainstream of benefits and loans, something that not only makes their lives better but also helps them expand their business.

Mastercard’s involvement and experience in the economies where each gig is a stepping stone to a better quality of life show that effective partnerships between governmental, social and multi-national organizations are the key to unlocking the benefits of the gig economy and transitioning such workers into the financial mainstream.

“Effective partnerships This is achieved in multiple ways, such as enabling low-cost digital between governmental, payments through Mastercard QR or contactless payments social and multi-national on merchant devices. Also relevant is enabling small and micro organizations are the key entrepreneurs to buy and sell overseas using Mastercard Send for to unlocking the benefits cross-border payments, and also enabling access to e-commerce of the gig economy for its through instant virtual cards and smartphones/ internet access participants.” through Pay on Demand.

Stakeholders working together can unlock the benefits of the informal sector by ensuring that digital and financial infrastructure becomes more inclusive and reaches all participants of this vibrant economy. Mastercard welcomes the opportunity to work with governments, financial institutions, mobile network operators and equipment manufacturers who share this vision and commitment to making a difference.

Amnah Ajmal Executive Vice President Market Development, Middle East and Africa Mastercard

CITATIONS

1. Mastercard and Kaiser Associates. The Global Gig Economy: Capitalizing on a ~$500B Opportunity. May 2019. 2. Kenya National Bureau of Staistics. Economic Survey 2019.

3 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

The Gig Landscape in East Africa

He is about 30 years old, speaks Swahili and English, has a high school degree, an abiding interest in tinkering with electronics, and a smart- phone that helps him connect to daily gigs as an carpenter. He has learnt, over the two years that he has been doing gig work, to keep his expenses flexible because he may earn anywhere between KSh 10,001 and KSh 30,000 ($100 – $300) each month.

His wife, a new entrant into gig work as a nanny-cum-household help, gets called in do chores as well. She enjoys the flexibility she gets from gig work, because she also has to look after their children. If only, the couple says, there was some stability and continuity of income, they would be able to plan their lives around their work – acquire a better mobile device with a more reliable internet connection, train as a driver, perhaps obtain a on a loan to join a gig platform.

This is the profile of a typical gig economy worker in Kenya in 2020. The informal sector is crucial to East Africa’s economy. Known as jua kali in Kenya, the informal sector is a job creation engine. According to the 2019 Economic Survey by the Kenya National Bureau of Statistics, the informal sector was responsible for 762,100 of the 840,600 new jobs created in 2018. [1]

4 The Gig Economy in East Africa: A gateway to the financial mainstream The gig economy, powered by digital tools, is the latest addition to this sector. The global gig economy is currently sized at $193 billion and it is growing at a projected annual rate of 17.4%. By the end of 2023, it 5.13m is forecast to be worth $455 billion. It includes 40.7 million freelancers people are employed by the gig on digital platforms across the globe, generating $193 billion in gross economy in Kenya, which was volume and $127 billion in disbursements to freelancers. valued at $19.7bn in 2019 More freelancers are entering the gig economy sectors such as ride sharing, professional services, handmade goods and household services and asset sharing. This is likely to accelerate worker participation and financial growth. By 2023, the number of freelancers and gross volume are expected to grow by 12% and 17% respectively. The US enjoys a considerable lead in the gig economy at 44% of global gross value.[2]

In the context of East Africa, gig work acts as a buffer against unem- ployment. It facilitates youth participation in economic opportunities. Flexi-work opportunities open doors for entrepreneurship. Improved livelihoods are a direct result of access to frequent gigs, which may pro- vide stable incomes.

While gig work creates job, allowing workers entry into the workforce while maintaining a work-life balance, it is also marked by uncertainty and the lack of insurance or a fixed salary.

According to the Lokoja Point survey commissioned by Mastercard con- ducted in January 2020, Kenya’s gig economy is nascent, buoyant and continues to grow, with more than 60% of gig workers joining the gig

Gig Worker What is your highest level of education? Secondary/high school degree Demographics 14 15 University/Bachelor’s degree in Kenya Less than secondary/high school degree 14 2 15 Some university but no degree 4 1 Vocational education/trade school No formal education Master’s degree 36 PhD

ender What is your approimate monthly household/family income? 60 15 KSh 10,000

39 3 KSh 10,000 – 20,000

27 KSh 20,001 – 30,000

13 KSh 30,001 – 40,000

4 KSh 40,001 – 50,000 Female Male 1 would “rather not say”) 3 KSh 50,001+

Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020

5 The Gig Economy in East Africa: A gateway to the financial mainstream Commitment ow long do you plan to continue as a gig worker? 52

