Brazil has been struggling to encourage the creation of startups and the promotion of a healthy ecosystem for them. For instance, the Brazilian Securities and Exchange Comission (the “CVM” – Comissão de Valores Mobiliários) has already issued regulations on Crowdfunding and the creation of angel investment agreements.
Our entrepreneurs will inevitably try to learn with globally known ecosystems, such as the ever-innovative Silicon Valley or the fast, intense ecosystem of Beijing[1]. However, due to the political and economic history of these countries and the consolidation of their ecosystems, some comparisons may come as inadequate to the Brazilian reality. What, then, if instead of looking at the already-established giants, we focus on a developing country with an ecosystem under construction, aiming to overcome its own difficulties in an innovative and creative manner?
So, let us deal with Kenya.
The former English colony took the first steps in that direction in the early 2000s: the advent of smartphones in the international market overthrew the price of conventional cellphones, which now suit every pocket[2], as well as the installation of underwater Internet access cables, which now connect Africa to the rest of the world.[3]
The consolidation of mobile phone usage in the country has opened new ways for dealing with their money circulation problems[4]. Kenya’s informal economy is so huge and active[5] that has a name: Jua Kali[6][7]. This informality has nevertheless presented itself as a hindrance to financial transactions, as it is difficult to open a bank account and even access to credit[8]. This has also created security problems, since, without the use of bank transactions, informal traders were compelled to move around with reasonable amounts of cash, thus facilitating robberies and theft.
Brazil also has a big – and growing – informal economy. In 2016, informal economy accounted for 16,3%[9] of Brazilian gross domestic product (GDP). Nevertheless, on the other hand, 64% of Brazilians have a bank account[10].
The flow of credit has also been undermined by Kenya’s poor infrastructure. Despite the growth of mobile communication, there is no solid structure for internet backbone providers.
Rather than seeing informality as a hindrance, M-PESA[11] used mobile communication to make room in the large informal economy. The company made it possible to carry out credit transactions through SMS so that, later on, users could withdraw money from ATMs operated by the company.
Another example of innovation used to overcome challenges in the country came at the end of 2007, when Kenya was amidst an electoral crisis which culminated in various conflicts and persecutions all over the country[12]. Ushahidi[13], a startup, reacted by creating a collaborative map through which users could signal and avoid dangerous regions, with the information updated by SMS.
Today, the company provides several analytics services as well as special plans, and is no longer only a location app.
Such changes continued into the next decade. Kenya’s new constitution[14], enacted in 2010, introduced relatively innovative elements, such as quotas for various government positions for women and the youth.
Women and young persons have a strong representation in the country’s economy. Chamas[15] were small groups formed by women who invested part of their money in the achievement of a given objective: credit for property, utensils, agricultural tools, etc. Today, these groups have diversified and become more sophisticated, with men and women making large investments in transportation, agriculture, and real estate.[16]
Back in 2010, in addition to a new constitution, the first center for the formation of an ecosystem for startups in the country was created, iHub[17]. An initiative not only seeking to accelerate new companies, but also to train skilled labor for Kenya’s growing technological wave, focusing mainly on programmers and entrepreneurs.
Besides, in 2013, the Kenyan government began the construction of a city for the formation of startups: Konza[18], “the capital of innovation”, thus symbolizing the relevant role that the State has been playing in the development of innovation in the country[19]. Some US$ 15 billion have already been invested in its construction, which fulfilment is expected for 2030, according to Vision 2030[20].
Despite the merit of these initiatives and very interesting perspectives, Kenya still faces serious problems. There is a new electoral crisis, just like the one in 2007[21]. This is just another similarity with Brazil, which democracy is still shaken by 2016 former president Dilma’s impeachment process[22].
There are no doubts, however, that Kenya is an interesting case study, which shows how a developing country with a huge informal economy can be committed to creating a startup ecosystem by joining governmental efforts with the private initiative.
Among the African countries, Kenya is worth of special attention. It is certainly a case to be closely followed by the developers of the Brazilian innovation ecosystem. Lessons learned from the Kenyan experience will certainly be rich, and those involved in innovative activities in both countries will doubtlessly learn with one another – and maybe even find opportunities to be jointly explored like developing solutions for the informal economy, infrastructure and financial sectors.
