Category Archives: Family Finance

High School Scholarships from Kenyan Banks

The leading indigenous Kenyan banks now have scholarship programs that target bright children who are going into high school.

  • The pioneer of this is Equity Bank, whose foundation program dubbed Wings To Fly will this year hand out 2,000 scholarships to school children entering high school. They target students with financial needs who scored more than  350 marks in primary school exams whose results were announced last week. The program has helped over 10,000 since its inception and students or their families can collect applications from their local bank branches. The support includes fees, pocket money, a pair of shoes each year and participation in a mentorship and leadership program. Also, in 2015, 65 students received overseas university scholarships from the Foundations’ Equity Leaders Program.
  • KCB, through its Foundation, has a scholarship program that will support 240 children from all counties through their secondary schools, and this will include tuition, uniform, books, and mentorship. KCB also has partnerships that support scholarships through the Palmhouse Foundation, Starehe Girls, & Starehe Boys schools, and others that donate books, renovate classes and provide water tanks to schools. The total figure is about Ksh 100 million ($1 million) for 2016. Their research shows that Kenya has one of the most expensive secondary education systems in Africa. Presently, fees for national and county schools range from KSh45,000 to KSh136,000 (~$1,360)  per year, which is not affordable for many parents.
  • Cooperative Bank is going to award scholarships to 655 children through  its Foundation Scholarship Scheme for 2016. 420 will be selected by the bank and 235 will be awarded by county governments in each of the 47 counties in Kenya (at 5 per county).  The bank will also pay for the university education of 130 of the top students in the secondary school examinations.
  • Family Bank has an education program that includes secondary school scholarships and a talent program that gives employment opportunities to top kids after high school.

Mwalimu SACCO acquires 51% of Equatorial Bank

EDIT: Jan 27:  The Government has ordered an inquiry into Mwalimu National Sacco’s bid to acquire Equatorial Commercial Bank. The Commissioner of Co-operatives has appointed an inquiry team report to him following a protest by the Co-operative Alliance of Kenya (CAK) 

Last week, Mwalimu SACCO became  the majority shareholder of Equatorial Commercial Bank (ECB), acquiring  51% of the bank for Kshs 1.6 billion (~$18 million). The acquisition was cleared after no objections were received from the Central Bank of Kenya (CBK), Competition Authority of Kenya (CAK) and Sacco Societies Regulatory Authority (SASRA). There was another objection, but not from any of the regulators, who were aware of the issues raised.

Mwalimu with Kshs 24.5 billion of assets (2013), acquired the stake in ECB,  the country’s 27th  largest bank (Kshs 15 billion) which has been boosted by an earlier merger with Southern Credit Bank. Mwalimu will have three (3) seats on the board of ECB, but the Society is not converting into a bank nor merging with ECB. Due diligence of the financial and legal processes was done by Ernst and Young and Mose & Mose Advocates.

This comes two years after the LAPTrust, a pension scheme and the Kenya Tea Development Agency acquired a combined 22% stake in Family Bank – and LAPTrust estimated their stake was worth 1.6 billion in 2013, just two years after paying a 1/4 of that amount.

Top Kenyan banking stories of 2011

Agency Banking took banking to your neighbourhood as kiosks became a bank – pioneered by Equity Bank, and followed by KCB (Mtaani) and Co-Op (Jirani) – mainly enabling cash deposits and withdrawals. Read more.

Cheque Truncation promised so much in new, more secure cheques, that would take a 1-2 days to clear compared to the current one week (four working days). However the launch was put off by a delay in printing of new cheques at several banks, and when the program rolled out a few months later, cheques resembled the old ones, and still cleared at the same old pace.

Fraud: There was increasing fraud reported as a result of faster, easier, banking through real time gross settlements and mobile banking, and there were more tales of thieves being arrested with dozen’s of skimmed ATM cards –
– so watch your statements every month

Mobile Partnerships: Banks surrendered on making customers use their own platforms for mobile banking, and instead opted to partner with Safaricom’s M-pesa. In 2011, there were 8 banks that account holders could move money from their bank accounts to M-pesa and back – and these included large banks like Barclays, Co-Op, Equity and KCB. Also electronic banking is now dead as a premium products, and many of the same banks now have these as a free addition to their customers, saving them from the expense of having to print and mail statements to customers.

Super Profits: Did banks profit from the Central Bank’s mismanagement of rates leading to weaker exchange rates? The Central Bank Governor said five banks did, but then refused to say who they were. Parliament continued to push and came up with a list, but could not prove the claims that the banks made super profits at the expense of the shilling.

Executive Suites: Management changes at KCB resulted in top managers leaving the bank – and moving to rivals like Family Bank and Jamii Bora where they cut equity based compensation deals based on performance (modeled after the Co-Op one of a few years ago).

Interest Rate Hike: Late in the year, there was an about turn in the monetary policy – to rescue the Kenya shilling that, and this came in the form of cut back in liquidity. From that, banks drastically raised their loan rates e.g. Mortgages at Equity bank went from 14% to 25% and many banks offered new loans at +30%. To stave off defaults, some banks held their existing loan rates steady, but with extensions of loan maturity periods. The Kenya Banker’s Association then proposed other measures (PDF) such as limiting repayment rate hikes, not penalizing early payers and (unlikely) asking banks to absorb costs!

2010 Bank AGM’s

a guest post by Kainvestor

Barclays Bank AGM:
Besides the ordinary issues of election of directors, approval of financial statements, dividends and director remuneration, there was also special business items on the agenda of amendment of articles to allow for electronic statements and transfer of dividends via mobile money.

