Kenya’s welfare plan should empower, not merely sustain

Kenya’s proposed Social Protection Bill 2025 represents a significant effort to reshape the nation's approach to supporting vulnerable citizens. The intent is commendable; providing a crucial safety net for employees. But its design raises practical questions about long-term impact.

The bill's focus on unemployment benefits raises important questions about coverage. With only 17 percent of Kenyans in formal employment, the majority working in informal sectors could potentially be excluded from its protections.

Consider a matatu driver who loses their livelihood when the matatu owner takes away the keys - would they qualify for support under the current framework? The bill’s focus on unemployment benefits may overlook this reality. This gap shows there’s need for systems that recognise Kenya's informal economy, which employs 83 percent of the workforce.

Beyond coverage limitations, the bill's approach to job loss assistance could use refinement. Providing Sh3,000 monthly to unemployed individuals offers temporary relief but doesn't address Kenya's underlying job shortage.

Could these funds be more impactful if directed toward job creation initiatives, vocational training or small business support?

Investments in growing sectors like renewable energy or digital technology could create sustainable employment opportunities while addressing immediate needs.

The potential for creating dependency also deserves consideration. Social protection is crucial but systems that do not promote self-reliance may prove unsustainable in the long-term. Kenya's existing Inua Jamii programme, for instance, demonstrates both the value and limitations of direct cash transfers.

The transfers are helpful but the stipends often can't keep pace with rising living costs. Alternative models like matched savings programmes could maintain support while fostering financial independence, teaching valuable money management skills alongside assistance.

Living costs present another critical factor. Even with unemployment benefits, many Kenyans would still struggle with Nairobi's high rents (consuming as much as 40 percent of a minimum wage earner's income) among other essential expenses. Could the bill incorporate targeted subsidies for housing, healthcare or education to make assistance more effective? Such measures might provide more substantial relief than cash transfers alone.

The concept of Unemployment Insurance Savings Accounts (UISAs), previously considered in the country, offers an interesting alternative model. Chile is one of the countries with successful implementation of such a model. A combination of individual savings with a collective safety net provides protection for the working population but in a way that incentivises them to look for work sooner than later.

Such an approach in Kenya's informal workers could create a more inclusive system. Workers and employers could contribute during employment, with payouts during job transitions and a solidarity fund for those who exhaust their savings.

But what’s the best alternative of them all? Teaching financial discipline. Encourage Kenyans to build emergency funds instead of waiting for handouts. The truth is, no welfare system can replace the need for personal financial responsibility.

Relying on the State for survival is risky when budgets are tight and priorities shift. Individuals should learn to build their own emergency funds, starting small and staying consistent while the State works on policies that lower the cost of living such that wages stretch enough for savings.

The Social Protection Bill 2025 represents an important step in Kenya's social policy development. But, can the system be designed to both cushion short-term shocks and create pathways to economic stability? How can the system best serve both formal and informal workers? How might it better incorporate Kenya's informal workers while encouraging personal responsibility?

These questions don't diminish the bill's good intentions but highlight opportunities to strengthen its impact. The challenge lies in creating a system that provides essential support while creating the right conditions for Kenyans to achieve lasting financial security. As discussions continue, the focus should remain on developing solutions that address Kenya's unique economic realities and empower all citizens to weather financial challenges.

The writer is the CEO, Enwealth Financial Services Ltd. [email protected]