A teenage boy is breeding rabbits in Nairobi. Traffic backs up in Mombasa as men armed with water and sponges wash the windscreens of waiting cars. On roadsides throughout Kenya women sell vintage clothing. Fashion blogs, run by teenage girls on their smartphones, reach millions.

We have entered the Biashara. If you are not African — indeed, if you are not Kenyan — the term may not be familiar, but in Kenya, Biashara is everywhere.

Biashara is a culturally loaded term. It is often used as a pejorative to describe someone just getting by, someone on the margins, someone not paying their taxes, someone not fully contributing to society.

That’s the narrative that suits the vested interests of the Kenyan establishment; corporations, big business, politicians and the mainstream media.

However, there are other voices out there, such as the influential Kenyan researcher Michael Kimani, who informs us that: ‘Biashara people are taxpayers and economic drivers, just like formal institutions, a fact that is often forgotten.’

The reality is that Biashara — the informal sector — makes up a least 40% of the Kenyan GDP. It is the yin to the yang of the formal sector, with its air-conditioned offices, global outlook, HR departments and layers of bureaucracy. But formal does not mean better. Ignorance of the informal risks missing out on the dynamism, entrepreneurship that Biashara creates.

Niti Bhan points out that all too often, ‘informal’ is conflated with ‘illegal’ or ‘criminal’, and quantifies the potential undercounting of GDP that ignoring the biashara sector risks.

An Economic Mirage

Things are not always as they seem. Somewhere near Kenya’s border with Uganda a collection of brightly coloured and patterned clothes blow in the warm breeze as they hang from the branches of a tree. Teresia is a mitumba merchant, a seller of second hand clothes, and to drive past her roadside stall you might mistake this as someone’s attempts to scratch a living on the margins of society.

However, appearances can be deceptive. She might not be sitting behind a desk on her MacBook putting a Google slide deck together but she is a successful entrepreneur nonetheless, with a record of bookkeeping and business success that many SMEs with a more polished appearance would envy.

Teresia turns over US $1,500 per month. Seven years of receipts are neatly handwritten in a succession of notebooks, she knows exactly her income and outgoings and pays her market fees to the local council. Pre-loved clothes blowing in a roadside breeze does not signify chaos or disorganisation.

Teresia is Biashara in action. Her business is not borderline or dubious or illegal. Yet time after time, formal economic models do not take account of the informal sector in countries like Kenya. It is somehow easier to label it as shadowy territory — the province of tax dodgers or smugglers — than to celebrate it for the dynamic, entrepreneurial success story it is.

Rahab Wangari also sells mitumba. Her story reminds us that the financial requirements of Biashara are not necessarily served by the traditional banking system. Which is why Rahab became a member of a social saving group, in Kenya called a Chama.

‘[A] Chama is a group where we come together with one goal, to help each other develop financially… I was introduced by my friend and I have gained a lot because I have started my own business. I saved little by little and then I was able to get a loan,’ she explains.

Talking about financial inclusion in countries such as Kenya — ‘banking the unbanked’ — is to miss the point somewhat, based on an incorrect assumption that allowing some of the poorest members of society to be targeted and bled dry by high-interest loans is always a good thing.

Anglophone countries have a blasé attitude to consumer debt that is not shared by many other countries — even inside Europe. In Germany, for example, to attempt to pay for daily groceries with a credit card would be frowned upon. Living on credit is simply not something Germans do — it’s for Britons and Americans. Sometimes unfettered access to the services offered by banks and their like is a mixed blessing.

Like Germans, not everyone in the world is addicted to debt and cheap money. In many countries, there is still a culture of saving money — and this allows Chamas (savings circles) to thrive in Kenya alongside the mainstream banking system.

As Raha explains in her video, for someone like her, operating in the Biashara sector, a Chama offered her a chance to save and borrow in a more reliable, less complicated way than a bank.

Rahab has a lower income than many Kenyans, but she is not poor, and neither is she shut out of the traditional banking system. She has a bank account, but when she applied for a loan, she had to wait a long time for the decision and was ultimately refused, whereas when she approached her Chama, their decision was positive and immediate.