As expected, shareholders approved everything and further approved selling the Bank’s custody business, though some thought the bank was selling (itself) out to Stanchart.

Q&A
– Why a very big amount in non-performing loans and why are they not up-dated consistently every year? Response was BBK has loaned out over Kshs 100 billion and only about 2b have a paying problem, and most of them are secured so can still recover money by sale of collateral. They collected over kshs 200m from impaired loan accounts in 2008 and over Kshs 400m in 2009.
– What is the bank planning to do with loans secured by fake titles for grabbed land that the government is likely to repossess when the new constitution is passed? The bank doesn’t have such loans and if by bad lack such unfortunate events take place, they believe they will have recourse in the courts.
– Why is annual report font too small to read?
Future annual reports will have fonts that are legible to read
– Since the bank is making a lot of profit with ever growing retained earnings and they are selling the custody business, why can’t they give out more dividends and a share bonus?
Selling of the custody business will be concluded in October this year so money has not been paid to the bank yet. Even so the amount will be used for expansion of the bank. The bank has also been increasing the amount of dividend paid out considerably, by 25% this year from Ksh.2.0 in 2008 to Ksh.2.50 in 2009, and this will be the trend as the bank makes more profits. A bonus might be given next year if the business continues performing well.
– Why are Q1 results late and when are they going to be released? The bank is within the required reporting period and the results will be published Monday next week
humorous moment: Mama Helena, a 94 year old lady from Muranga, said (in kikuyu, translated by Director Judy Nyaga) that she’s too old to wait for the bonus next year and wanted the directors to give her bonus this year.This was supported by several old shareholders.
Goodies: a BBK labeled bag and packed lunch

Family Bank AGM:
… Got in late when they were discussing the only special business agenda. The bank was seeking shareholders approval to offer and allotment of unissued shares. This was approved, though one share holder asked if it meant that the bank would be going public on the NSE to which one director declined saying if that was the case shareholders will be informed first…. later got feeling that some shareholders are not for the idea to have the bank list on the NSE as they feel that they will loose out to new investors.

– Ng’ang’a Muchai retired after serving the bank for 26 years as a director.
– Goodies: a bottle of mineral water, cup of coffee/tea and snacks afterwards.
thanks Kainvestor, other guest posts are also welcomed

Urban Inflation Index December 2009

Comparing changes to three months ago – September 2009 and a year ago – December 2008

What’s gotten more expensive

Fuel: A litre of petrol is Kshs 83.5 (~$5.0/gal) up slightly from 80.9 three months ago, but still about 10% lower than the 92.7 of last December.

Entertainment: A bottle of Tusker beer (at local pub) is now Kshs. 140. This is up from 120 price of three months ago and also a year ago. There is a proliferation of new pubs all the time in Nairobi – and as others shut down, more entrepreneurs step up (with a new name, coat of paint and furniture) to take their turn behind the bar counter. The median price in Nairobi now seems to be 150 shillings ($2) for a beer, as Tusker brewer east African Breweries (EABL) remains untroubled by Summit of Keroche (what’s to blame? – poor distribution, dirty tactics by EABL, poor marketing?) or by the reports that South African giant SAB Miller may choose to re-enter the re-enter the Kenyan market following collapse of an EABL-SAB agreement in Tanzania.

Electricity/utilities: this month’s electricity bill is Kshs 2,100 ($28) compared to the 1,900 of three months ago, as well as last December. 2009 has been a year of harsh reality checks for Kenyans with the failure of rains, drying of dams and water & electricity rationing programs. And while electricity rationing has ended, water rationing is still on in urban areas, and in rural areas, water sources are diminishing and the usage of water is becoming a cause for tension among communities and neighbours. The government has set out to reclaim and restore water towers in the country, notably the Mau Forest, and has made investment in geothermal energy and is linking up with neighbouring country grids (Ethiopia, Tanzania) ; unfortunately wind and solar energy are not considered to be viable large scale avenues worthy of requisite investment.

about the same

Food: though the inflation impact of food items has been played down by the Central Bank (CBK) who said food prices distorted inflation figures, there has not been much change in the last quarter.

food is bad for inflation

Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 83 compared to 84 three months ago. But this is much better for consumers than the 97 shillings of a year ago.

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 200 up, unchanged from 3 months ago, but 25% higher than the 160 shillings of a year ago.

Consensus among farmers and traders is that 2010 will be a worse year for food production in the country, so we’ll see where prices are next year.

Gotten cheaper

Communications: there have been lots of developments towards reducing the cost of communications as competition in the sector heats up.
– Mobile giant Safaricom, who told institutional investors that they aim on becoming the ISP of choice for Kenyans, have been pushing out internet devices at a rapid pace. The company earned 7.2 billion ($96 million) from SMS and data in H1 of 2010 (up from 2.1 billion a year ago). They have now partnered with Equity Bank to get laptops computers (with free modems) to thousands of consumers by way of bank loan
– Both Safaricom and Orange (Telkom Kenya) are selling 3G modems’ at a cost of Kshs 2,000 (~$26) – these used to cost 4,00 before. And with Safaricom you can cash in just 2,000 bonga (loyalty) points and get the modem, which used to cost 15,000 bonga points a year ago.
– ISP’s respond Wananchi have lowered Internet prices of their broadband zuku packages since the arrival of fibre cable connection in Kenya. Meanwhile KDN is offering free butterfly service over Christmas and have a program with family bank to offer free wifi services to their customers.

Foreign Exchange: 1 US$ equals Kshs. 75.62 compared to Kshs. 75.93 three months ago and 79.08 a year ago.