Category Archives: kenyamoneyinthepast

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 (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 have 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, 104 M 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.

    EIU SAP

    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..

Kenya’s Money in the Past: M-Pesa Money Real Quick

This recently published book traces M-Pesa from its origins to the impact it has had on millions of Kenyan users. It has excerpts of interviews with insiders at Vodafone/Safaricom, Kenyan regulators, politicians, entrepreneurs, bankers, and dozens of other people, for who the service has had an impact on their lives.

While mobile money did not originate in Kenya, and the design of M-Pesa was not local, Kenya is the country that, for now, has extended mobile money far deeper than any country, and the book notes developments in other countries to emulate the success and scale of M-Pesa.

M-Pesa was the accidental outcome of a pilot project, but it is ultimately the end result of the hard work, partnerships (such as with Commercial Bank of Africa and DFID, but some broken at Faulu and Equity banks), funding, and decisions of some of the people interviewed. 

It’s development process was not widely understood, nor was it universally popular, especially with bankers, who (like almost everyone else) did not forsee the ernomity of what M-Pesa would become in the lives of hithero unbanked Kenyans. 

The book was completed in 2012, a few months before M-Pesa made a bigger foray into the world of banking when, Safaricom and Commercial Bank of Africa launched a SIM based bank account called M-Shwari.