Fact of the Week: Long-Term Digitalization Policy in Kenya Has Accelerated Economic Growth, and It Brought Digital Payment Services to Over 40 Million People In 2020

Luke Dascoli July 26, 2021
July 26, 2021

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Source: Fagerberg, et. al, “An Evolutionary Analysis of Transformative Change in LDCs: the cases of Kenya and Rwanda,” University of Oslo: Working Papers on Innovation Studies, June 2021.

Commentary: Developing countries poised to gain the most from digitalization are those prioritizing investment into their information and communications technology (ICT) stock and setting long-run policy initiatives to improve digital accessibility. In sub-Saharan Africa, where only about 28 percent of the population has Internet access, Kenya is a prominent example of the benefits that sustained early investment into ICT have for developing economies. A recent paper from the University of Oslo finds that policy initiatives such as Kenya’s Vision 2030 and the 2013 Science, Technology, and Innovation Act have helped realize Kenya’s recurring long-term visions for improved economic growth and parity.

Kenya’s medium- and long-run technology policies have helped capitalize on the global trend of digitalization by restructuring government institutions to increase funding for research and innovation projects, while also collaborating with firms willing to invest in digital services. Kenya’s innovation priorities since the early 2000s have closed the gap of cellphone ownership with high-income nations, bringing broadband connectivity via mobile devices to nearly 50 percent of the country by 2019. The most notable advancement in Kenya’s digital economy was its central bank’s decision to support the private-sector launch of M-Pesa, a mobile-money platform offering digital remittances and alternative means of funding for entrepreneurship. The study finds that digital payments services via M-Pesa surged to over 40 million regional users by 2020. The explosion of digital services, especially with mobile money, has brought rapid economic development to Kenya, with an average annual GDP growth rate of over 5.3 percent since the country’s financial recovery in 2004. While there are more advancements to be made, Kenya’s long-term innovation policies for improved digital access prove that digitalization is a force for sustainable economic growth among developing nations.