An innovative idea to contract a limited number of refugee and host community-run shops as distributors, and give a proportion of assistance to refugees in the form of mobile money to buy food of their choice has birthed and inspired a serial entrepreneurial spirit in Kakuma and Kalobeyei refugee camps in northern Kenya, that the World Food Programme (WFP) now estimates to be worth up to $56.6 million (Sh5.6 billion).
The goal has been to increase choice for refugees and nurture the food retail market, as opposed to distributing regular physical food ratios, according to a WFP report co-authored by the World Bank’s International Finance Corporation (IFC) and the University of Oxford’s Refugee Studies Centre.
The result has been bustling retail markets and restaurants in Kakuma One, the proposed Huduma-Biashara Business Centre, and the new market- based Kalobeyei settlement, that according to WFP, have become examples of the shift towards private sector-led development in refugee contexts.
It all started in 2015, when WFP introduced Bamba Chakula (BC) (‘get food’ in Swahili) programme, a cash-based intervention designed as an alternative to in-kind food assistance. It represents a transitional arrangement between in-kind and full-cash assistance.
By providing refugees with mobile currency supplied through Safaricom’s M-Pesa and Equity Money, it allows recipients to choose the food items that suit their preferences, with some restrictions relating to commodities like alcohol and tobacco, while supporting the growth of local markets. The currency is only redeemable from contracted traders, who have been able to apply for BC contract during a series of competitive application processes.
In Kalobeyei, refugees receive nearly all food assistance through BC, while in Kakuma, about 70 percent of food assistance is in-kind and the rest through BC. The programme also gives selected traders exclusive access to the purchasing power provided to refugees through all cash-based assistance.
As at May 31, the United Nations High Commissioner for Refugees (UNHCR) reported that 476,695 refugees and asylum seekers live in Kenya. Of these, 190,181 are hosted in the Kakuma camp and Kalobeyei Integrated Settlement. Somalis makes the majority at 54.5 percent, South Sudanese (24.4 percent), Congolese (8.8 percent), and Ethiopians (5.9 percent).
The report shows that Kakuma and Kalobeyei receive $500,000 (Sh50 million) each per month in BC transfers.
However, ICF estimates that the BC shops in Kakuma received $720,028 (Sh72 million) in BC transfers and those in Kalobeyei $249,743 (Sh26 million) during the month of the survey.
“This deviation from the $500,000 (Sh50 million) figure is likely because of reporting errors or delays in monthly BC spending by customers,” notes the report.
It estimates that around $300,000 (Sh30 million) is spent per month in cash in the BC shops in Kakuma and up to $120,000 (Sh12 million) in those in Kalobeyei based on shop owners reporting a 63:37 ratio of BC sales to cash sales in Kakuma and a 81:19 ratio in Kalobeyei.
For non-BC shop sales, it’s arrived at by multiplying the estimated nu0mber of shops with their reported mean sales. For Kakuma this gives $2,016,700 (Sh200 million).
“However, we think this is probably an overestimate given that our household survey data from Kakuma suggests an aggregate monthly earned income of around $1.3 (Sh130 million) and the IFC estimates around 61.5 percent of household income goes on food,” it says.
This implies that, even with additional income from food ration sales and remittances, cash sales in non-BC shops may be no more than $1 million (Sh100 million) per month.
Aggregating these estimates of total retail sales and expenditure gives an approximate market size of around $3 million (Sh300 million) for the Kakuma camps and Kalobeyei settlement.
Based on food ration composition (sorghum, rice, pulses, and oil), and size and market value at the time of the survey, it estimates that the market value of WFP food rations across Kakuma camps is around $1.7 million (Sh17million) per month.
This suggests that the overall food market may be worth between $36 million (Sh3.6 billion) and $56.6 million (Sh5.6 billion) per year, depending on how it is measured, WFP says.
It shows that refugee men are more likely to own shops than women: 69 percent of refugee shop owners are male, and this pattern is similar for those with BC status and across locations within Kakuma. The exception is for BC traders in Kalobeyei, for which the ratio is almost 50:50.
However, the opposite pattern can be found among Kenyan traders. Among Kenyans, 63 percent of shop owners are female in Kakuma Town. In Kalobeyei Town 75 percent of the shop owners are women.
In terms of nationality, Somali and Ethiopian refugees are disproportionately likely to be involved in business compared to their population size. Burundians, Congolese, and Sudanese refugees are also over-represented. By contrast, South Sudanese refugees are underrepresented.
“These differences cannot solely be attributed to the BC contract itself, as the groups are inherently different in some aspects such as nationality, gender, family background, education, training and prior (shop) experience. BC traders also invested more start-up capital in their businesses to begin with,” it says.
The report shows that Kalobeyei-based BC traders do better than their counterparts in Kakuma, in terms of profits and sales. This is unsurprising given that there are fewer BC retailers operating in Kalobeyei even though the volume of aid distributed in the form of BC is the same (about $500,000 per month per site).
Within Kakuma, 19 percent of household survey respondents admit to selling part of their in-kind food aid in order to acquire cash, and this is likely to be underreported.
In terms of market structure, BC food retailers are reliant on an oligopoly of just a few local suppliers. These consist of four Kenyan- Somali host wholesalers- Al-Amin, Al-Mubarak, Kakuma Wholesalers (Ogle), and Kaeris, and one Ethiopian refugee wholesaler, Mesfin. All except Al-Amin have entered into an agreement with WFP as ‘preferred wholesalers’.
For regulations purposes, the WFP provides price guidelines to wholesalers and retailers, and retailers regularly meet to agree on common prices, explaining why prices do not vary much across traders.
Also, nationality plays a role in exchange. A preference for doing business with one’s own nationality seems apparent in hiring employees and when customers choose which shop to buy from, but nationality has little importance when retailers decide from which wholesaler to source goods.
Refugee-host interaction is limited between retailers and customers. Refugees source from Kenyans, but Kenyans rarely source from refugees.
Besides the BC programme, WFP has introduced the Kenya Retail Engagement Initiative (KREI), to support and develop the broader transition from in-kind aid to cash-based assistance, supply chain development, and business training for food retailers.
Credit plays an important role in the transactions between retailers and wholesalers. More than 60 percent of food retailers state that their wholesaler(s) offer(s) either bulk discounts, goods on credit, or both. There are substantial differences between BC and non-BC shops with respect to obtaining credit.
About 74 percent of BC applicants who can access credit report they normally buy on credit, compared to 54 percent of unsuccessful applicants and 48 percent of non-applicants. As a result, BC traders are much more likely to regularly purchase goods on credit than non-BC traders.
Also, many BC shopkeepers retain the refugees’ BC- listed SIM cards as collateral, and in return distribute products on credit if BC transfers are delayed or if customers run short of food and money at end of the month. Trust and loyalty play a key role in shaping market-based interactions.
An estimated 76 per cent of BC traders report that their suppliers offer them the opportunity to purchase goods on credit, as opposed to 58 percent of unsuccessful applicants and 47 percent of non-applicants.
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