Category Archives: kenyamoneyinthepast

Kenya’s Money in the Past: Indians in East Africa

Indian Africa, minorities of Indian-Pakistani origin in Eastern Africa, is a 484-page book with lots of information, charts, statistics and stories of the arrival and enduring impact of Indians in East Africa:

Some excerpts: 

  • Almost all Indian traders to East Africa were from the northwest (Sindh) now Pakistan, Gujarat, Punjab, and Maharashtra in India.
  • The Indian population in Kenya which fell to 78,000 in 1979 rose once again to stabilize at 100,000, half of whom acquired Kenyan nationality. The demographic resurgence was probably due to donor pressure but also favorable treatment under President Moi who got into a tactical alliance with high society to check the influence of the emerging Kikuyu middle class. Thus in 1986, Indians who had been dispossessed in 1967 returned to manufacturing, by buying out subsidiaries of multinationals.
  • Indians are in 80% of industrial sectors and control 90% of business activity in the textile industry through 50 mills and 350 other companies. In the pharmaceutical sector, they control 60%, 80% of the chemical/plastics, 80% of iron business, and 90% of electrical installation ones (French Embassy statistics).
  • 25 of the 44 banks are controlled by Kenyan Indians.
  • Family business structure: Capital raised stays with the founder (first generation) while the second generation (sons) assume managerial and administrative positions and prepare the business for expansion.
  • Business Capital: Most Kenyan Indians businesses are totally dependent on local resources unlike the perception that they get foreign capital – only 5% of 210 entrepreneurs surveyed said they had received such – and this was from expatriate parents in Britain, India, Dubai.
  • Business Finance: Bank loans are secondary sources of funding – only 33% had received them, while 67% never had. They have other informal sources of credit such as employer associations to which some Europeans and Africans all benefit – and 32% of interviewees were members of groups like the United Business Association. Suppliers are frequent credit sources for small merchants. To obtain credit, one must demonstrate honesty, good management and present minimum guarantees such as from family members, real estate collateral, and repayment schedule. There is also mutual help within communities on matters of illness, death, or when a business is failing.
  • The book has profiles of different types of duka wallahs (traditional shopkeepers) as well as chapters on the settlement and emergence of business communities in Kampala, Nakuru, and Dar es Salaam.
  • For Ismailis, health and education are their priority political commitments.

The book, edited by Michel Adam is published by Mkuki na Nyota publishers of Dar es Salaam and the French Institute for Research in Africa and distributed outside Africa by the African Books collective.

Kenya’s Money in the Past: Digital Kenya

Digital Kenya, by Bitange Ndemo and Tim Weiss, charts the rapid emergence of Kenya in the world of technology. Through stories and interviews with people in the sector, you learn about risk-taking and making policy from humble beginnings back in the mid-1990’s when the whole country shared 32 kbps, and the then telecom Kenya Posts & Telecommunications (KPTC) monopoly declared internet services as being illegal. At the time, KPTC was connecting about 10,000 users to the phone network, and with 77,000 potential customers waiting, they envisioned a 5% tele-density in Kenya by the year 2015. The tele-density in 2015 turned out to be 88% thanks to rapid changes that came after fibre cables and the cheaper mobile phones emerged.

One story is a narration of how, as a peace agreement was being signed in February 2008 to end the post-election violence in Kenya, the ICT Ministry managed to secure a guarantee to enable the laying of the TEAMS fibre cable that ultimately changed the face of ICT in Kenya. This came after the ministry had stepped back from another long-discussed  bureaucratic cable project – one called EASSY. This was one of the examples of government officials circumventing red tape for a good outcome. Another was the roll out of M-Pesa which is also cited here, ahead of regulations and thanks to some  individuals in government giving it their cautious blessing. Not all of them turned out well, and one case cited is of officials at the Postal Corporation sabotaging a land deal that would have led to the establishment in Nairobi of the headquarters of a multinational telecommunications organization.

There are many other stories that show issues of privatization, race, the lack of vision & finance, tech startups, the need for skills to scale, and the disconnect between local capital & the tech sector. It also shows the disconnect of ICT with both formal banking and also with the agricultural sector, two crucial links yet to be adequately bridged in Kenya.

Thanks to the Ford Foundation, the books is available free of charge and a free book download can be obtained.

Kenya’s Money in the Past: Old Books

I came across some old books this weekend; One was a collection of speeches by former Central Bank Governor, Philip Ndegwa, and the other was a collection of contributions made by MP JM Kariuki in parliament.

