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Originally published at <a href="https://inside.com/campaigns/inside-business-27700/sections/fintechs-thriving-in-emerging-markets-234731" class="jss99">Inside.com Business</a> by Bojana Dobran
 
Payments, credit, and neobanks make up the majority of fintechs in Africa, Latin America, and India, according to "The State of Fintech in Emerging Markets&nbsp;<a href="https://bfaglobal.com/catalyst-fund/briter-catalyst-fund-state-of-the-fintech-industry-report/?utm_source=briter&amp;utm_medium=social&amp;utm_campaign=fintech_report" class="jss99">Report</a>" by Catalyst Fund and Briter Bridges.&nbsp;Its authors <a href="https://techcrunch.com/2021/05/06/payments-lending-and-neobanks-rule-fintechs-in-emerging-markets-report-says/">surveyed</a> more than 177 startups and 33 investors in the three regions.
More:
<ul>
 <li>Some 300 million currently unbanked African adults account for 17% of the global unserviced market. In Latin America, 70% of people do not use banking services.</li>
 <li>Equally highly underserved markets, together with relaxed regulatory policies, give a boost to investments and growth.</li>
 <li>Financial technology companies raised $23B in the regions since 2017.</li>
</ul>
 
<figure><img src="https://firebasestorage.googleapis.com/v0/b/wazoplus.appspot.com/o/post-images%2F1621958847109_IMG-4615.PNG?alt=media&amp;token=11240ac5-c0b0-4ca2-8945-be9cbda30909" style="">&nbsp;</img></figure>
<ul>
 <li>An average African&nbsp;seed round brings founders $1M in financing. India and Latin America are better funded: seed-stage capital raises collect $4M on average.</li>
 <li>The most significant raises on the African continent in 2019 involved Branch (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwjzytePrbXwAhUBlawKHQ4-DDkQFjABegQIBBAD&amp;url=https%3A%2F%2Fwww.pymnts.com%2Fnews%2Finvestment-tracker%2F2019%2Fbranch-venture-funding-visa-partnership%2F&amp;usg=AOvVaw3rJpvc0Cp0bSArJMsnyw_A" target="_blank">$170M</a>), Tala (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwis-5iVrbXwAhUMWa0KHRq4AcwQFjAAegQIBBAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2019%2F08%2F21%2Ftala-series-d-india%2F&amp;usg=AOvVaw1KdnqjDSF4IBXSR1UGCWml" target="_blank">$110M</a>), World Remit (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwi344GfrbXwAhUFMqwKHQi1BhQQFjAAegQIAxAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2019%2F06%2F03%2Fworldremit-raises-175m-to-help-users-send-money-to-contacts-in-emerging-markets%2F&amp;usg=AOvVaw0TfGgEJgiVQ5nQS8Erp_eR" target="_blank">$175M</a>), Interswitch (reportedly&nbsp;<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;ved=2ahUKEwii4KX0rLXwAhVHSq0KHRSaClsQFjAAegQIBBAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2019%2F11%2F11%2Fnigerias-interswitch-confirms-1b-valuation-after-visa-investment%2F&amp;usg=AOvVaw34cjAzvmF81kmdRIQD36_e" target="_blank">$200M</a>), and OPay (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwjFn8irrbXwAhUHRqwKHcU2CIEQFjAAegQIAxAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2019%2F11%2F17%2Foperas-africa-fintech-startup-opay-gains-120m-from-chinese-investors%2F&amp;usg=AOvVaw1YX4x3z4P7NNSMMBTsprBz" target="_blank">$120M</a>). In 2020 there were only three significant deals: Flutterwave (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwiEsvCNrrXwAhUCTawKHUM2BBcQFjABegQIAxAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2020%2F01%2F21%2Fafrican-fintech-firm-flutterwave-raises-35m-partners-with-worldpay%2F&amp;usg=AOvVaw1Mlso8E8XhKhgBQNQcBQPc" target="_blank">$35M</a>), TymeBank (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwimj-OurrXwAhVGJKwKHe__BjIQFjAAegQIBBAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2021%2F02%2F23%2Fsouth-african-digital-bank-tymebank-lands-109m-from-uk-and-phillippines-investors%2F&amp;usg=AOvVaw1eh5pXbUuWKsZXLCXbrnnV" target="_blank">$109M</a>), Kuda (<a href="https://www.google.com/url?sa=t&amp;rct=j&amp;q=&amp;esrc=s&amp;source=web&amp;cd=&amp;cad=rja&amp;uact=8&amp;ved=2ahUKEwiGuMDPrrXwAhUF5awKHYwOBD0QFjABegQIAxAD&amp;url=https%3A%2F%2Ftechcrunch.com%2F2020%2F11%2F10%2Fnigerias-kuda-raises-10m-to-be-the-mobile-first-challenger-bank-for-africa%2F&amp;usg=AOvVaw2PnlnxsrDOJZCuH9Ep_SzR" target="_blank">$10M</a>).</li>
</ul>
 
