Category Archives: Sidian

5 Kenyan banking stories of 2022 and 2023

2022 in Review 

1. Credit reference shake-up: A failure of banks to carry out proper credit education and to convey the benefits of good repayment to customers, through lower interest rates, caught up with them. This was combined with a tendency to blacklist defaulters at the earliest instance to punish them – and became an issue at political campaigns ahead of the August 2022 election.

The new government set in motion a plan to clear over 4 million borrowers from credit reference bureau blacklists This was in part a 50% waiver on their debt and a window of six months for borrowers to pay the balance of the amount. At the Absa Q3 results briefing, management of the bank explained that there would be no immediate impact as these were loans of people who got stuck in 2020 (during the Covid-19 disruption) that had already been fully provided for

2. CEO suite changes: At Absa Bank Kenya, MD Jeremy Awori left after nine years. He later joined Ecobank Transnational Incorporated, the parent of the Ecobank Group, as the Group CEO replacing Ade Ayeyemi, who retired after attaining the age of 60. Absa Kenya then picked its Chief Financial Officer Yusuf Omari to take over as interim CEO  as  Moses Muthui was made the interim CFO. 

At KCB Joshua Oigara left after nine years and later in the year joined the Standard Bank group as the CEO of Stanbic Kenya and South Sudan, after Charles Mudiwa retired after two decades. KCB appointed Paul Russo, who was MD of their National Bank subsidiary as the new KCB Group Chief Executive Officer. Following that, KCB now has Anastacia Kimtai as the acting KCB Kenya MD and Peter Kioko as the acting MD of National Bank of Kenya

At the I&M Group, the CEO of I&M Bank Kenya Kihara Maina moved on to be the group’s regional CEO, taking over from Chris Low, and the new Kenya MD is Gul Khan who joined from Airtel Money Africa. 

Cooperative and Diamond Trust and Equity banks still retain their long-serving leadership though, at Equity, Polycarp Igathe stepped down as Chief Commercial Officer to contest for the Nairobi Governor seat in the August 2022 elections. edit And from Mwango Capital, we learn of more leadership changes at banks with Sam Muturi joining as Consolidated Bank’s new CEO and Anuj Mediratta as CEO of Gulf African Bank with Helen Chepkwony as the acting CEO of the Kenya Deposit Insurance Corporation (KDIC). Also, Shelter Afrique had another executive change with Thierno-Habib Hann stepping in as the new MD/CEO, replacing Kingsley Muwowo, the CFO, who had been the interim boss. Another change saw Rose Kagucia become the Acting CEO/Managing Director at Dubai Islamic Bank, replacing Peter Makau.

edit in February 2023, Ecobank appointed Josephine Anan-Ankomah as the Managing Director, Ecobank Kenya, replacing Cheikh Travaly who retired at the end of 2022 after attaining the mandatory retirement age of 60 years while NBK appointed George Odhiambo as its substantive Managing Director.

3. Capital raising and arranged marriages: Banks set out to raise new capital in different ways. Larger banks with foreign links like Absa can attract Tier II funding at low rates (of about 3%) which is lower than the cost of deposits or the bond markets (about 9%). Smaller banks arranged sales like Spire to Equity and Sidian to Access while deposit-taking microfinance banks found fintech partners. Key Microfinance is now LOLC Kenya, UMBA, a Delaware fintech bought 66% of Daraja Microfinance Bank, Century Microfinance became Branch Microfinance Bank and Uwezo Microfinance is now Salaam Microfinance Bank. 

4. Green finance is in: Banks report on it and the Kenya Bankers Association published sustainable finance guidelines and principles for banks to align their processes and products (including loans) and the Central Bank has guidelines on climate risk management. Banks are now attracting “green finance” and touting their green credentials joining new green alliances and measuring their activities such as tree planting and reducing their carbon footprints. 

5. Resurgence of the bank branch” Co-Op, Diamond Trust, Family, and NCBA bucked the branch closure trend to show that digital growth needs a physical presence to support it. 

Outlook for 2023

1. Go Big in Ethiopia: Following Safaricom’s big entry into Ethiopia, will banks now follow into the next big African market African after DRC that has delivered big for Equity? Kenyan bank support new partners of the telco that can lead to other businesses in the country that need to unlock financing – and take on the local giant Commercial Bank of Ethiopia (27th largest in Africa), which is not growing its assets now with currency restrictions and a prolonged war. The entry path for foreign banks is now set and KCB, Equity and Stanbic are among the dozen foreign bank that have had representative offices in the country for a few years.

