Digitally connected workspaces can help Kenya’s gig economy overcome some of its biggest drawbacks, ultimately driving financial inclusion and leading to improved economic possibilities.

This is a according to a study released on Tuesday by global payments company MasterCard. The report indicates that fluctuation in income from week to week is a cause for frustration for 60 percent of gig workers in the country, and that is attributable to traditional ways of doing business.

Gig economy is a term used by economists to refer to jobs that are based on short-term, temporary and flexible independent contractual agreements.

The paper, The Gig Economy in East Africa: A Gateway to the Financial Mainstream, shows that the gig economy continues to grow, with almost two-thirds (60 percent) of gig workers joining this segment of the economy between 2017 and 2019.

However, the research underscores that for this part of the economy to reach its potential and unlock prosperity for millions of people, the digital divide must be bridged through connected devices that power the digital economy, and add value such as access to capital and market.

A gap between legacy business models — offline gig economy — and business designs meant for the future of work, exists in Kenya, with the former still holding the bigger share of the market.

“Currently, the online gig economy is a tiny portion of the overall gig economy. In 2019, the total size of the online gig economy in Kenya stood at Sh11.7 billion, employing 36,573 people, while the offline gig economy comprises 5.1 million workers, and accounts for Sh2 btrillion,” the paper states.

Despite this, online gig economy work is preferred, and the report found that almost 60 percent of workers would prefer online gigs to offline because the former enables end-to-end management of projects.

More than 35 percent of respondents said that finding gig work is easier on a digital platform, and about 30 percent said platforms make faster payments possible, and help them connect to other workers.

Jorn Lambert, chief digital officer at Mastercard said that while gig work is present everywhere in Kenya, the growth of digital technologies and linked devices presents a real opportunity to help gig workers quickly connect to consumers to meet their demands for services, and overcome significant pain points such as inconsistent work, financial planning challenges and late payments.

“If each key player in the gig economy ecosystem comes together – from the platform, to the mobile industry and the payments provider – we can ensure that the end-to-end journey of the gig worker is both smooth and profitable, and realise the true potential of inclusive, sustainable growth across the continent,” he said.

Some of the most common types of gig work in East Africa are in artisanal and general services, which include welders, electricians, carpenters, and domestic work.

The report identified business independence as a powerful motivator behind the movement, and being self-employed with the freedom to work at an individual pace are part of why gig work is growing.

“It is an inclusive space where people of different social and economic backgrounds can fit in and earn a living,” the report says.

Ngozi Megwa, Senior Vice President, Digital Partnerships, Mastercard in Middle East and Africa decried the reality that traditional platforms often do not adequately serve the needs of the gig worker, who is at risk from personal accident and injury, loss in revenue from any absence from work, incomplete delivery or payments, and economic volatility.

“However, connected devices are bridging divides between urban and rural, rich and poor, and connecting gig workers to peers, information, opportunities and services. But what’s equally as critical is establishing a digital identity for gig workers across platforms,” she noted.

While there are various gig platforms currently being utilised, it is difficult for a single platform to provide the value and benefits that workers require, such as easy collection of payments via digital channels, and access to credit, training and insurance, as they tend to move from one platform to another.

“A collaborative approach is called for to not just create jobs, but also a gig-worker identity that provide benefits, ensuring decent working conditions and improved livelihoods,” added Ms Megwa.

With the digital economy fast becoming an enabler of greater prosperity and inclusion, gig platforms have proven to be key “unlockers” of many services and opportunities utilised by gig workers.

But access to gig work opportunities is often not enough to keep a giworker afloat. Loans, instant payments, and benefits such as insurance, are the top three perks desired by gig workers in Kenya, and 45 percent of respondents said they are willing to pay between Sh100 and Sh500 a month for such ben­efits and services.

“Over 80 percent of respondents said instant payments when a job is completed is the most desired feature of a gig platform. And in step with the prevalent mobile money system, 62 percent of respondents said they prefer to receive payment through mobile money such as M-Pesa or Airtel Money because it is readily available, reliable, easy to manage, secure, and convenient,” the report established.