<figure><img src="https://firebasestorage.googleapis.com/v0/b/wazoplus.appspot.com/o/post-images%2F1621959127990_IMG-4616.PNG?alt=media&amp;token=97ff7ee2-e571-4207-888c-1f13b4de8cc1" style="">&nbsp;</img></figure>
 
<ul>
 <li>India hosts over 25 unicorns and added eight&nbsp;last month. In 2019, Indian fintechs raised $4.8B, according to analysts. Last year, $3B poured into the sector.</li>
</ul>
 
<figure><img src="https://firebasestorage.googleapis.com/v0/b/wazoplus.appspot.com/o/post-images%2F1621959231247_IMG-4617.PNG?alt=media&amp;token=cf90d858-8508-4a98-82d1-312a0c8c67bf" style="">&nbsp;</img></figure>

FinTechs thriving in emerging markets

Facebook held its <a href="https://www.pymnts.com/facebook/2021/facebooks-f8-for-developers-focuses-on-ecommerce-business-tools/">F8 conference</a> for developers on Wednesday, announcing a series of new tools designed to facilitate e-commerce transactions in its services.&nbsp;The tech giant is also looking to ensure businesses can provide more customer support via its&nbsp;Messenger, WhatsApp, and Instagram platforms.
<a href="https://www.cnbc.com/2021/06/02/facebook-f8-announcements-business-messaging-focus.html">More</a>&nbsp;tools Facebook introduced:
<ul>
 <li>Facebook announced its Messenger&nbsp;API for Instagram will be available to all businesses, making it easier for them to automate and manage direct conversations with customers.Businesses can now set up automated responses to common inquiries. Similar tools already exist for WhatsApp and Messenger. 
</li>
 <li>The tech giant revealed 90% of Instagram users follow at least one company.</li>
 <li>Businesses will now be onboarded onto WhatsApp in five minutes, down from a few weeks.</li>
 <li>WhatsApp will now have "Reply" buttons enabling users to select&nbsp;prewritten responses when they're talking to a company.</li>
 <li>List messages will enable businesses to offer consumers a menu of&nbsp;up to 10 options during a conversation.</li>
 <li>Last week, Google also announced a new set of e-commerce tools. We covered it in a previous issue of Inside E-commerce that's available <a href="https://inside.com/campaigns/inside-ecommerce-2021-05-28-28000">here</a>.</li>
</ul>

Facebook's new e-commerce tools

Originally published at <a href="https://thehustle.co/06142021-vr-to-combat-covid/">theHustle.co</a> by Juliet Bennett Rylah
COVID-19 3D sounds like a bad horror movie coming to a movie theater, but it’s actually how researchers are studying the virus.
Nanome — a San Diego-based startup that <a href="https://techcrunch.com/2021/02/09/nanome-raises-3-million-to-help-scientists-get-up-close-with-molecular-structures-in-vr/">raised</a> $3m this year — uses VR to help people study molecular structures.
Researchers can see, move, and build atoms in 3D and <a href="https://nanome.ai/press">collaborate</a> remotely in real-time, per <a href="https://www.theinformation.com/articles/how-scientists-are-using-vr-to-study-the-coronavirus">The Information</a>.
<h4>Most of Nanome’s users…</h4>
… are academics and biopharmaceutical companies who license its tech. But the free version is available now on <a href="https://store.steampowered.com/app/493430/Nanome/">Steam</a> and <a href="https://www.oculus.com/experiences/rift/1873145426039242/">Oculus</a>. And downloads are +50% between March 2020 and March 2021 compared to the year prior.
How do you use VR to stop coronavirus?
While the COVID-19 vaccine prevents infection, we still need <a href="https://eswi.org/knowledge-center/difference-between-vaccines-antivirals-and-antibiotics/">antivirals</a>, which treat people who’ve already been infected.
Andrey Kovalevsky, a senior R&amp;D scientist at Oak Ridge National Laboratory, is using Nanome on an Oculus Rift S to figure out how to stop a COVID-19 protein from reproducing.
“Without VR, it is difficult to comprehend the three-dimensional of a protein,” Kovalevsky told The Information.
<h4>What else could medical science do with VR?</h4>
Caltech, NASA’s Jet Propulsion Laboratory, and the National Cancer Institute have <a href="http://ovras.caltech.edu/OVS/TUMOR/">explored</a> how VR could help find tumors in diagnostic imaging scans.
Immertec’s Medoptic lets surgeons <a href="https://www.axios.com/immertec-virtual-reality-surgical-training-tampa-807d2a96-c7c2-48fc-9912-808433cd92f2.html">broadcast</a> their procedures, a service CEO Erik Maltais describes as “a combination of MasterClass and Twitch for health care in VR.”
<a href="https://www.seeheru.com/">Heru</a> — which recently snagged <a href="https://finance.yahoo.com/news/heru-series-funding-accelerates-cloud-130000045.html">$30m</a> in Series A funding — is developing AI-driven vision diagnostics software for use in AR/VR headsets.