Her membership of the Chama allowed her to save money each month and then, after a year or two, to take out a loan to start her business. Chama’s meet regularly, usually monthly, and the treasurer collects the savings money, which is later redistributed as loans. The specific rules may vary from country to country, and even Chama to Chama, but the principle is the same.

In Kenya alone there are more than 1.5 million Chamas. They are part of a global phenomenon of informal savings circles that exist all over the world under different names: Committee in India, Wichin Gye in Korea, Arisan in Indonesia, Seettuva in Sri Lanka and Investment Clubs in the West.

Some may differ in rules and conventions, but all have broadly the same purpose: to allow individuals to save and borrow, peer-to-peer and face-to-face. No credit checks are needed before loans are taken because the Chama is rooted in the local community, where people know each other, and where individuals’ reliability and creditworthiness can be easily assessed.

Most Chamas will accept new members only if they are recommended by an existing member, who then becomes (at least partially) liable for the debt in the case of default, giving everyone skin in the game. And it turns out that reputation and social peer pressure is a significant incentive, leaving Chamas with ultra-low default rates that would be the envy of many global credit-checking agencies.

A Magical Matatus Mystery Tour

A bus with a massive green spoiler, outsize alloy wheels and emblazoned with images from the US Dollar sits at the traffic lights. Another painted neon pink and resembling Optimus Prime from the Transformers pulls up beside it. A futuristic version of the Beatles Magical Mystery Tour collides with Pimp My Ride. You can’t go anywhere in Nairobi without seeing matatus — the minibuses which make up the city’s informal transport network.

Extravagantly decorated and fitted with hi-tech entertainment systems, matatus occupy the no-man’s land between taxis and private transport, attracting customers from competitors with high-speed internet and promises to get you to your destination in record time.

Matatus are privately owned, and their drivers are self-employed — poster boys for the Biashara sector. Yet, few would have the cash to buy their own — or even raise the deposit for one. Once again, Chamas provide the lifeline to these small businesses. Integrated into the livery of many matatus is the name of the Sacco — a particular type of Chama — through which the owner funded it.

For Saccos, this is an important element of their business model: they will own many matatus and will have drivers/fare collectors working for them. A big Sacco will have many matatus. This is a way of getting their logo out on to the streets and attracting savers. Saccos operate on a much larger scale than Chamas do.

Matatus can come with their own challenges for drivers — not least the pressure to pay bribes to the proportion of crooked cops who make it their business. Robert Omariba explains in this video how seven years of Chama membership helped him buy first a matatu and then the private taxi he now operates.

The flexibility of Chamas, where loans can be paid back early with no penalty, make life easier for owner-drivers such as Robert, who may wish to scale up or down at various points in his life, without being tied into the inflexibility of a bank loan.

Car loans are a widespread means of financing vehicle purchase worldwide, and a recent story from the UK illustrates the dangers. With fears that the vehicle lending sector is the next high-risk lending bubble that is about to burst, and a shocking recent survey that showed less than 13 per cent of British car loan customers knew (to the nearest £1,000) what they currently owed on their loans, the car loans offered by Chamas seem like models of restraint and consumer-friendly prudence.

Decades of simplistic personal-finance advertising and the normalisation of debt in the UK have led to a dumbing down of the entire population, where the only figure that matters is the monthly repayment you can support, rather than the cost of the debt itself.

If you see matatus everywhere in Kenya, the other ubiquitous feature of the landscape is the mPesa sign.

Years before the rest of the world had ApplePay or Google Wallet, Kenyans were paying for goods and services with their mobile phones. Payments with mobile units (‘mobile money’) — for which mPesa is the largest provider — are tailor-made for the Biashara sector, requiring no bank account or proof of a business address.

‘Anywhere you go in Kenya, you see two colours… the red of Coca-Cola and the green of mPesa.’ says cryptocurrency adviser Stephen Taylor, recalling his overriding impressions of his first visit to Nairobi.

The mPesa branding really is everywhere in Kenya: not just on purpose-built kiosks, signs outside corner shops or on advertising hoardings, but emblazoned on the sides of bars, restaurants and even the most ramshackle rural buildings. mPesa green is everywhere, providing paint jobs for buildings that would otherwise have remained bare or peeling.