1 14 9 7

Less than More than More than More than Don’t know/ 1 year 1 year but 2 years but 4 years cannot less than less than say exactly 2 years 4 years Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020

economy between 2017 and 2019, some backed by the new gig plat- forms now functioning in the economy. In which industry do you work? Like much of the informal sector, uncertainty is a fact of life, with more Artisan & than 50% of gig workers saying that they don’t know how long they General Services 20 would continue working the gig. About 30% said they planned to stop gig work in two to four years. A total of 66% of gig workers said that Automobile 13 this was their full-time commitment. Transport & Logistics 10 Research estimates in 2019 peg the total size of the Kenyan gig economy Entertainment 9 at $19.7 billion employing 5.13 million workers in six key sectors: agricul- ture, manufacturing, trade and hospitality, construction, transport and Hospitality 9 communications, and community, social and personal services. [3] Beauty & Personal Care 7 Who is the gig worker? Digital For many respondents, gig work is their first entry into the workforce Entrepreneur 6 % after completing high school or higher education, making it a natural Information 60 6 choice for millennials and Gen Z. Research shows online access to op- Technology of gig workers prefer portunities is preferred by about 60% of gig workers. Less than 20% say online access to gig Consultation 4 they prefer to access gig work offline. [3] opportunities Human 3 More than 35% of workers always secure new gigs via online platforms, Resources but they may turn to offline or other digital channels once the first Healthcare 3 contact is made by engaging via WhatsApp messages, phone calls or text messages. Income from gig work fluctuates and a majority (38%) earns anywhere between KSh 10,000 to KSh 30,000 per month ($100 to $300).

Skilled and unskilled workers propel the gig economy Globally, particularly in markets such as the US, the gig economy is grow- ing on the back of platforms such as ride-sharing, restaurant delivery, professional and creative services, and asset sharing, among others.

In East Africa, particularly in Kenya, artisanal and general services, which includes welders, electricians, carpenters, and domestic work

6 The Gig Economy in East Africa: A gateway to the financial mainstream such as nannying and housekeeping command the largest share of workers, who use local online platforms to find opportunities. 67% Gig work platforms such as the locally founded Fundis and the Swed- of gig workers in Kenya are ish-Chinese Lynk are used to find work. Mastercard research shows educated up to secondary/ high that these gigs are the easiest to find through word-of-mouth. The oth- school or higher er two segments, automobiles at 13%, and transport and logistics at 10%, also have a similar offering.

The automobile segment allows gig participation via companies such Commitment ow long do you plan to continue as a gig worker? as Mobius Motors Kenya that manufacture vehicles, and Associated Ve- 52 hicle Assemblers (AVA) that assemble vehicles and motorcyclists who may double as mechanics and tire repairers. In the transport and logis- tics sector, local company Maramoja and the international ride sharing platform Uber are both used by gig workers.

The gig economy in Kenya is not always online, even if it begins online and is preferred by most. According to the Mastercard research, about 18% find gigs exclusively offline. Close to 65% of workers find work pri- 1 14 marily online and about 60% would prefer online gigs to offline. 9 7 Currently, the online gig economy is a very tiny portion of the overall gig economy. Research-based estimates in 2019 put the total size of the online Kenyan gig economy at $109 million, employing 36,573 gig Less than More than More than More than Don’t know/ workers, with the offline gig economy, comprising 5.1 million workers 1 year 1 year but 2 years but 4 years cannot accounting for $19.6 billion. [3] less than less than say exactly 2 years 4 years Online gig work via platforms is preferred because it enables end-to- end management of the project. A sizeable number (over 35%) said that finding gig work was easier on a platform, and about 30% said platforms made faster payments possible, and also that they helped In which industry do you work? them connect to other workers. Artisan & 20 General Services Research backs the fact that millennials, and by extension Gen Z, work in a technology ecosystem that includes social networking, instant mes- Automobile 13 saging, video-on-demand, blogs and wikis. The digital natives are used Transport to instantly connecting, engaging, and collaborating with cohorts and & Logistics 10 managers seamlessly, leading to better productivity. [4] Entertainment 9 Why gig work? Hospitality 9 “Work is something you do, not something you travel to.” this 1995 Beauty & statement by journalist Woody Leonhard in his book The Underground Personal Care 7 Guide to Telecommuting: Slightly Askew Advice on Leaving the Rat Race Digital Behind, typifies the digital native generations, whether millennials and 6 Entrepreneur Gen Z, which form the largest portion of gig workers. Information Technology 6 Flexibility emerges as the biggest reason that Kenyans choose to start Consultation 4 gig work, with close to 70% picking it as a reason above supplemental income (55%), not finding full-time employment (25%), and other fac- Human Resources 3 tors. The ability to control personal schedules and unlimited compensa- tion caps are drivers that keep workers in the gig economy. Healthcare 3 Being your own boss, and working at one’s own pace are powerful driv- Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 ers, even as the theoretically unlimited opportunity size.