How researchers are using VR to combat COVID

Originally published at <a href="https://thehustle.co/06142021-vr-to-combat-covid/">theHustle.co</a> by Juliet Bennett Rylah
 
Here’s a stat that seems obvious but is still impressive: 2.8B+ people <a href="https://www.statista.com/statistics/483255/number-of-mobile-messaging-users-worldwide/#:~:text=Global%20number%20of%20mobile%20messaging%20users%202018%2D2022&amp;text=In%202020%2C%20an%20estimate%20of,popular%20mobile%20messenger%20app%20worldwide.">use</a> messaging apps to chat.
And now a lot of those people also use them to shop.
It’s called “<a href="https://medium.com/chris-messina/2016-will-be-the-year-of-conversational-commerce-1586e85e3991#.f50xaqevj">conversational commerce</a>” (AKA c-commerce) and, <a href="https://www.economist.com/business/2021/07/10/will-conversational-commerce-be-the-next-big-thing-in-online-shopping">according</a> to The Economist, it’s hot in online shopping.
<h4>Conversational what now?</h4>
In c-commerce, businesses use AI bots on platforms like China’s WeChat, Apple Business Chat, and Facebook Messenger to connect with customers.
The bots help them browse and find products, book services, make purchases, and track delivery info. It’s fast, convenient, and works even if your internet is spotty.
Example: In 2017, Lego launched <a href="https://www.thedrum.com/news/2017/11/23/meet-lego-s-facebook-messenger-chatbot-ralph-helpful-alternative-bricks-and-mortar">Ralph</a>, a friendly bot that helped shoppers find the perfect gift for building-block enthusiasts.
Other big brands including Ikea, Sephora, Walmart, and Coca-Cola are all aboard this train, too — and it’s no wonder.
<h4>AI-powered chat…</h4>
… could power <a href="https://www.businessinsider.com/chatbot-market-stats-trends">$142B</a> in retail spend by 2024, per Insider Intelligence (that’s up from $2.8B in 2019).
And supplying chat functionality is a growing business, too: <a href="https://www.yalo.com/">Yalo</a> has raised <a href="https://www.crunchbase.com/organization/yalochat">$100m+</a> to help businesses onboard to messenger platforms like WhatsApp (where customers exchange an eye-popping 175m messages per day with business accounts).
What’s the best use of all this fancy AI? Chatbots that send you <a href="https://www.dominos.com/chat-pizza-order/">pizza</a>.

Is c-commerce the key to ecommerce?

Originally published at <a href="https://www.morningbrew.com/daily/stories/2021/07/15/revolut-800-million-funding-round-signifies-hot-fintech-market" class="jss111">morningbrew.com</a> by Matty Merritt
 