Investing is a critical part of total financial health. It can mean the difference between barely scraping by on Social Security later on in life or living comfortably and having the money to do things you want to do. There are many ways to invest, but regardless of what avenue you choose, one thing is true—the earlier you start, the better returns you can get.

Investing is defined as when someone commits money or other financial assets to something with the expectation to gain a financial return.

Find out how to start investing today with this guide.

On this page:

• What You Can Invest In
  • Stocks
  • Mutual Funds
  • ETFs
  • Bonds
  • Real Estate
  • Cryptocurrency
• Investing for Retirement
• Which Investment Strategy Is Best for You?
• How to Determine How Much You Should Invest

What You Can Invest In

Whether you have been investing for years or you are a new investor, it is important to understand the different types of investments. Each has different purposes, risk levels, and expected returns.

Some require more of a financial commitment but have the potential for larger returns; others require less of a commitment or have less risk, but also will have less of a return.

Investing in Stocks

A stock is a tiny piece of ownership in a business. Corporations and companies issue stock in two types: common stocks and preferred stocks.

• Common stock is generally what people are referring to when they talk about buying stocks. If you own common stock, you are part of the company’s ownership, called shareholders or stockholders. Each year, the board of directors for that company looks at its profits and losses and decides whether to send shareholders a piece of those profits or reinvest them into the company.
• Preferred stock is just what it sounds like—stock that ranks a bit higher than common stock. Preferred stockholders get their share of the profits, called dividends, before the common stockholders. If the company ends up going bankrupt, they have to pay back the preferred stockholders first as well.

You can invest in stocks in several ways:

Using a Financial Advisor to Invest in Stocks

For many years, your only option was a financial advisor, who navigates Wall Street for you, advises you on the best groups of and individual stocks to buy and sell, and actually files the transactions for you in your investment account. Though you will often have to pay management fees, having a seasoned advisor to help you with your money can help ensure that your portfolio makes sense for your investment goals.

Using a Robo Advisor or Online Platform to Invest in Stocks

You can sign up with a robo advisor, which is a software that will automatically buy and sell your stock based on the parameters you set. You can also use one of the many online stock trading brokerage firms dedicated to DIY investors who want more control over their investments. Not all of these options are expensive; in fact, some platforms are completely free.

Using a Micro-Investing App to Invest in Stocks

You don’t necessarily need a lot of money to invest either. In fact, micro-investing apps such as Acorns and Betterment are highly popular—and they allow you to invest tiny amounts of money at a time, such as rounding up your debit card purchases to the nearest dollar and investing the change.

Expected Returns

Returns can vary widely depending on the type of stocks you own and how the companies you invest in do over time. The average return you can expect is about 12% over the long term, while in a booming economy you could see returns of up to 30% or higher, though these higher returns are not normal and usually regress to the mean.

The risks involved with stocks are obvious; in order for you to get a return, the company you’re investing in needs to perform well. Companies who take an economic turn for the worse could end up cutting into your returns—or even into your initial investment.

Investing in Mutual Funds

If the idea of trying to find, research, and invest in the right company sounds like a lot of complex work, you might be more interested in a mutual fund. They’re one of the most popular investment types in the United States because they allow people to invest in a section of companies that are grouped together.

What Are Mutual Funds?

A mutual fund is a collective pool of money that gets contributed to by companies and individuals alike. The fund has a manager, whose job it is to invest the money for the investors according to the parameters and goals set up for that fund. 

A long-term fund, for instance, might be made up of companies whose value has wild fluctuations in the short-term but will net high gains over time. A fixed-income fund, on the other hand, will be invested in strong companies whose value is fairly set and might grow very slowly, but also won’t lose money.

Expected Returns

The average return on a mutual fund is less than if you invested in stocks, with a 20-year return of about 4.67%. In the short term five-year market, they did slightly better at 6.92%. Mutual funds have many of the same risks as stocks do; you’re investing in the future of a company. If the company goes under, so does your money.

Investing in ETFs

An ETF is an exchange-traded fund. The simplest way to think of them is as mutual funds that are traded like stocks daily on Wall Street. ETFs offer diversification by spreading your risk out over different types of funds.