7 The Gig Economy in East Africa: A gateway to the financial mainstream o you work as an online o you prefer online or offline gig worker? or offline gig work?

Online Online Online

Offline Offline Offline Primarily online, Primarily online, No preference sometimes offline No preference Primarily offline, Primarily offline, 60% 40% 20% 0% 60% 40% 20% 0% sometimes online

60% 40% 20% 0% 60% 40% 20% 0%

Why do you use a gig platform? Why do you perform gig work? To be able to To be able to Flexibility find jobs Supplemental To manage jobs income/extra cash Can't find full-time To get paid faster Can't find full-time employment To connect with Only while looking other gig workers Only while looking other gig workers for full-time work Gig platform Gig platform Other not used Other

60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0%

What do you like about What do you dislike about being a gig worker? being a gig worker? Flexible work Flexible work No job stability schedule Being my own boss, Being my own boss, Not knowing income working at own pace working at own pace from week to week No salary cap. Earn No salary cap. Earn Not having benefits as much as I want as much as I want like insurance I can have I can have Hard to manage multiple jobs multiple jobs finances

60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 o you work as an online o you prefer online or offline gig worker? or offline gig work?

Online Online

Offline Offline

Primarily online, sometimes offline No preference Primarily offline, 60% 40% 20% 0% sometimes online

60% 40% 20% 0% Source: Towards a digital workforce: Understanding the building blocks of Kenya’s gig economy. August 2019. Why do you use a gig platform? Why do you perform gig work?

To be able to Flexibility find jobs Supplemental % To manage jobs 35 income/extra cash of gig workers in Kenya say To get paid faster Can't find full-time they always secure a new employment gig via online platforms To connect with Only while looking other gig workers for full-time work Gig platform not used Other

60% 40% 20% 0% 60% 40% 20% 0%

What do you like about What do you dislike about being a gig worker? being a gig worker?

Flexible work No job stability schedule

Being my own boss, Not knowing income illustrative purposes only for photo Stock working at own pace from week to week No salary cap. Earn Not having benefits 8 The Gig Economy in East Africa:as A gatewaymuch toas the I wantfinancial mainstream like insurance I can have Hard to manage multiple jobs finances

60% 40% 20% 0% 60% 40% 20% 0% o you work as an online o you prefer online or offline gig worker? or offline gig work?

Online Online Online

Offline Offline Offline Primarily online, Primarily online, No preference sometimes offline No preference Primarily offline, Primarily offline, 60% 40% 20% 0% 60% 40% 20% 0% sometimes online

60% 40% 20% 0% 60% 40% 20% 0% Why do you use a gig platform? Why do you perform gig work? Why do you use a gig platform? Why do you perform gig work? What are some of your needs/ What perks or services pain-points related to gig work? would you like to receive? To be able to To be able to Flexibility find jobs Loans Supplemental Income fluctuation To manage jobs Supplemental To manage jobs income/extra cash income/extra cash Insufficient income Money Can't find full-time to cover expenses management tools To get paid faster Can't find full-time employment Seasonality of jobs Instant payments To connect with Only while looking other gig workers Only while looking other gig workers for full-time work Merchant offers Gig platform Lack of benefits Gig platform Other not used Other Insurance and 60% 40% 20% 0% other benefits 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0%

Stock photo for illustrative purposes only for photo Stock 60% 40% 20% 0% What do you like about What do you dislike about What do you like about What do you dislike about Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 being a gig worker? being a gig worker? Flexible work Flexible work No job stability schedule The gig disconnect Being my own boss, Being my own boss, Not knowing income Gig workers globally face challenges that come with the benefits of working at own pace from week to week working at own pace from week to week such work. Benefits most sought after by gig workers include: insurance No salary cap. Earn No salary cap. Earn Not having benefits (health, dental, vision, life, disability), financial services (savings, tax as much as I want like insurance as much as I want like insurance support, retirement benefits, salary advance), education (professional I can have Hard to manage I can have Hard to manage training, personal finance education), and perks (paid leave, cashback / multiple jobs finances finances merchant discounts). [2] 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% 60% 40% 20% 0% For gig workers in Kenya, the biggest frustrations are around continuity o you work as an online o you prefer online or offline gig worker? or offline gig work? of income. More than 55% said that not knowing when the next gig is contributes to instability. Close to 60% said that fluctuation in income Online Online from week to week is a cause for frustration. Interestingly, fluctuating income is perceived as a bigger problem (reported by about 62%) com- Offline Offline pared to income being insufficient to cover monthly expenses (reported by about 52%). Clearly, financial planning suffers when income is sea- Primarily online, sometimes offline No preference > % sonal and unpredictable. Primarily offline, 60 60% 40% 20% 0% sometimes online of respondents choose getting What can improve a gig worker’s life? Loans, instant payments and in- loans as the most-desired perk surance are the top three perks desired by gig workers in Kenya, and 60% 40% 20% 0% they would like with gig work 55% of them expect to receive these perks at no cost. Why do you use a gig platform? Why do you perform gig work?

