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Kenya eTrade Readiness AssessmentVIIIFIGURES, TABLES AND BOXESFIGURESFigure 1: Enabling factors for e-commerce development in Kenya. 3Figure 2: African countries leading in e-commerce in 2019–2020. 11Figure 3: Dialogue between the Government and the private sector. 15Figure 4: Dialogue between the Government and development partners. 15Figure 5: Impact of COVID-19 on sales among businesses in the private sector. 16Figure 6: Services sectors that benefited the most from e-commerce in Kenya (current and future). 17Figure 7: Goods sectors that benefited the most from e-commerce in Kenya (current and future). 18Figure 8: Consumer purchases of goods. 19Figure 9: Consumer purchases of services. 20Figure 10: Kenya Network Readiness Index performance. 22Figure 11: Most pressing issues regarding ICT infrastructure to create an environment conducive toe-commerce. 24Figure 12: Map of community networks in Kenya. 27Figure 13: Preferred delivery method for local and international deliveries. 33Figure 14: Logistics and trade facilitation priorities. 36Figure 15: Forms of payment offered to local and international customers. 38Figure 16: Important factors for making an online purchase in Kenya. 40Figure 17: Most pressing issues to promote e-payment solutions in Kenya. 41Figure 18: Law enforcement in Kenya. 43Figure 19: Implications of international standards on trust in e-commerce. 48Figure 20: Most pressing issues in terms of legislative and regulatory frameworks. 50Figure 21: E-commerce skills and capacity-building needs. 52Figure 22: Kenya’s banking structure as of December 2020. 56Figure 23: Banks in Kenya by total assets (in billion US ). 57Figure 24: Maps of financial inclusion and exclusion. 58Figure 25: Access to finance: the most pressing issues for e-commerce development in Kenya. 61Figure 26: Main reasons for not applying for funding. 61Figure 27: Location of innovation hubs in Kenya. 62TABLESTable 1: Status of four key laws as per UNCTAD Global Cyberlaw Tracker. 43Table 2: Government of Kenya’s digital skills pillar. 53Table 3: Loan accounts per sector. 59BOXESBox 1: Bridging the digital divide: Current efforts to draft the national ICT accessibility standard. 23Box 2: Kenya’s Licensing and Shared Spectrum Framework for Community Networks aimed at minimizingthe digital divide. 28Box 3: Costly and complex trade logistics continue to hinder the expansion of Enda’s reach to internationalmarkets. 35Box 4: Improvement in advanced digital skills is important to grow e-commerce in Kenya – the example ofShop Nanjala. 54Box 5: Accelerating the digital economy through women-owned businesses. 63

AKCBKCCPCOMESACOVID-19DLPDSTEACEPAeT ReadyFSD sAfrican Continental Free Trade AreaAfrican Development BankApplication Programming InterfaceBusiness-To-ConsumerBritish Standards InstitutionCommunications Authority of KenyaCompetition Authority of KenyaCentral Bank of KenyaCounty Connectivity ProjectCommon Market for Eastern and Southern AfricaCoronavirus DiseaseDigital Literacy ProgrammeDigital Services TaxEast African CommunityEconomic Partnership AgreementeTrade Readiness AssessmentFinancial Sector Deepening KenyaGross Domestic ProductInformation and Communications TechnologyKenya Bankers AssociationKenya Private Sector AllianceKenya Information and Communications ActKenya National Bureau of StatisticsKenya National Chamber of Commerce and IndustryKenya Revenue AuthorityLeast Developed CountryMegabits per SecondMinistry of Energy and PetroleumMinistry of ICT, Innovation and Youth AffairsMinistry of Industrialization, Trade and Enterprise DevelopmentMicro, Small and Medium-Sized EnterprisesNational Addressing SystemNational Optic Fibre Backbone InfrastructureNetwork Readiness IndexOnline Dispute ResolutionPostal Corporation of KenyaPayment Service ProviderPerson With DisabilitySavings and Credit Cooperative SocietySouthern African Development CommunityStandard Gauge RailwaySmall and Medium-Sized Enterprises

