Kenya Economy - Employment Earnings & Consumer, Money Banking & Finance

Employment Earnings & Consumer

By the year 1992, an estimated 2.1 million people were employed outside rural small-scale agriculture. A total of 91,000 jobs were created. Growth in employed persons declined in the years 1990 to 1992. Total employed persons by 1992 were 1,462,600. Due to the government’s effort to reduce wage bills and achieve budgetary savings, a decline in the number of persons employed in the public sector was realized by 1%. On the other hand, the informal sector created 68,800 additional jobs representing 27.2% of total persons employed in 1992.

The overall nominal wage bill rose from K£ 2,649 in 1991 to K£ 3,013 million in 1992 representing a 13.7% increase. Average earnings per person increased from K£ 1,837.4 per annum in 1991 to K£2,059.7 per annum. Due to inflation rate increase in this period from 19.6% in 1991 to 27.5% in 1992, consumer prices skyrocketed.

Some of the factors that led to the high inflationary pressures were: -

  • Devaluation of the Kenya shilling
  • Withholding of donor aid to Kenya
  • Use of foreign exchange certificates in importing goods and services
  • High monetary expansion.

By 1994, total employment outside rural small-scale agriculture and pastoralist activities had grown to an estimate of 3.4 million persons. Employment in the informal sector had overtaken the public sector and represented 53.4% of the total employed persons with a total number of 1,792,400 persons. Overall, nominal wage bill increased by a huge 20.5% from K£3,496.6 million in 1993, to K£4,213.8 million in 1994. Inflation declined by 17.2% from 46% in 1993 to 28% in 1994.

The inflation declined due to the following reasons: -

  • Appreciation of the shilling against major currencies.
  • Good weather conditions
  • Governments austerity measures

The year 1996 saw the total employment outside rural and pastoralist activities stand at 4.3 million persons. The number of persons employed in the informal sector was 2,643,800 and accounted for 61% of total persons employed. Those employed in the modern sector were a total of 1,670,000 persons. The overall wage bill increased from K£ 5,303.7 million in 1995 to K£ 6,669.8 million in 1996. The rate of inflation was contained within a single digit but rose from 1.6% in 1995 to 9% in 1996.

The Kenyan economy generated 384,800 additional jobs in 1997 to bring total employment outside rural small-scale agriculture and pastoralist activities to 5.1 million persons by 1998. The overall nominal wage bill increased by 23.3% rising from K$ 8247.7 million in 1997 to K$ 10170.3 million in 1998. Average earnings per person expanded by 25.% from K$ 5004.6 per annum in 1997 to 6258.3 per annum in 1998. Overall inflation as estimated by Nairobi consumer price indices, declined by 4.6% points from 11.2% in 1997 to 6.6 in 1998.

Money Banking & Finance

The banking sector constitutes 50 commercial banks, this number is however expected to drop due to the merger of four of the banks into two 7 Non-Bank Financial Institutions (NBFIs), 2 mortgage finance companies, and 4 building societies as per the year 2000. The Deposit Protection Fund Board put two institutions under liquidation within the year.

In the year 1992, money supply grew by 35per cent compared with 24 per cent growth rate registered the previous year. During the same year, net foreign assets increased by Kshs. 629 million. The Balance of Payment recorded a surplus in 1992. By 1994, money supply had expanded by a further 31 per cent compared with the year 1993 whereas net foreign assets declined by 32 per cent. Domestic credit increased by 46 per cent from K£ 5,011 million in 1993 to K£ 7,416 in 1994. In the same year, interest rates were brought down by the Central Bank of Kenya. This figure, which stood at 52 per cent of banks' assets, decreased by 3.9 per cent to Kshs 224.9bn from Kshs 234.0bn in August 1999.

The year 1996 saw some major changes in the banking industry with more non-banking institutions being converted into commercial banks. The net foreign assets grew substantially from K£ 346 million in 1995 to K£ 1,432 by December 1996. This figure decreased by 1.0 per cent to Kshs 429.1bn at the end of August 2000 from Kshs 433.4bn at the end of August 1999. Holdings of Government securities, the other major asset, accounting for 18 per cent of total assets, increased by 4.6 per cent to Kshs 77.9bn in August 2000 from Kshs 74.5bn in August 1999. Banks balances at the Central Bank however declined to Kshs 28bn from Kshs 29.3bn.

Growth in the financial sector decelerated in 1998 due to a depressed economy, high portfolio of non-performing loans in the banking sector, low investment in the stock market and reduced demand for commercial bank credit. The level of interest rates declined in 1998 following the decline in 91-day treasury bills interest rate. However, lending rates remained high.

The banking sector experienced a crisis during the year and as a result, five commercial banks were placed under Central Bank’s statutory management. The Capital markets particularly the Nairobi Stock Exchange also did not perform well, with the 20-share index falling below the 3000 point.

Last Updated on Tuesday 24th November 2009