To be able to Flexibility find jobs Supplemental To manage jobs income/extra cash

To get paid faster Can't find full-time employment To connect with Only while looking other gig workers for full-time work Gig platform not used Other

60% 40% 20% 0% 60% 40% 20% 0%

What do you like about What do you dislike about being a gig worker? being a gig worker? CITATIONS 1. Kenya National Bureau of Statistics. Economic Survey 2019. 2. Mastercard and Kaiser Associates. The Global Gig Economy: Capitalizing on a ~$500B Opportunity. May 2019. Flexible work No job stability schedule 3. Mercy Corps / Genesis Analytics. Towards a digital workforce: Understanding the building blocks of Kenya’s gig economy. August 2019. 4. Pricewaterhouce Coopers. Millennials at Work Reshaping the Workplace. 2011. Being my own boss, Not knowing income 5. Addison-Wesley. Leonhard, Woody. The Underground Guide to Telecommuting. 1995. working at own pace from week to week No salary cap. Earn Not having benefits as much as I want like insurance 9 The Gig Economy in East Africa: A gateway to the financial mainstream I can have Hard to manage multiple jobs finances

60% 40% 20% 0% 60% 40% 20% 0% Stock photo for illustrative purposes only for photo Stock

Digital Inclusion: A Prime Enabler of the Gig Economy

Cash dominates transactions in East Africa in the strategic sectors of the economy – agriculture, tourism and micro, small and medium-sized enterprises (MSMEs). Connected devices that power the digital econ- omy have proven to be vehicles of inclusion and development in Africa. Bridging divides between urban and rural, rich and poor, they connect individuals to peers, information, opportunities, and services.

The relatively underdeveloped infrastructure, such as roads or electric power, has made the mobile phone a service delivery platform that not only reduces communication and coordination costs but also trans- forms lives through innovative applications and services. [1]

Strengthening the digital sector facilitates more inclusive growth of the gig economy. The smartphone is already a force to be reckoned with. In 2019, mobile technologies and services generated $4.1 trillion of economic value (4.7% of GDP) globally, resulting from the economic impact of mo- bile communications on consumers, businesses and nations.

Estimates say that as countries benefit from the improvements in pro- ductivity and efficiency brought about by increased take-up of mobile services, this is expected to rise to $5 trillion (4.9% of GDP) by 2024. [2]

10 The Gig Economy in East Africa: A gateway to the financial mainstream ow do you schedule What tools do you use gig work? to manage gig work? Mobile Mobile phone 47 phone 5 Personal Paper-based relationships 35 expense tracker 1

Mobile 34 Electronic 12 apps expense tracker Referrals 33 None Word of Prepaid mouth 32 cards 6 Social media, e.g. WhatsApp 2 Other 2 Desktop computer

Tablet 3

Other 2 Source: The gig economy in East Africa. Lokoja Source: MobileSource: solutions a catalyst in Kenya penetration Internet for Point survey for Mastercard. January 2020

Between 2024 and 2034, 5G technologies are expected to contribute $2.2 trillion to the global economy. ThereWhat will tools be moredo you than use 600 to manage million gig work? new subscribers by 2025; nearly two-thirds will5 be from Asia Pacific and Sub-Saharan Africa. Smartphone connections in Sub-Saharan Africa are expected to double by 2025. [2]

This economic contribution is possible because connected devices facil- itate planned urbanization and growth by leveraging the gig economy and providing access to services. A high degree of informality is one of the characteristics of rapid urbanization that African countries are cur- rently experiencing. 1 In the Mastercard 2020 survey, more than 47% of respondents12 said 6 they use the mobile phone to schedule gig work. Since mobile phones 2 47% are used in personal life, they transition easily to being used as tools of gig workers in Kenya say in the digital economy. The survey found thatMobile 80% ofPaper- gig workersElectronic use None Prepaid Other phone based expense cards they use the mobile phone mobile phones to find jobs, schedule assignments, getexpense paid andtracker man- to schedule gig work age income. tracker

About 45% of people in the SSA region own a mobile phone. Subscrip- tion to mobile services is growing at a compound annual growth rate (CAGR) of 4.6%, one of the fastest in the world. However, the region still lags the global average in ownership of both feature phones and smartphones.

