Products on Display, Kawangware Market; PHOTO: COURTESY
Every morning, before the sun rises, thousands of women across Kenya begin their day. In open-air markets, they set up stalls and arrange piles of fresh produce. They prepare for the day’s operations by bargaining with customers, restocking supplies, and managing their spaces.
It’s routine work, but vital. These women are the backbone of Kenya’s informal sector, which contributes 35% to the national GDP.
Behind this daily enterprise lies a brutal truth. Despite their resilience, many women remain trapped in a persistent cycle of financial exploitation. Each year, billions of shillings are lost to corruption, predatory lending practices, and illicit financial flows. Whether through routine bribes, high-interest digital loans, or exclusion from formal banking services, women in the informal sector face systemic barriers that drain not only their earnings but also their potential to grow and thrive.
Claudine, Head of Business Banking for SMES at Equity Bank Kawangware, notes that many women in informal trade remain outside formal banking not by choice but due to systemic barriers.
“They’re often unable to meet basic requirements like minimum balances or collateral,” she explains.
“Even those with thriving businesses lack things such as a minimum bank balance to access loans, car log books, title deeds, or formal business registration. That locks them out of credit and the safety of formal financial systems.”
“Many are stuck in ‘chamas’, leading them to lack money to deposit in the bank.” She adds.
They are not just traders but mothers, entrepreneurs, and community leaders. They are the backbone of Kenya’s economy. But the question remains: when will the system stop working against them?
The Silent Tax: Bribery and Extortion in Informal Trade
For many women in Kenya’s informal economy, paying bribes has become routine; it is simply the cost of doing business.
Traders in open-air markets often reserve a portion of their daily earnings to “secure” their spaces from county officials or to pay middlemen who assert control over market territories. Sometimes, they also make payments to avoid harassment from police and other enforcement officers. These transactions occur off the books, lack receipts, and are unpredictable.
“They come every week, and whether you’ve made sales or not, you must pay something or they’ll threaten to close down your stall. Sometimes we even borrow just to give them,” said Irene Vugutsa, a trader in Kawangware market.
A Transparency International report shows that women in informal trade are especially vulnerable to corruption. This is mainly because they work in public spaces where enforcement officers, who are rarely held accountable, exploit their visibility and lack legal protection. Many women recount stories of paying multiple levies to county officers, (”I face constant harassment from local authorities. The city council collects money weekly, and if I don’t have it, they threaten to shut down my stall or fine me. It’s exhausting, and it puts a massive strain on my finances. I often have to borrow just to cover the bribes and still manage to feed my family and pay business rent,” shared Kavindu, a vegetable vendor in Kawangware.), local law enforcers, and even organised groups masquerading as market regulators.
At the Kenya-Uganda border, a study by Sauti and GIACE revealed that 56% of women traders experience corruption daily, while 81% encounter it monthly. Police were cited as the primary offenders in 47% of cases, followed by revenue officials at 18%.
A report from the Ethics and Anti-Corruption Commission estimates that informal traders lose Ksh. 238 billion annually to bribery and extortion, of which Ksh. 119 billion is lost by women.
“Yes, the city council collects money weekly. Sometimes, you have nothing at hand to give them, and they end up threatening you.” Anita, a vegetable vendor in the Kabiria area, Nairobi, states.
“ It causes financial strain… It affects my business since I can’t borrow beyond a certain limit due to outstanding debts.” Kavindu adds.
For many, the cost is not only financial. Those who refuse to comply face threats, confiscation of goods, and even gender-based harassment. Intimidation keeps them in constant fear and insecurity, hindering their ability to grow beyond mere survival.
The Dark Side of Digital Lending
To the unsuspecting clients, mobile loan apps offer a lifeline. With a smartphone and a few taps, women traders can access quick loans to restock goods, cover emergencies, or pay rent. But what seems like a financial cushion is often a trap lined with hidden fees, unrealistic repayment timelines, and punishing interest rates.
In the last decade, Kenya has seen an explosion of over 120 digital lending platforms, offering instant credit without the need for collateral. However, many of these loans come with annual interest rates as high as 400%. Borrowers often borrow from one app to pay off another, sinking deeper into a cycle of debt.
“I have used them before,” Nancy, a hairdresser in Kawangware, explains. “The experience wasn’t good because of the threatening messages they sent and the short repayment deadlines.”
“You end up borrowing from one app to pay for the other. Before you know it, you’re blacklisted on CRB.” her collegue added.
Joseph Kairu, a financial expert at ABSA Bank, draws attention to a more insidious issue: the link between some digital lending apps and fraudulent behaviour.
“We’ve seen a rise in cases where unregulated apps don’t just exploit borrowers, they also pose cybersecurity risks,” he explains. “Some apps harvest personal data without consent, access contact lists, and can even plant spyware. These practices border on financial fraud and data breaches, and many users aren’t aware of the risks until it’s too late.”
He adds that without strict regulation and digital accountability, vulnerable groups, particularly women in informal trade, become easy targets for exploitation not only financially, but also digitally.