2. Will digital bank customers stick around? January 1 sees a return of several bank charges that were waived in March 2020 at the start of the Covid-19 wave to enable bank customers to make digital and contactless payments. Many tried out digital services offered by their banks for the first time as they were now free of charge. Non-funded income is key for bank profits, but it will be seen how the return of bank and mobile payments/transfer charges will be received by customers are different banks. In this economy, customers are more cost-conscious than ever, especially with the government tax on every bank transaction going up to 20% in 2023.  

3. New savings and investment products that target diaspora, retail and unbanked customers. While lending to the “hustler” economy is well-documented, digital wealth creation and preservation products are still lagging.

Ahead of the much-anticipated IPO’s to come to the Nairobi Securities Exchange, EFG Hermes has invested in a platform for retail investors and this week Acorn got approval for Vuka, a platform for retail investors to into REIT’s.

4. African banks get serious about Nairobi: Access (17th largest in Africa) Ecobank (18) and UBA (25) have all had relatively small footprints in Kenya but now have a chance to grow. Across Africa, there are changes in the banking hierarchy with the largest bank group by asset size for decades, Standard Bank of South Africa with a sluggish home economy about to be passed by the National Bank of Egypt 166 billion, as Egypt Bank Misr has also passed SA’s Absa group to be number six on the continent. You can also expect a resurgence in West Africa, into East, perhaps by buying more banks, as Access is with its second bank deal (for Sidian) to leap up the Kenya asset ranks which are led by Equity (37th in Africa) and KCB (40). edit. However, in January 2023, Centum Investments cancelled the agreement to sell its 83.4% stake in Sidian Bank to Access Bank.

edit Jan 27, 2023.

5. The year is expected to usher in a new regime at the Central Bank of Kenya with a new Governor, Deputy (2 positions) and Chairman by June 2023. The current cabinet Secretary of the National Treasury (i.e. the Finance Minister) is himself a former CBK governor. 

All about EADB

The East African Development Bank (EADB) is a development finance institution, headquartered in Kampala, Uganda and has country offices in Kenya, Tanzania and Rwanda. It was one of the  few institutions that survived the collapse of the original East African community. Its main products are medium-term financing and its long-term loans for projects that can be durations of 12 years. 

The bank is in the news over a case involving Kenya’s Cabinet Secretary Raphael Tuju over their demand that he repays $13.6 million (~Kshs 1.4 billion) that arose from a $9.19 million loan in April 2015. 

Excerpts from the 2019 EADB annual report:

  • The bank is owned by four East African countries; the Governments of Kenya 27%, Uganda 27%, Tanzania 23% and Rwanda 9.5%. Other shareholders are the African Development Bank with 8.8% and FMO Netherlands with 2.7%. 
  • EADB has $374 million in assets, which includes $190M in cash in the banks. It earned a profit of $8.7 million (~Kshs 944 million). It is exempt from taxes in all members countries but pays no dividend as their policy is to build up capital of the bank.
  • Had $152 million (~Kshs 16.5 billion) of loans of which $58M (38%) are to Tanzania ventures, $39M to Uganda, $36M to Kenya ones and $17M to Rwanda borrowers. $109 million (71%) of the loans are in US dollars which is the preferred currency of most borrowers.
  • Of the loans, $92M are in stage one (performing normally), $52M in stage two (higher credit risk) and $7M are in stage 3 (impaired). 
  • During the year, existing clients – Kayonza Tea Growers, Centenary Rural Development Bank, Opportunity Bank, and the Government of Tanzania all increased their borrowing. Also in 2019, some long term loans paid off and exited the bank including Nkumba University, Sugar Corporation of Uganda and New Forest Company. The bank also participated in the official launch of the Lake Turkana Wind Power which they partially-financed while Strathmore University completed a Law School Centre for which EADB has provided a Kshs 422M loan.
  • The bank disbursed $21.3 million to new projects during the year. Some were: in Tanzania (National Housing Corporation, $30M to Iyumbu Satellite Centre, and to Tanzania Petroleum Development Corporation to distribute natural gas to 30,000 households), in Uganda ($6.3M for a medical consumables manufacturing plant in Kampala), in Rwanda ($10M to a new cement plant and four lines of credit to a national development bank) and in Kenya (Kshs 30M working capital to Jumuia Hospitals in Huruma), Sidian Bank (EUR 2 million credit line) and Musoni Microfinance  (EUR 1 million credit line). 
  • They have borrowed $81 million from multilateral development banks and other financial institutions including the European Investment Bank, African Development Bank ($22M), CBA ($9M), the Arab Bank for Economic Development in Africa ($10M) and a new line from KFW Germany ($7.8M) whose recipients include Sidian Bank, Musoni Diary and West Kenya Sugar. 
  • Kenya’s  Treasury Principal Secretary, Dr. Julius Muia sits on the board while Treasury Cabinet Secretary, Amb. Ukur Yattani sits on the Governing Council along with other East African finance ministers.