Across the world, 67 of every 100 people have a mobile subscription, and 65 of every 100 own a smartphone. In SSA, 45 of every 100 people have a mobile subscription, and a smartphone. [2]

A World Bank report found that the arrival of faster internet in Sub-Sa- haran Africa during the late 2000s and early 2010s increased the prob- ability of an individual being employed by 3.1% to 13.2%, depending on the country. Often, higher-quality jobs are listed online, available to those with digital literacy and internet access. [3]

11 The Gig Economy in East Africa: A gateway to the financial mainstream What perks, services would you How do you find out about Mobile money is also powering digital transactions. In 2019, the number like to receive as a gig worker? gig work opportunities? of mobile money accounts registered globally crossed 1.04 billion. East Africa added 22 million new accounts in 2019. Called the “the cradle Instant Word of mouth pay-outs of mobile money”, it saw the number of active mobile money accounts Personal sources, exceed 100 million. [4] Loans e.g. family, friends Merchant Advertisements, One of the reasons that the digital economy is being seen as the future offers e.g. billboards of Africa is because of its population mix. By 2030, Africa is expected to Money Social media, e.g. hold the world’s largest potential workforce. management tools LinkedIn, Facebook Insurance and Gig platforms With more than 60% of its population under the age of 25, SSA is the other benefits world’s youngest region. The continent’s working-age population is set Other Other to increase by two-thirds, from 370 million adults in 2010 to over 600 million in 2030. Younger populations are considerably more educated 60% 40% 20% 0% 60% 40% 20% 0% and digitally savvy than their older counterparts. [5] Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 The rise of digital platforms Startups are using digital technology to fill talent and service gaps. An- dela, for example, trains African software engineers at its campuses in Nigeria, Kenya and before placing them as part of “distributed teams” to companies in Africa and globally. [6]

Lynk has emerged as a local favorite in Kenya, matching gig work in categories ranging from plumbing and electrical work to yoga lessons and hair care to customers. It also invests in onboarding and up-skilling its members. Lynk has reported a two- to three-fold increase in month- Which gig platform ly income for participating workers, in addition to providing them with do you work with? services such as logistics and warehousing support, material wholesal- Uber 22 ing and ongoing skill training. [7]

Glovo 12 It’s not unusual for small businesses – from chicken farmers to tailors and fashion designers – to run their office entirely from their phones, with Bolt 11 access to opportunities and payments. Being connected to the internet makes possible business networking, lifting multiple communities across Fundis 10 Africa out of poverty and digital isolation. Micro and small businesses Lynk 10 report a positive impact from being able to stay open longer while also connecting more easily with potential buyers and suppliers. [8] MamaFua 7 In the Mastercard survey 2020, gig workers said they preferred to use Little Cabs 7 platforms because these enable end-to-end management of their jobs. However, most workers work with only one platform. Kisafi 4 Even though most gig workers – offline and online – are focused on Sendy 3 general services, the platforms commanding most attention are in the transport and logistics sector. The top three most commonly used gig Safi Safi 3 platforms in Kenya are Uber, Glovo and Bolt. Fundis and Lynk from the Parapet 2 artisan and general services sector follow. Ease of finding jobs and ease of navigation are the top two draws for CIick Cabs 2 using platforms. In fact, ease of use and ease of finding jobs ranks above being paid faster in why workers choose a platform. Mara Moja 2 Instant payment upon completion of their gig work is the most desired Isamado 1 feature on a gig platform demanded by 81% of gig workers in Ken- Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 ya. The most desirable capabilities in a gig platform are include instant

12 The Gig Economy in East Africa: A gateway to the financial mainstream

What tools do you use to manage gig work? 5

1 12 6 2

Mobile Paper- Electronic None Prepaid Other Phone based Expense Cards Expense Tracker Tracker Why do you use specific gig platforms?

It has lot of job listings It is easy to find jobs It is easy to use (navigate) It has tools to manage my jobs It has tools to manage finances It has worked for me in the past Stock photo for illustrative purposes only for photo Stock 60% 40% 20% 0% Why dont you use What can improve gig work? a gig platform? 1. Access to loans Access and ability to secure loans from non-personal sources with fu- Don't have access ture cash flow being the collateral and or guarantee for repayment. to gig platforms These loans would enable workers procure work tools, faster internet Platforms take too service and smartphones. much of my earning 2. Improved payments I find gig platforms Faster and instant payment to eliminate the need to secure personal difficult to use loans from friends and family to bridge the cash flow gap from late Jobs I want are not payment after tasks have been completed. on gig platforms 3. Bundled services Platforms dont Eligibility to enrol in a single program that provides access to a broad have tools I need coverage of products such as health insurance, education insurance and retirement savings. 60% 40% 20% 0% What features of gig platforms 4. Affordable smartphones and internet access do you like best? Affordability of smartphones and internet access which are founda- tional tools for gig workers will improve their experience.