Alice, a second-hand clothes Dealer in Kabiria, Nairobi, shared how the system has trapped her deeper into debt:
“I took loans from a digital lending app,” also, “because I couldn’t afford to buy a smartphone in cash. So I went for a loan phone offer, but now I’m paying nearly three times more than I should. The interest rates are crazy and quite exploitative to small business owners like me.”
According to Financial Sector Deepening Kenya (FSD Kenya), a key challenge is financial literacy. Most borrowers don’t understand compound interest, hidden fees, or the terms that govern digital credit. Others aren’t aware of their rights or how to report exploitative behaviour.
Anthony Munyao, the Marketing Manager at SMEP Microfinance Bank, offers a perspective from within the financial industry. He notes that while regulation is slowly taking shape, especially with interventions from the Central Bank of Kenya, the digital lending space still operates with minimal oversight.
“It’s not that these platforms are entirely unregulated; regulation is evolving, but the digital credit sector has grown so fast that enforcement hasn’t caught up,” he explains. “Some lenders capitalize on emotional vulnerability. They know borrowers are desperate and uninformed, and that’s where exploitation thrives. Without accessible financial education and strong consumer protection, many, especially women, end up in cycles of stress, debt, and social harm.”
Claudine adds that while products like Fanikisha are designed to offer women-friendly digital lending options, adoption has been slow.
“We’ve seen that digital literacy is still a major gap. Many women are afraid to use apps because they don’t fully understand the terms. Without education and support, these tools become just another trap,” she says.
The lack of regulation means many lenders use aggressive tactics like contacting family members, employers, or clients to shame borrowers into repayment, a violation of privacy that causes emotional and social harm.
The Link Between Informality and Illicit Financial Flows
Kenya’s informal economy is extensive but predominantly operates outside formal systems. This obscured nature is not solely a consequence of informality; it also contributes to the prevalence of illicit financial flows (IFFS).
Financial exclusion forces women to depend on unregulated lenders and cash-based transactions, which are hard to monitor and tax. Women frequently face barriers when trying to access banking services, such as high minimum balance requirements for their accounts, the need for collateral, or the necessity of formally registering their businesses.
“Informality isn’t a sign of incompetence; it’s often the result of exclusion,” Claudine states. “The current system is not designed to recognize informal women entrepreneurs as legitimate. Until we fix that, they’ll keep operating in the shadows.”
This invisibility allows large suppliers in the informal economy to evade taxes, further weakening public resources. Government funds that could improve access to credit or offer business training are lost, leaving women traders to fend for themselves.
Corruption only worsens these financial leakages. When daily fees are paid as bribes instead of through official systems, the money ends up in shadow economies instead of contributing to national development.
Breaking the Cycle: The Need for Policy Reform
A multi-pronged strategy is needed to address the complex challenges facing Kenya’s informal economy and digital lending space. This includes enforcing regulations on digital lenders to cap interest rates, ensure transparent repayment terms, and penalize harassment, as outlined in the Central Bank of Kenya’s Digital Credit Providers Regulations 2021. According to the GIACE report, County governments should combat corruption in informal markets by eliminating illegal levies, digitizing payments, and holding corrupt officials accountable. Financial inclusion must be boosted by developing affordable, accessible credit tailored to informal traders without collateral or registration, as stated in a study by Mercy Corps.
Claudine emphasizes the importance of intentional onboarding and support.
“You can’t just build products and expect women to come. We have to engage with them, build trust, explain options clearly, and offer solutions that match their income patterns,” she says.
“Financial literacy must go hand in hand with access, it’s the only way to create lasting inclusion.”
“Women, especially those in low-income and informal sectors, often lack access to accurate financial information. Strengthening financial literacy can empower them to make informed decisions, avoid over-indebtedness, and assert their consumer rights.” Stated in the FSD Kenya report.
Finally, the Deloitte Policy Analysis suggests that formalizing informal businesses through tax breaks and simplified registration can help integrate them into the formal economy.
The women of Kenya’s informal economy strive to do their best. They work hard, support their families, and generate billions in economic value. But despite their contributions, they remain on the margins, exploited, ignored, and overburdened.
While institutions such as Equity Bank and Mercy Corps focus on onboarding and education, others emphasize the need for broader systemic change.
“Digital lending in Kenya grew faster than regulation could keep up,” says Anthony. “In the rush to fill credit gaps, oversight lagged behind innovation. Now, we’re seeing the consequences of exorbitant rates, privacy violations, and deepening debt cycles. Regulation must catch up, but so must our efforts to reach those being left behind.”
As one trader stated,
“I’m struggling to feed my family and pay business rent. I want to grow, but these debts, high taxes, and bribes hold me back.”
The fight for justice in Kenya’s informal economy concerns not only money but dignity, security, and the right to thrive.
Kenya’s future rests on the backs of its women traders. The question now is: Will the system continue to fail them, or will it finally rise to protect them?
CREDIT: “The project received support from the Thomson Reuters Foundation through the Media Foundation for West Africa, as part of its global work aiming to strengthen free, fair and informed societies. Any financial assistance or support provided to the journalist has no editorial influence. The content of this article belongs solely to the author and is not endorsed by or associated with the Thomson Reuters Foundation, Thomson Reuters, Reuters, nor any other affiliates”.