Fintech has become more popular than a white Telfar bag. After an $800 million funding round, Revolut, a London-based fintech startup, is now the UK's <a href="https://techcrunch.com/2021/07/15/revolut-confirms-a-fresh-800m-in-funding-at-a-33b-valuation-to-supercharge-its-financial-services-superapp/?utm_source=morning_brew" rel="noopener" target="_blank">biggest private company ever</a> with a valuation of $33 billion. It was worth just $5.5 billion last year.
Revolut falls into the category of “neobanks,” which plug into traditional banking infrastructure and repackage it with a smooth, easy-to-navigate platform. Revolut allows users to bank, invest, transfer money, budget, or do anything else their financial heart desires.
<h2>Fintech investing &gt; other kinds of investing</h2>
When you say, “Invest in my new fintech startup,” investors say, “How much?” $1 out of every $5 raised globally last quarter went to the fintech industry for a total of <a href="https://www.morningbrew.com/daily/stories/2021/07/08/global-venture-funding-uses-momentum-2021s-first-quarter-hit-record-highs-second-quarter?utm_source=morning_brew" rel="noopener" target="_blank">$33.7 billion</a>, per CB Insights. With Stripe and Klarna, fintech boasts two of the five most valuable unicorns in the world.
It’s also clear that Europe doesn’t need help from Ted Lasso to build world-beating fintechs.
<ul>
 <li>Klarna, the Swedish buy-now-pay-later company responsible for the staggering amount of Girlfriend exercise dresses in your closet, snagged a $46 billion valuation last month.</li>
 <li>Wise, a British money-transfer app, was the first tech company to go public on the London Stock Exchange via direct listing last week. The company was valued at $11 billion and its listing was a huge win for the burgeoning fintech industry the country has been <a href="https://fortune.com/2021/07/07/fintech-wise-public-london-stock-exchange-direct-listing/?utm_source=morning_brew" rel="noopener" target="_blank">trying to birth</a> since Brexit.</li>
</ul>
Zoom out: Venture capitalists are betting that fintech companies, with their focus on digital and their potential to attract the legions of underbanked or unbanked people in the world, will successfully disrupt incumbent banks.

Join the Fintech Revolut-ion

Originally published at <a href="https://learn.robinhood.com/articles/6UsdUrlnUvxiDpDT4D2bup/what-is-an-initial-public-offering-ipo/">robinhood library</a>.
<h2>🤔 Understanding an IPO</h2>
An Initial Public Offering (IPO) is a company’s first time offering its stock for sale to the public. It’s a lengthy process in which investment banks usually help the IPO’ing company determine an appropriate price to sell its shares on the <a href="https://learn.robinhood.com/articles/2oZ3da1LxPhVbsVxk5kVHa/what-is-the-stock-market" rel="noopener noreferrer" target="_blank">stock market</a> — and it culminates with List Day, when the shares become tradable.
When a company IPOs, its stock becomes listed on the public investing menu for the first time. Media hype surrounding the event can make it tempting to purchase stock in recent IPO companies, but IPO investing can be like jumping into the deep-end — it may not be appropriate for new investors looking for stable or predictable investments. More information on investing in an IPO can be found in the SEC’s <a href="https://www.sec.gov/investor/alerts/ipo-investorbulletin.pdf" rel="noopener noreferrer" target="_blank">investor bulletin</a>.
<h2>Why do companies list their stocks?</h2>
For many companies, an IPO is an opportunity to raise substantial new money to grow the business. “Going public” also makes shares more <a href="https://learn.robinhood.com/articles/5NN1CBg7Od8qFSN3gnttFv/what-is-liquidity" rel="noopener noreferrer" target="_blank">liquid</a>, which means it’s easier for early shareholders, like founders and initial investors, to turn their shares into cash. Lastly, the stringent financial reporting requirements that come with going public can encourage stronger management practices that may benefit shareholders.
<h2>Pricing and listing stock in an IPO</h2>
The IPO process usually begins with the company hiring one or more investment banks to help it decide the initial price of its shares. The company then issues a preliminary prospectus and registration statement (or S-1) detailing its business model and plans for the funds raised.
After that, the company and its banks can host a roadshow to discuss the business model with institutional investors, analysts, hedge funds, and fund managers, who can provide an indication of interest in buying the stock. This helps the company and its bankers determine the share price.
With the initial stock price determined, the company makes available new stock to offer on <a href="https://learn.robinhood.com/articles/2oZ3da1LxPhVbsVxk5kVHa/what-is-the-stock-market" rel="noopener noreferrer" target="_blank">stock markets</a>. In exchange for its shares, the company receives funds paid by investors who have purchased shares.
After the IPO, its stock is freely tradable on the secondary market, and most investors (except certain company insiders with restrictions) can buy or sell shares as they please.
<h2>What happens on the day of an IPO?</h2>
Investing in any stock comes with risk of the share price rising or falling, and that is especially true on List Day. Shares begin trading in public markets, initially at the final IPO price, then freely based on demand by investors.
In the US, trading of stocks begins at 9:30am ET (when the market opens). But List Day trading for an IPO making typically does not begin until later due to pent-up demand and limited supply of shares. Once the trading does begin, investors can begin buying and selling the new company’s shares through your brokerage firm.
<h2>Are there risks to trading a recently listed stock?</h2>
There are risks to trading all stocks, especially stocks of companies that recently listed.
Hype can increase volatility:
<ul>
 <li>There’s often media attention surrounding an IPO, and statements by the company’s leadership or bank underwriters may be overly optimistic or pessimistic in the early days of trading. This heightened attention can increase volatility, meaning the share price may rise or fall by significant amounts on a single day.</li>
</ul>
Investment banks can protect the stock price:
<ul>
 <li>In the days following an IPO, the bank underwriters are allowed to protect the stock price from falling too much. They may even buy shares of the newly-listed company. Once this support ends, the stock price has the potential to fall below the offering price. Look for this kind of price support in a company’s IPO registration paperwork.</li>
</ul>
IPO stocks are considered speculative. An investor should read the prospectus carefully:
<ul>
 <li>Typically released to the public a few weeks ahead of the IPO, the prospectus is required paperwork filed by the IPO’ing company. It’s designed to give investors information that can help them decide whether the offering is a good investment, like the terms of the stock, disclosures regarding the company’s financial condition, risks that the company faces, and details regarding their business model.</li>
</ul>
<h2>Direct Listing: An alternative way to go public</h2>
Both IPOs and Direct Listings give individual investors access to invest in companies for the first time, but there are some key differences. Unlike an IPO, a Direct Listing doesn’t involve issuing new shares or raising new capital. This means there’s no investor roadshow, and fewer fees paid to investment banks by the stock-issuing companies.
Companies with strong brands that aren’t looking to raise new capital are generally attracted to Direct Listings.Their core need is the ability to list their shares publicly so early investors and shareholders can sell off their stakes — the Direct Listing can satisfy that, possibly more efficiently. <a href="https://www.robinhood.com/stocks/spot" rel="noopener noreferrer" target="_blank">Spotify’s</a> 2018 Direct Listing is a well known example.