Being paid when 5. Training and skills development the gig is complete Workers recognize the importance of acquiring new skills via online Ability to manage and offline training programs to improve their ability to earn higher income vs. expenses wages and drive repeat business.

Access to benefits, 6. Childcare services e.g. insurance, loans It is common for artisanal gigs such as cleaning carried out mostly by women to get cancelled by the workers. The major reason is that Other women are the primary childcare providers and often have to trade- off taking care of their children over scheduled gigs. 80% 40% 0% Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 January Mastercard. for survey Point Lokoja Africa. in East gig economy The Source:

payment, education trust fund, insurance and a healthcare savings pro- gram. Provision of equipment, referrals, free trials, payment efficiency and improved labor standards are key expectations of gig workers for a benefits marketplace platform.

Barriers of cost, access and speed However, there are still barriers to internet access that need to be over- come to realize the massive opportunity that the East Africa region represents. One is the slower speed of internet data in Africa compared to other continents. SSA lags other regions in 4G adoption, which ac- counted for 27% of total connections in 2019, compared to the global average of 52%. [2]

13 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

Across Africa, the average cost for 1GB data is 7.12% of the average monthly salary. In some countries on the continent, 1GB costs as much as 20% of the average salary, which makes it inaccessible for all except the upper crust. In comparison, the cost of 1GB of data in the United States is 0.15% of the average monthly income. [9, 10, 11]

81% The Mastercard survey 2020 finds that despite the clear preference for of gig workers in Kenya say using platforms, these are not the number one source for accessing instant payment when a job new opportunities. According to the survey, people also find gig work is finished is the most desired via social media such as LinkedIn or Facebook, followed by personal net- feature of a gig platform works such as family, word of mouth and advertisements.

CITATIONS

1. Aker, Jenny C. and Mbiti, Isaac M. Mobile Phones and Economic Development in Africa. Journal of Economic Perspectives—Volume 24, Number 3. 2010. 2. GSMA Intelligence. The Mobile Economy 2020. 3. Africa Development Forum. Edited by Jieun Choi, Mark A. Dutz, and Zainab Usman. The Future of Work in Africa: Harnessing the Potential of Digital Technologies for All. 2019. 4. GSM Association. Naghvai, Nika. State of the industry report on mobile money. 2019. 5. World Economic Forum. Samans, Richard and Zahidi, Saadia. The Future of Jobs and Skills in Africa. May 2017. 6. World Economic Forum. Hruby, Aubrey. A new kind of company is revolutionizing Africa’s gig economy. 2019. 7. Donner, Johnathan. Could Africa’s Marketplace Platforms Help Upskill a Generation for the Digital Age? 8. Mastercard. Pay on Demand: The digital path to financial inclusion in Africa. 2020. 9. Alliance for Affordable Internet. Woodhouse, Teddy and Cameron, Calum. Affordability Report, 2019. 10. Cable.co.uk. Worldwide mobile data pricing: The cost of 1GB of mobile data in 228 countries. 2020. 11. Census.gov. Guzman, Gloria G. Household Income: 2019. American Community Survey Briefs. September 2020.

14 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

Unlocking Prosperity: An Intersection of Needs

The downstream benefits of a digital economy can be amplified by strengthening financial inclusion.

According to the Mastercard survey 2020, the key pain points faced by gig workers are the inconsistency of work that makes it difficult to pre- dict cash flow; income fluctuation; costs such as training, data plans, transportation and fuel; delayed payments, which force the gig worker to acquire personal loans from friends and family; availability, cost and quality of internet connectivity; affordability of smartphones; and over- crowded gig platforms that result in high levels of competition.

Each of the players in the value chain – from the platform to the mo- bile industry and the payments provider – plays a role to ensure that the end-to-end journey of the gig worker is smooth and profitable. It requires a holistic view of the employment journey rather than just the gig bit, or the payments bit, or the connectivity bit.

A collaborative approach is called for to not just create jobs, but also bridge the skills gap, providing incremental learning and training oppor- tunities at every stage of gig work, ensuring better working conditions and benefits.

15 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

In September 2020, Mastercard announced the expansion of its world- wide commitment to financial inclusion, pledging to bring a total of 1 billion people and 50 million micro and small businesses into the digital economy by 2025. As part of this effort, there will be a direct focus on providing 25 million women entrepreneurs with solutions that can help them grow their businesses. [1]

The key solutions on which stakeholders - including the government and private sector entities - need to focus on include:

1. Enhanced market access via digital acceleration The biggest challenge for gig workers is continuity of gigs and income. 98% According to the Mastercard 2020 survey, a large number of gig workers workers indicate a preference are still excluded from the digital economy. MNOs and digital platforms for a platform marketplace have the potential to enable gig workers to access consumers at scale. with multiple capabilities Data can be a key driver for accelerating the onboarding of gig workers across multiple platforms, especially as the scrutiny increases on the reliability of gig workers.