XTFAToTTVETULFUNCITRALUNCTADUNECAUPUUSFVATWTOKenya eTrade Readiness AssessmentTrade Facilitation Agreement (WTO)Turn-over-TaxTechnical and Vocational Education and TrainingUnified Licensing FrameworkUnited Nations Commission on International Trade LawUnited Nations Conference on Trade and DevelopmentUnited Nations Economic Commission for AfricaUniversal Postal UnionUniversal Service FundValue Added TaxWorld Trade Organization

EXECUTIVE SUMMARY1EXECUTIVE SUMMARYKenya has a robust digital infrastructure, due to theinvestments the Government and other stakeholdershave made over the last three decades. This hasresulted in increased Internet adoption, uptake ofdigital devices, and mobile money innovations, whichhave collectively been critical enablers to the growthof e-commerce in the country. To this extent, Kenyais among the leaders in e-commerce on the Africancontinent, with combined revenues expected to hitUS 3.6 billion in 2022. In 2020, 13 e-commercestart-ups from Kenya raised US 43,505,467 infunding (Disrupt Africa, 2021). Nonetheless, thereare several barriers to this growth, and several policymeasures need to be taken for more participants tofully benefit from e-commerce. Since this assessmentwas conducted during the COVID-19 pandemic, thisreport brings to light the impact of the pandemic one-commerce in the country, and ponders strategies toimprove e commerce moving forward.eTrade readiness assessment and strategyformulationNational policies on ICT, e-government and the existingtrade policies indicate Kenya’s readiness to engage inand benefit from e-commerce. The Government isalso aware of the role of public–private dialogue in thedevelopment of e-commerce, and regularly engagesthe private sector in policy formulation. Additionally,significant strides have been made to create anenabling regulatory environment for businesses andtrade to flourish within the digital space. Nevertheless,Kenya still lacks an e-commerce strategy to propelgrowth in this space, while an eTrade policy is yet to bedeveloped. Likewise, there is a dearth of business andconsumer data on e-commerce, which is essential inpolicy formulation for the industry.ICT infrastructure and servicesKenya has made substantial investments in ICTinfrastructure, essential for the growth of e commerce.This includes core digital infrastructure for connectivityand data infrastructure (data centres, submarinecables and cloud infrastructure). These developmentsare accompanied by efforts to increase the generationof electricity, including from renewable energy sources.Consequently, this has resulted in exponential growthin mobile subscriptions, broadband subscriptionsand improved international Internet bandwidth.There is also increased digitization of public services,with several government services available online.Nevertheless, the country is grappling with a digitaldivide in the uptake of digital devices, a gap in mobilenetwork coverage, inadequate access to reliable andaffordable electricity, a gap in last-mile broadbandconnectivity, relatively high costs of data, and highcost of essential infrastructure hardware. These gapscontinue to be a deterrent for increased e-commerceadoption.Trade logistics and trade facilitationKenya has relatively well-developed transport andlogistics infrastructure, including four internationalairports, an extensive road and railway network, andtwo modern deep seaports at Mombasa and Lamu,which have been critical enablers of e-commercedevelopment in the country. It also has severalnational and international couriers serving its domesticmarket. However, the absence of physical addressingsystems, heavy road congestion, lack of track-andtrace capabilities among smaller logistics companies,and poor road infrastructure in some parts of Kenyaare critical challenges to e-commerce in the country.Kenya has ratified the Trade Facilitation Agreement(TFA) of the World Trade Organization (WTO), whichrequires it to make several reforms to its trade andcustoms facilitation laws.Payment solutionsKenya is a continental leader in mobile moneyinnovation. It is the home of M-Pesa, the leadingmobile money transfer service in Africa, with over 50million active users. Consequently, mobile money isthe most prevalent payment method for e-commerce.In 2020, there were more than 30 million activeregistered mobile money subscriptions in Kenya,while the total value of mobile money transactions inthe same year was US 50 billion. Additionally, banktransfers, debit and credit cards, and cash are widelyused for e-commerce. Nonetheless, the high costof transactions, and concerns about fraud, continueto hamper trust and hinder the use of electronicpayments for e-commerce.