What is an Initial Public Offering (IPO)?

Originally published by <a href="https://www.afdb.org/en/documents/publications" class="jss464">the African Development Bank Publications</a>.
 
Recent macroeconomic and financial developments
Real GDP in Rwanda was estimated to contract by 0.4% in 2020 due to the COVID–19 pandemic, after growing 9.4% in 2019. Trade, transportation, and tourism services have been the sectors most affected by the global pandemic. COVID–19 also hurt investment and exports. Rising food prices, stoked by disruptions to regional and domestic supply chains, contributed to a 6.6% increase in inflation in 2020. That was far higher than the 2.4% in 2019 and breached the central bank’s 5% policy target. The National Bank of Rwanda reduced the key policy rate to 4.5% in April 2020 from 5.0% in 2019 to stimulate growth, but private sector credit remained subdued, expanding by 10.2% in 2020, compared with 12.6% in 2019. Low tax yield and elevated health and social protection spending caused the fiscal deficit to grow to 8.3% of GDP in 2020, compared with 7.3% in 2019. The deficit was financed by COVID–19 budget support loans and grants from cooperating partners. Low exports and reduced foreign direct investment resulted in a current account deficit equivalent to 16.5% of GDP in 2020, compared with 9.3% in 2019. Gross reserves shrank. In 2020 they could cover 2.4 months of imports, compared with 4.5 months in 2019. Low external inflows contributed to a 4.6% depreciation of the Rwandan franc against the US dollar. The financial sector remains stable and well capitalized, with a capital adequacy ratio of 23.7% in June 2020, above the 15% regulatory threshold. The latest available data show an unemployment rate of 22.1% in May 2020, compared with 15% a year earlier. Unemployment growth reflects the virtual shutdown of such major industries as transport, food, and hospitality during the lockdown and is likely to increase the poverty rate —which was 38.2% in 2017, the most recent data available.
Outlook and risks
Growth is projected to rebound in 2021 and 2022, supported by high infrastructure spending on Bugesera airport and a pick up in the tourism sector as the effects of the pandemic dissipate. The implementation of the African Continental Free Trade Area is expected to boost intraregional trade, which will support growth—especially if Rwanda increases its share of intra-regional exports. Inflation is expected to abate within the policy target as reopened borders increase the food supply and domestic containment measures ease further. The fiscal deficit is projected to narrow to 7.8% of GDP in 2021 and to 7.2% in 2022 due to a planned fiscal consolidation in the 2021/22 fiscal year. The current account deficit is projected to narrow to 10.4% of GDP in 2021 and further improve to 9.1% in 2022, mainly because a rollout of COVID–19 vaccines should trigger a rebound in tourism and foreign direct investment. The downside risks to the outlook include trade disruptions due to simmering regional political tensions, a decline in the fiscal space due to a rising debt burden, and a resurgence of the COVID–19 virus.
Financing issues and options
Rwanda’s public debt was 58% of GDP in 2019 due to elevated spending on key infrastructure investment and a decline in aid flows. The COVID–19 crisis caused an increase in health-related spending and a decline in tax revenues, resulting in an increase in public debt to 66% of GDP in 2020, which is expected to reach 72% of GDP in 2021, above the safe debt ratio of 65%. In anticipation, the country’s debt distress was raised from low to moderate by the International Monetary Fund and World Bank, effective in June 2021. An urgent fiscal adjustment to a safe debt ratio of 65% of GDP is required to avoid the risk of slipping into high debt distress. The planned transition to the private sector–led growth, the use of blended finance and de-risking strategies to fund infrastructure projects, drawing on reserves, and renegotiating debt will help avoid overburdening the public balance sheet. Capacity building in the management of fiscal risks from private-public partnerships should be prioritized to support a fiscal consolidation strategy.