Access to affordable internet will also be fundamental to this shift. Partnering with an enabling gig platform to grow is key to driving more opportunities for gig workers.

2. Platforms connected through gig-worker identity Access to credit and benefits are key for gig workers to survive when business is slow. Currently, however, it is difficult for a single platform to provide such a service, as gig work is platform agnostic, allowing work- ers to move from one platform to another. A way to establishing an identity for gig workers across platforms can enable their temporary

16 The Gig Economy in East Africa: A gateway to the financial mainstream Partnerships in action

Mastercard works in partnership with multiple market participants across Africa to ensure that the benefits of inclusion in the financial mainstream reach an increasing number of people in the region.

Mastercard partners with Delivery Hero SE, a delivery platform, to fully digitize its payment chain within its ecosystem across all their brands in the Middle East and North Africa (MENA). Announced in September 2020, the partnership impacts more than 650,000 delivery riders in the region who can now receive instant access to their earnings and a wide range of financial services that bring them into the financial digital ecosystem. [3]

Responding to the increasing demand for e-commerce, Mastercard part- ners with leading brands across Africa to bring exclusive discounts to con- sumers shopping from home. These include on-demand courier service Glo- vo, supermarket chain Tuskys, Mama Rocks Burgers and Art Caffe Market Place in Kenya, Sakanal in Senegal, and Nairabox, Ulesson and Showmax in Nigeria. [4]

Through its mobile platform Mastercard Farmer Network, Mastercard 650,000 improves market access, increases price transparency, and digitizes pay- delivery riders will ments to connect small farmers in Kenya, Uganda and Tanzania. East Af- rica is also served by Kasha, an e-commerce platform optimized for wom- receive instant access en’s health and personal care, delivering confidentially to both urban and to their earnings low-income rural areas. [1]

In Uganda, Mastercard launches Kupaa in partnership with UNICEF Ugan- da and the country’s Ministry of Education, which enables parents and caregivers to pay school fees and other school expenses with their mobile phones securely, easily, and in small payments when they are able, easing the burden of lump sum payments. [1]

Mastercard expands its partnership with Unilever to create Jaza Duka (fill up your store), a digital program created in 2018 for micro-merchants in Kenya with more than 18,000 duka owners already registered. The pro- gram provides a micro-credit eligibility recommendation to Kenya Com- mercial Bank (KCB), which can then assess a retailer’s creditworthiness and extend credit for stock purchases. [1]

Mastercard announced a global partnership with Samsung to enable digi- tal access to consumers and small businesses in emerging markets through its extensible Pay on Demand platform. [5]

employers to contribute to their well-being while also enabling lend- ers to have an overview of the gig worker’s overall cash-flow. A legal framework for gig work is being discussed globally to ensure recognition of the fact that independent workers use gig work as full-time employ- ment and are entitled to register. for government benefits and private services via platforms that may be mandated to open their systems to allow this. [2]

Gig economy platforms share many strategic objectives, such as con- trolling service quality and dealing with regulation, to be successful. Key goals include improving freelancer retention and engagement where gig workers have numerous platforms available. Critical business needs include the opportunity for third-party innovations from providers such as Mastercard, who can work together to offer value-added incentives to promote loyalty.

3. Efficient payments provide instant access to earnings Payment service providers (PSPs) are becoming increasingly integral to the growth of the gig economy, facilitating platforms’ compliance

17 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

ow do you prefer to be paid with regulation concerning KYC and payment flows, and to seamlessly for your gig work? disburse funds across geographic markets as platforms expand. PSPs are expanding their and the platforms’ payout capabilities to accom- Cash modate a growing range of markets and to provide customized solu- Mobile money tions to cater to the specific needs of each platform. A payment solu- (MPESA/Airtel) tion addressing gig workers’needes is effective when if it provides the Online bank convenience of instant settlement as well as access to funds through transfer/deposit cash-out mechanisms. Payment by/into gig wallet Gig workers live from day-to-day earnings and cite “instant payment Payment into after a job is completed” as the most desired feature of a gig platform a card in the Mastercard 2020 survey. 60% 40% 20% 0% Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020 In step with the prevalent mobile money system, 62% of respondents say they prefer to receive payment through mobile money such as MPESA or Airtel because it is readily available, reliable, easy to manage, secure, and convenient. Other expectations include provision of equipment, re- ferrals, free trials, payment efficiency, and improved labor standards.