You can buy ETFs online from “spiders” such as Standard & Poor’s Depository Receipts, which track the S&P 500 stock market.

Expected Returns

ETF returns are gauged by how well they did against the S&P 500 or other indices.

The risk in ETFs lies in the market itself; if the market collectively does well, so will your ETFs. There is also risk in the type of ETF you’re investing in. If you have a biotech ETF, for instance, and biotech companies hit a slump, you could find yourself losing money even if the market is generally doing well.

Investing in Bonds

If your goal is to eventually live off of the interest generated by your portfolio, then bonds are something you should look into. 

There are different types of bonds, but they all operate under basically the same principles. Bonds result in an investor lending money to the issuer in exchange for interest payments. You could invest in a municipal bond used to build a hospital or other project in your city; you could also invest in government bonds, corporate bonds, and other types as well.

Expected Returns

Though bonds are often seen as safer than stocks, they typically offer lower returns. There are also several risks involved with them. Understanding their terms is crucial; bonds with long terms can often fluctuate a great deal, which means your investment value can go up and down as well.

Investing in Real Estate

There are several types of real estate, or property, investing. You could purchase a home or apartment building and rent it out for income. You could also engage in ancillary real estate investment, which basically means you install vending machines, a mini-laundromat, or other things inside of a building that someone else owns. You can even invest in real estate online or engage in some crowdfunded real estate purchases that let you buy a piece of property without having to take on 100% of the risk.

In order to do this, you’ll generally need a fairly sizable amount of money to start, and the risks are great. A tenant could end up treating your property poorly, resulting in you needing to put money into repairs. They may not pay the rent, which leads to you having to evict them, pay for court costs, or other associated fees. If you use the equity in your own home to make your first rental property purchase, you could find your own residence at risk.

Expected Returns

Returns vary; it all depends on what you invest in, where your money comes from to purchase it, and whether your tenants or mini-business do well. Having a property manager who handles the day-to-day operation of the property can help but will also cut into your profits.

Investing in Cryptocurrency

Cryptocurrency is “mined” by computers that are solving complex math problems. There are hundreds of cryptocurrencies on the market, but for most people, Bitcoin is the most well-known. You can buy these currencies through Bitcoin and cryptocurrency exchanges, in which you trade dollars for Bitcoins. You can hold your virtual currency online in a wallet or download it to a hardware wallet with encryption for more security.

Expected Returns

Bitcoin has the potential for huge short-term returns; the problem is that you’ll need to babysit your investment pretty closely. You could make as much as 100% in a matter of weeks—you could also, however, lose your investment almost entirely. Bitcoin is highly volatile, and in 2017, the value ranged anywhere between $967 to $13,860 depending on the day.

You can buy or sell your Bitcoin much like stocks, and there are a number of exchange apps that allow you to purchase fractions of a Bitcoin.

Investing for Retirement

Many people see retirement as an abstract concept that is so far off in the future that they don’t need to worry about it now. In reality, you should be starting to plan and save for retirement as early as possible because of a little thing called capitalizing returns, waiting to invest in retirement can result in thousands of dollars lost.

You can invest for your retirement as an individual investor or through a brokerage account in which it will be managed for you.

401(k)

A 401(k) is a type of retirement plan usually offered by your employer, though you can open one by yourself as well. You can have a certain amount of your paycheck diverted to it each month, and in some cases, the employer will also match your contribution to a certain percent, which grows your balance faster.

The funds are invested into mutual funds, although you are usually able to also choose the fund that you’d like them invested in. As the money grows, profits are reinvested, which results in exponential growth. One thing to keep in mind is that contributions to a  traditional 401(k) are not taxed upfront. Therefore, when you deduct your funds during retirement you will be taxed at the back end.

Traditional IRA or Roth IRA

An IRA is an individual retirement account, and it can help you plan for retirement while also lowering your tax liability. You can contribute up to $5,500 per year into IRAs, and doing so lowers your adjusted gross income, which means you’ll pay less income tax each year that you contribute.