African Economic Outlook 2021- RWANDA

Originally published by <a href="https://www.afdb.org/en/documents/publications">the African Development Bank Publications</a>.
 
Recent macroeconomic and financial developments
Kenya’s economy has been hurt by the COVID–19 pandemic. In 2020, GDP growth is expected to decelerate to 1.4% from 5.4% in 2019. Growth is supported by agriculture, while weaknesses in services and industry have had a dampening effect. Domestic demand is subdued while external demand has neither helped nor hurt growth. Expansionary fiscal, monetary, and financial policy measures were introduced to mitigate the impact of the pandemic on businesses and households. Inflation is expected to ease to 5.1% because of lower aggregate demand. The fiscal deficit is expected to widen to 8.3% of GDP—the result of revenue shortfalls and pandemic-related spending increases to deal with health issues and to mitigate the damage to household income and businesses. The current account deficit is expected to narrow to 5.4% of GDP, supported by a sharp reduction in the oil import bill. Foreign exchange reserves declined to $7.8 billion (4.8 months of import cover) at the end November 2020 from $8.96 billion (5.6 months of import cover) at the end November 2019. The local currency weakened by 8.9% to KSH 110 to the US dollar at the end November 2020 from KSH 101 to the dollar a year earlier. The financial sector was affected by spillover effects from major sectors; the capital market was the hardest hit. The Nairobi Securities Exchange share index fell 20% between 30 September 2019 and September 2020, and market capitalization fell 2% over the same period. The pandemic did serious social damage. Nearly 2 million people are estimated to have fallen into poverty, and nearly 900,000 lost their jobs.
Outlook and risks
The growth outlook is positive. The economy is projected to grow by 5.0% in 2021 and 5.9% in 2022. The rebound assumes that economic activity will normalize due to a full reopening of the economy, the Economic Recovery Strategy being successfully implemented, and Kenya capitalizing on an expected improvement in external liquidity and benefiting from initiatives to meet its external financing needs. The external initiatives could include debt refinancing, restructuring and debt service relief, and additional concessional loans. Inflation is projected to remain within the Central Bank of Kenya’s target range of 2.5% to 7.5%, and fiscal and current account deficits are forecast to narrow as a result of improved revenue collection and exports. Downside risks to the outlook could emanate from delays in the full reopening of the economy, failure to secure external financing to execute the budget, a slowdown in global growth, and disruptive social conditions during the run-up to the 2022 elections.
Financing issues and options
Public debt surged to 72% of GDP in 2020 from 61% in 2019, driven mainly by public investment in infrastructure, debt management–related challenges, and the COVID–19 crisis. Kenya is now at high risk of debt distress as determined by the International Monetary Fund. Addressing the emerging fiscal and debt vulnerability risks would require growth friendly reforms, soliciting external financial assistance, concessional credit, and debt refinancing and restructuring. The growth–friendly reforms could entail revenue-related steps to improve tax compliance, widening the tax net by reviewing the list of tax-exempt and zero-rated items, formalizing the informal sector, ensuring that public expenditures reach their intended targets, and deepening the domestic financial market to support private and public sector credit growth.

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