Toffene Kama has 15 years of experience in the mobile payments space and still remembers people’s excitement when they realised that digital payments could be so simple. He was introducing people to the idea of mobile money back in 2003, a good 12 years before Apple rolled out their mobile payment system.

While mPesa is a centralised service, administered by Safaricom (itself a subsidiary of Vodafone), their winning formula has been to their services on the ground, allowing individuals to operate mPesa top-up services, no matter how small. In a way, this is the perfect example of Biashara in action, with restaurateurs augmenting their income by offering mPesa services or kiosks springing up by the roadside.

Toffene highlights the spirit of independence that both mobile payment networks and Chamas bring to those who use them.

‘Chamas are people who decided not to wait for anyone. They want to make a savings plan. They are looking for tools to do it. If you give them that tool, they will take it.’

Bitcoin, lambos and moon!

Perhaps it is this early switch to mobile money that has opened up the door to cryptocurrency in East Africa.

One barrier to adopting any new technology is the existence of a legacy system which already does the job, even if it does the job less well. Despite being the richest country in the world, the United States has lagged in mobile phone adoption. Even today, it only ranks seventh in handsets per head.

One of the reasons for this is that the landline infrastructure was so well established that there was no immediate incentive for people to buy a mobile phone. If someone wanted to talk to their friends, they could normally pick up a phone at their home or workplace and speak to them.

However, in countries without this infrastructure, consumers simply went straight to mobile, bypassing landlines entirely, and the US and, to a lesser extent, the UK found themselves at a comparative disadvantage, being forced to play catch-up with the likes of South Korea and Taiwan.

The same thing has happened with mobile money. While Apple Pay and Android Pay are becoming popular, only a tiny number of people in the West have made cryptocurrency payments with their mobile phone. Money is very much associated with bank accounts, and the idea of having a means of payment on your phone which is not tied to a bank is something which still makes people feel uneasy.

These cultural barriers are lacking in Kenya, and the ease with which people have taken to the mobile-money providers such as mPesa means that there is an openness to the idea of alternative digital currencies that you don’t necessarily get elsewhere.

Bitcoin and other cryptocurrencies have been gaining traction slowly around the world since 2009, but when the phenomenon went mainstream at the end of 2017, one factor that was overlooked was its truly global nature.

All that has been required to engage in crypto culture — other than an internet connection — are an aptitude for technology and a disregard for socio-financial conventions… something that Kenyans, particularly the younger generation, possess in quantity.

You cannot spend long on crypto-Reddit or crypto-Twitter without being exposed to a rich culture of memes, in-jokes and self-deprecating humour, ‘When moon, sir?’ and ‘When Lambo?’ being the most frequent.

Nairobi software engineer Eugene Mutai states simply: ‘Crypto has changed my life.’

He describes in the video how he read about Bitcoin for the first time, experimenting with sending small amounts backwards and forwards, and doing some trading.

‘When I used it I thought: ‘This is incredible!’. I researched about it deeply. Like Warren Buffet says, do not invest in anything you do not understand.’

Eugene is a risk-taker. His strategy would chime with tens of thousands of other young people across the world who realised the potential — and the risk — of this new technology.

‘I dreamed of owning a Ducati 390,’ he says, going on to explain how he went on to buy not only his dream motorbike but also a flashy BMW car.

‘I don’t need a Lambo,’ he jokes.

Eugene is not the only Nairobi resident who knows the power of a good crypto meme.

Memes without borders

Like a 21st-century version of Esperanto, the vocabulary of HODL, Lambo and Moon are universal, transcending culture and even language. For those who don’t know the origin of the meme, it famously started on Bitcoin Talk back in 2013.

In the video below, we meet investment advisor Jackson Njuguna, wearing his HODL T-shirt — beloved by crypto enthusiasts the world over.

But Jackson doesn’t just believe in HODLing for himself. Everyone has different skills, and his niche is understanding technology and investments. Long before crypto came along, he was managing the investment portfolio for several Chamas, growing their savings pots on the global markets.