4. Cash flow and benefits support Serving the micro-insurance needs of the gig worker is important. Traditional products may not adequately serve the needs of the gig worker who is at risk from personal accident and injury, loss in revenue from any absence from work, incomplete delivery or payments, and economic volatility.

Loans, instant payments, and benefits such as insurance are the top three perks desired by gig workers in Kenya.

As many 67% of respondents in the Mastercard 2020 survey expect to access these perks and services via the gig platform app they already

18 The Gig Economy in East Africa: A gateway to the financial mainstream What perks, services would you What are you willing to pay like to receive as a gig worker? monthly for perks/services?

Instant KSh 100-300 pay-outs (USD 1-3)

Loans KSh 301-500 (USD 3-5) Merchant KSh 501-1,000 offers (USD 5-10) Money KSh 1,001+ management tools (USD 10+) Insurance and Nothing, other benefits it should be free

60% 40% 20% 0% 60% 40% 20% 0%

Where would you envision Would you prefer a platform that accessing the perks/services offers you these in one place?

5 2 9

2 Bank app Platform app Both 67

Source: The gig economy in East Africa. Lokoja Point survey for Mastercard. January 2020

work with. About 28% of workers say that they would like to access these via their banking apps. A small percent – 5% – expect to access these perks and services via gig platforms, banking apps, governmental avenues, or savings and credit cooperative societies. In fact, 98% of gig workers indicate a strong preference for a gig plat- form marketplace with multiple capabilities.

With 45% of respondents saying they are willing to pay for such ben- efits and services, there is evidence of the gig worker emerging as a consumer of benefits, rather than a recipient. A quarter of gig workers interviewed said that they would pay KSh 100-300 per month ($1-3) and 26% of gig workers said they would pay KSh301-500 ($3-5) to ob- tain benefits and loans.

The solution lies in a cover that is:  On demand and can be flexible based on availability of gig work  Digitally delivered based on the worker’s usage patterns  Affordable and dynamically priced with both the platform and the worker contributing toward the cover  Pooled, based on a peer-to-peer model that covers a pre-de- termined number of workers at any given point of time, based on the history of active daily workers on the platform [6] Regular costs such as training, data plans, transportation, and fuel have a negative impact on cash flow of gig workers. In as far as any

19 The Gig Economy in East Africa: A gateway to the financial mainstream Stock photo for illustrative purposes only for photo Stock

cash flow solution can support things such as provision of equipment, referrals, free trials, these would bridge the needs gap.

5. Connectivity Increased coverage of 3G, 4G, and 5G networks, combined with a higher penetration of affordable smartphones, innovation in mobile financial services, enabling regulation, and advancements in energy supply are some of the pathways to increased participation of the gig workforce in the economy. [7]

CITATIONS

1. Mastercard Builds on COVID-19 Response with Commitment to Connect 1 Billion People, 50 Million Small Businesses, 25 Million Women Entrepreneurs to the Digital Economy by 2025. May 2020. 2. Harris, Seth D. and Krueger, Alan B. A Proposal for Modernizing Labor Laws for Twenty-First Century Work: The “Independent Worker”. December 2015. 3. Delivery Hero and Mastercard forge largest partnership deal to transform the digital payments and financial services landscape for 20 million consumers, riders and restaurants in MENA. September 2020. 4. Mastercard partners with leading online and mobile platforms to bring exclusive discounts to consumers shopping from home. July 2020. 5. Mastercard and Samsung Partner to Enable Digital Inclusion. March 2020. 6. Microsave. Charagu, Peter. Covered! How informal youth workers in the gig economy can be insured. May 2020. 7. GSM Association. Sharma, Akanksha, Viljoen, Kim, Ajadi, Sam, Moreau, Mathilde Martin, and Muheim, Philippe. Powering Youth Employment through the Mobile Industry in Sub-Saharan Africa by 2025. January 2020.

20 The Gig Economy in East Africa: A gateway to the financial mainstream Authors

This white paper was written in partnership with Mastercard’s Digital Payments & Labs, Mastercard Labs for Financial Inclusion, and White Paper Media Consulting.

The findings and recommendations presented in this paper were in- formed by secondary research as well as interviews with Mastercard executives.

The user survey conducted by Lokoja Point on behalf of Mastercard in- cludes 1,500+ in-person interactions with workers in the informal sector across five zones in Kenya, in-depth face-to-face interviews with more than 50 respondents, and market assessment and insight sessions with seven experts on the gig economy.

All images are for representational purposes only.

21 The Gig Economy in East Africa: A gateway to the financial mainstream mea.mastercard.com