2Legal and regulatory frameworkKenya has adopted legal frameworks that have abearing on e-commerce. These include the KenyaInformation and Communications Act, Rev. 2009(amended in 2013), the Consumer Protection Act of2012, the Data Protection Act of 2019, the ComputerMisuse and Cybercrimes Act of 2018, the ElectronicTransaction Bill of 2007, and the Information andCommunication Bill of 2008. The country has also putin place laws that promote the protection of intellectualproperty rights; these are in the Constitution that waspromulgated in 2010, the Industrial Property Act of2001 and the Copyright Act of 2001.Nonetheless, the Consumer Protection Act of 2012needs to be amended to address several gaps relatingto e-commerce. There is also a need for increasedpublic sensitization on these laws and sensitizationof the duty bearers for increased compliance. Thereis also a need for improved enforcement of theseregulations to stem the cases of fraud (such asmisleading advertisement, payment fraud and nondelivery of goods), cybercrime and other issueshindering the growth of e-commerce.E-commerce skills developmentThe Government is aware of the glaring digital skillsdeficit in the country, and has put in place policymeasures to address them. One of these measuresentails mainstreaming ICT at all levels of education,as highlighted in the National ICT Strategy forEducation and Training and the country’s “Vision2030” policy document. Nevertheless, there is stilla skills mismatch between curricula in institutionsof higher learning and labour market demands. Thishas resulted in high unemployment among youth,particularly recent graduates. The private sector andother development partners have also initiated severalprogrammes to complement the Government’s effortsto upskill the public. Private sector companies suchKenya eTrade Readiness Assessmentas AkiraChix, Moringa School and Andela also offerdigital skills courses to close the skills gap in thecountry. In addition to targeting schoolchildren andthe youth, both public and private sector agencieshave developed digital literacy skills programmes forwomen and persons living with disabilities. Additionally,e commerce marketplaces have been instrumental inequipping entrepreneurs with hands-on e commerceskills. While a couple of development centres wereestablished in the first half of 2022, they may ultimatelyadd to the skills gap problem rather than address itpoaching top developers from existing local start-ups.Google has also announced that it will open an AfricaDevelopment Centre in Nairobi.Access to financeThere are several forms of financing, both formaland informal, available to e-commerce companiesin the country. The formal sources include banks,savings and credit cooperative societies (SACCOs),mobile loans, government funds, venture capitalfirms, private equity firms and development partners,among others. The informal ones include chamagroups, informal money lenders and employers.Nonetheless, entrepreneurs still face lots of challengesin accessing financing for their businesses. Thesechallenges include inadequate fundraising/pitchingskills necessary to raise funds for viable ideas, lackof collateral, the prohibitive cost of borrowing, inabilityto find guarantors, short repayment period, and thelengthy approval processes for bank business loans.These challenges are exacerbated among women,who face numerous gender-based, cultural and socialbased challenges when accessing finance. Financialinstitutions also face several challenges in lendingto these businesses. Though several measures arein place to address these challenges (including theavailability of business incubators; the Kenya StartUp Bill; and the Central Bank of Kenya (Amendment)Act, 2021), much more needs to be done to improveaccess to financing among e-commerce companies.

EXECUTIVE SUMMARY3Figure 1 : Enabling factors for e-commerce development in KenyaAmong the following, please indicate the most important issues to create an environment conducive ntconduciveconducivetotoe-commercee-commercein inKenyaKenya(public and privatee-commercein Kenya(Publicandprivate sectorsurveys,60 responses)65%ICT infrastructure35%35%Coordinations among institutios32%Secure transactions32%Trade logistics and cross-border facilitation measures23%23%22%22%Existence of a c

IV Kenya eTrade Readiness Assessment PREFACE The eTrade for all initiative, launched at the fourteenth session of the United Nations Conference on Trade and Development (UNCTAD XIV) in July 2016, is a practical example of how to harness the digital economy in support