When he became aware of crypto, he saw the opportunity to bring in more generous returns for the Chamas he serves. Not only does he manage cryptocurrency investments for his Chama, but he strongly believes in encouraging others to learn and share the responsibility.

‘They trust my word on cryptocurrencies,’ he says of the Chama members he advises.

‘The initial value proposition of chamas is to create return for investors… I meet them as individuals. Most are predominantly investing in land so when you try to encourage them to think outside the box, they look at it based on returns.’

The money managed by Jackson alone is enough for him to need several bank accounts, and many Chamas opt for the financial management services offered by Asili Enterprise. Asili Enterprise looks after the financial affairs of over 100 Chamas. Needless to say, there’s a lot of paperwork. Chamas record their transactions by hand in paper-based ledgers.

Bookkeeping errors are responsible for an annual Chama failure rate of 6%. Although this number is small, a start-up called Chamapesa think they’ve found a way to reduce it to virtually nil.

By digitising bookkeeping and recording transactions to an immutable ledger, Chamapesa can improve accounting accuracy and transparency for Chamas. The ledger makes transactions visible to Members yet keeps them secure from public view, which also reduces incidents of theft and fraud.

A Trust and Identity model enhances the social bonds that underpin Chamas. It speeds up the verification of new Members and encourages inter-group lending, making savings work harder.

It also lets Chamas access a global network, cryptocurrencies and other investor assets (such as fiat currency or precious metals).

It’s no surprise to hear that Asili Enterprise is keen to adopt a digital tool like Chamapesa — and not just because it can automate and improve record-keeping and auditing: mobile technology appeals to a younger generation, ensuring the Chama tradition continues.

But is it too early to expect people to entrust the record-keeping of their savings circles to bleeding-edge technology, accessible via a mobile phone?

Not so, thinks cryptocurrency activist and filmmaker Tomer Kantor, pointing out that the growth of cryptocurrency awareness in Kenya has been exponential, precisely because people here are open to technology and new ideas in a way that those in Western towns and cities are often not.

Kantor remembers his visit to Nairobi four years ago, and being present at Kenya’s very first Bitcoin meetup.

‘The speed with which this has evolved is unreal,’ he says. ‘But in a way, I’m not surprised by it. mPesa and the mobile money networks were like the catalyst. It informed the culture differently.

‘Kids grew up watching teenagers start from absolutely nothing and building an agent network. They know that it’s possible to grow a global business like that because they’ve seen it happening before, in front of their eyes.’

John Karanja is one of those people who heard about Bitcoin in February 2014. Although it was only four years ago, it sometimes seems a lifetime ago, so dramatic has been the change.

‘We had about 10–20 people in 2014 and we’ve seen a rapid increase,’ he says of the early Bitcoin meetups.

‘We now have meetups every week, there is lots of interest — and it’s not just from cryptocurrency speculators.’

In fact, cryptocurrency investment and speculation is not the focus of John’s efforts. Like many other entrepreneurs in cities around the world, he is alive to the technological possibilities that blockchains can bring across many different sectors.

These nascent businesses waiting to disrupt the global incumbents, seem distant from the humble Biashara economy, but it is all part of the same picture: a positive portrait of entrepreneurial skills and achievable dreams.

John’s incubator, BitHub, nurtures blockchain startups.

‘Lots of young people have been energised by learning about blockchain… for them it’s opportunity to learn new skills.’

In the video he speaks about WebHive, a high-tech blockchain startup that focuses on harvesting and distributing solar energy.

‘It’s also time for Africans to contribute to these big projects that are happening globally,’ he says.

For anyone who has been involved in the crypto community in Africa, Europe, Asia or the US, the message is the same. The promise of cryptocurrency and blockchain technology offer a chance to become involved in some of the most exciting projects in the world, at a time when barriers to opportunity are being broken down like no other period in history.

Yet, no matter how global our outlook, localism is still important. Cryptocurrencies and blockchains may transcend national borders, but acquiring the technology and tools to interact with those around us — such as empowering Chamas to do their own book-keeping — is undoubtedly the first step towards this bright future.

For more information on Chamapesa check out the resources below: