Kenya's `hot sun workers' create jobs nation desperately needs. Small-scale loans to urban entrepreneurs help cut unemployment

Hezbon Massawas and his wife, Consolata, are helping solve one of the challenges facing developing nations with burgeoning populations. They are creating new jobs. Four years ago they began making suitcase-sized tin storage boxes in an open field in Nairobi. Such people are known here as jua kali (hot sun workers), because of the conditions under which they work.

At one point, Mr. Massawas had eight employees. Then several left to set up their own box-making businesses nearby. Today, part of his business is shaded by one of several roofs erected in fields in Nairobi at the direction of Kenyan President Daniel arap Moi.

Kenya, according to several international experts here, is a leader in Africa in helping these workers - and for good reason.

By the year 2000, Kenya's potential work force will double, to about 14 million. The government says the majority of future nonfarm job opportunities will be in the so-called informal sector, and it promises to help this sector grow.

Throughout the developing world, there is a great need to increase the rate of jobs created. In about 40 years, its working-age population will be greater than the entire world's population today, according to a new study by the World Resources Institute in Washington.

Most developing countries lack the capital to expand large industries fast enough to keep pace with mushrooming work forces, analysts say. More and more hope is being pinned on the informal sector. Generally, these are businesses so small they do not qualify for standard loans.

Among them are roadside stalls that sell food and clothing, tailors, and mechanics who often work under trees. These workers are often very innovative. Here, for example, hot sun workers make small portable stoves out of pieces of old oil drums. Often they are one-person operations. Many are women.

Mary Wanjiku Gachaga is one of them. She operates a small clothing stall in Nairobi. With the help of a $300 loan last fall from the National Council of Churches of Kenya (NCCK), she expanded her stock and boosted her monthly profits from about $60 to $300.

``I used to borrow to buy food,'' says Mrs. Gachaga. Now she and her husband, who works as a messenger, can afford more staples, especially sugar and bread, and school uniforms for their children. And, according to Flora Wekesa, a staff worker at NCCK, Gachaga is up to date on repayment of her loan.

Among other nations where people are being helped with similar loans are: Senegal, Jordan, Bangladesh, Indonesia, the Philippines, Honduras, and the Dominican Republic, says the United States Agency for International Development (AID).

It costs only about $500 to create a new job in such small businesses, compared to about $22,000 in large industries, says R.K. Bhatia, an Indian consultant to the Kenyan government. Setting up a roadside stall is a lot cheaper than expanding a factory.

Small enterprises, says Mr. Bhatia, also need fewer imported materials and thus do not require as much foreign exchange for purchases as do large ones.

Kenya is offering loans under a pilot loan plan by the government-run Kenya Commercial Bank, has waived import duties on some machinery used by small enterprises, and has committed additional funds to rural markets, sheds, and electrical lines for small businesses.

Since 1983, AID has committed some $12 million to helping small businesses in Kenya, says Peter Leifert of the AID office in Nairobi. The funded programs appear to be creating more jobs, he says.

Nearly 1,000 people, more than half of them women, have applied for loans under the bank's pilot program for small businesses.

The loans, initially from AID funds, will be made at the local commercial rate of 14 percent interest. The typical collateral requirements are waived because most applicants can't meet them. But applicants must have a solid business record, and skills in bookkeeping are considered essential, so the bank provides recipients with training.

``It's a whole re-orientation of the banking system,'' says Lawrence Masaviru, of the Kenya Commercial Bank.

A private Kenyan group, the Kenya Small Traders' Society, headed by Wilson Muchiri, has begun offering small loans to help small businesses expand. Members, who pay about $10 a month dues - on which they earn interest - can apply for loans six months after they join.

``If I can get a refrigerator ... I can start selling chickens and fish and ducks and eggs,'' says butcher Daniel Weru Gathogo, who is a member of the traders' society, and is planning to apply for a loan. He runs a small roadside stall north of Nairobi.

The Rural Enterprise Programme, mostly funded by AID, has helped with loans and training for some 5,000 individuals in 20 small business projects over the last few years. So far, the repayment rate on its oldest loans is running 80 to 90 percent.

One method the program uses to ensure that loans are repaid, says director Fred O'Regan is ``group guarantees.'' If one member of the worker group getting a loan defaults, the others must pay the difference.

An AID evaluation of the program's projects notes that some ``will certainly fail,'' but adds that ``the risk of exploring these innovative schemes seems worth taking.'' The report praises the program as ``a major center of innovation and learning.''