Philip Ndegwa

  • The Central Bank devaluing of Kenya’s shilling is not a bad thing, and the economic impact of this is widely misunderstood.
  • Commercial  banks should be innovative and do more for rural Kenya; not just mop up their deposits, which they then only lend to businesses in urban areas.
  • Kenya’s population will double every 17 years if the current population growth rate remains at 4% a year (a speech he gave at a population conference in Nairobi).

old local books

JM Kariuki

  • There is a shortage of land for housing, and the government should take back all urban land that remains undeveloped for over two (2) years.
  • Why do government officers remove fences inside (colonial) farms that the government is buying to restore people? After this is done, the new owners will still have to go back and install new fences. Farms should be bought with the fence divisions intact.
  • While Kenya’s coin currency has the face of President Kenyatta, they should also inscribe his name around the sides so that future generations will know who the president was.

Kenya’s Money in the Past: Diners Finance

Found an annual report from Diners Finance from year 1989.  Just 12 pages long, it ended in the month of November as the institution commenced operations on 1 December 1988.
Other excerpts 

Diners management

  • Diners had Kshs 200 million in assets, fixed assets were 1.8 million (1%), advances (loans) were 25%, and liquid assets were Kshs 143 M(71%).
  • The assets included Kshs 15M  million in cash, 104M on short call, 23 M in treasury bills and 49 M in advances (loans)
  • They had public deposits of 176 million from  674 depositors.
  • The deposits and total assets are listed month by month from December 1988 to November 1989
  • The profit before and after tax was Kshs 831,970. Elsewhere, there was a mention of Kshs 109,000 losses that were to be offset against future taxes
  • The directors were A. Kassam (chairman), and F. Levene who served from December 1988 till he resigned in March 1989, the same date on which A. Virjee was appointed. The secretary was Samvir management services. The accounts were audited by “Certified Public Accountants” and the audit cost Kshs 75,000. Elsewhere Peat Mawrwick are listed as the auditors.
  • In his printed comments, the chairman noted that this was their first year of operation, and a very competitive one… increased oil prices and falling coffee prices affected the level of credit available. the shilling also fell greatly and the government in a bid to control inflation and reduce the budget deficit, continued to issue treasury bonds in large quantities and at high interest rates that banks could not match – and this reduced the amount of money available to other sectors of the economy. Diners finance extra services
  • Central Bank allowed banks to charge up to 18% for lending over 3 years and up to 15.5% for loans with a repayment of less than 3 years.
  • While commercial banks paid little or no interest to their current account holders, Diners was one of the first institutions to advertise in the media for individual depositors at attractive rates of interest. The incentive resulted in deposits of Kshs 170 million from 674 depositors ensuring a well-spread deposit base with an excellent foundation for Diners growth.
  • The book was designed and produced by ScanAd & Marketing and printed by Majestic.
  • in 1989,  US$1 was ~Kshs 19

Kenya’s Money in the Past: EIU Prospects for 1990

Found this interesting booklet from the 1980’s. It’s out of print but glancing at some pages, it has some  interesting perspective in terms of things to come  (excerpts in italics):

  • EIU CoverGovernment Used to Love the World Bank and Hate the International Monetary Fund: (but) one result of the struggle with stabilization and structural adjustment has been a reversal of the government relations with the bank and the fund..Kenyan officials contemplate an application to the fund with reluctance, they regard negotiations as unnecessary taxing, tie up lots of top officials and are short-term in gains. Relations with the World Bank were preferred but now things are changing;  (in 1983) the World Bank announced it was withholding the second tranche of its structural adjustment loan pending fulfillment of conditions attached to the loan. At the same time the IMF singled out Kenya as an example of an economy where effective adjustment policies had brought down inflation and promoted economic growth, and an IMF Survey reported that Kenya’s efforts to reduce domestic and external imbalances (pzrticlulary under the current economic adjustment program), have met with considerable success.


    Some Kenya Structural Adjustment Programs (SAP’s)

  • Top Technocrats speak the same language as the IMF: While relations with the World Bank are strained, those with the IMF have blossomed. New appointments have helped this including George Saitoti who replaced the unhappy Arthur Magugu as Finance Minister in 1983 and he called for larger IMF loans, moderation in import legislation and exchange rate flexibility. So does the governor the central bank, Phillip Ndegwa, whose recent collection of papers includes one on the virtues of exchange rate fluctuation.   
  • The tourism plans were considered ambitious: The target for 1988 was 724,000 tourists for 1988 (35% above the 1985 figure).
  • Oil Price Trends are in Kenya’s Favour
  • Annual growth rate  (target) for 1970 to 1983 was reduced from 6.3 to 5.4% since population growth was estimated (since the 1979 census) at 3.9%, not 3.5%
  • Fiscal & Monetary Reforms Proposed: Attempts to tighten control of government expenditure and reduce tax evasion would be accompanied by attempts to shift deficit financing from the CBK to commercial banks. There would also be upward adjustment of interest rates to stimulate increased savings..