Older notes on how EADB is different from a typical commercial bank:

  • EADB disburses payments to third parties e.g. supplier or contractors for work done/services rendered to sponsor. Disbursements are made against presented supplier invoice or completion certificate for building works. They insist that sponsors procure through open tendering as much as possible.
  • Most EADB loans are repaid quarterly except leases which are monthly. Projects are required to set up standing orders for loan repayment. 
  • They don’t have a deposit-taking, commercial bank so borrowers make repayments to special accounts at other banks (escrow accounts) e.g. payments from buyers of apartments financed by EADB are made into such accounts.
  • Companies are required to submit quarterly accounts for monitoring and failure to submit accounts can delay further disbursement to a project.
  • EADB lending approval decisions are made based on the loan amount involved and applications that are larger than $1 million are approved by the board of directors.
  • As a DFI, some criteria for the financing of projects include economic measures such as increasing the level of real consumption, contribution to government revenue (corporate tax, VAT, excise, export taxes), foreign exchange saved, and employment opportunities created.
  • Projects in arrears get transferred to their “Work Out Unit,” a special department that determines how to resolve these – either by a recovery (sale of assets), write-off (after selling assets), or a turnaround (reviving projects to normal) which is the preferred and most successful option. Sometimes, the borrower is asked to recommend a buyer of assets (provide leadership) if it becomes necessary to sell some of them. 
  • The bank enjoys immunity from prosecution and this has been raised by Tuju’s lawyers in several pleadings. In the past, EADB has also faced challenges including petitions to wind it up, such as a decade ago when they trying to recover over $13M from Blueline, a Tanzanian transporter.  
  • edit On September 28, the OPEC Fund for International Development signed a $20 million loan in favour of the East African Development Bank to go towards supporting SMEs and infrastructure projects in East Africa, in the third loan of this kind that the OPEC Fund has provided to EADB.

Banks that Serve Blackberry Apps

I am a Blackberry (BB) user. It’s been a struggle to keep up with the world as not many new apps are being created or updated for Blackberry.  While the number of BB users has flat-lined, many remain loyal and tied to their devices.

They also appreciate the platform and new apps that improve the phone experience. The app world today is considered to be either Android (Google) or iPhone (apple)  – and developers and institutions are primarily making apps in these two formats only. So it’s nice to see a few banks still coming up working apps for with Blackberry, and the BB10 (platform). Here are a few:

IMG_20160506_203327Chase Bank (Mfukoni): Chase customers always rave about Mfukoni online. But starting the BB10 app starts with a somewhat sinister request for loads of data, even to open and run the app. This includes a request to connect with, and invite other BBM users, location data, shared files, calendar contacts, camera, SMS, email & PIN messages etc. If you decline, you can’t do things like search for branches or ATM’s without enabling location settings.  Once connected, It seems you can open accounts,  view products (youth current, women accounts, etc), request insurance, and ATM cards.  But it has a few dead menus too.

Co-Op (MCo-Op  Cash): From the start, you can log in or do self-registration. You really can’t browse the products, or see how rich the app experience is for customers until you first register. But this is an easy process, that does not require much information – just your name, telephone number,  national ID number, birth date, and your existing account number (if you’re already a Co-op customer).

Family Bank (Pesapap): The app also starts with a request for lots of information like the Mfukoni one. So, once again, it wants to access your camera, device information, location data, microphone, text, email & PIN messages, calendar, and contacts. Later, you can log-in, request for cards, get locations of branches & ATM’s, but while it only took a few MB to install, it sometimes kicks you out, with a warning that your phone needs more memory.

Sidian (Vibe): It’s nimble, light, and not intrusive, with good navigation and responses. It has a  menu that you can jump back to, sending you back to the main menu if you cancel (e.g if you’re checking out a service that requires you to be registered / or you don’t have an account).

Self-registration and signing in is simple and you only have to enter your user name (usually your mobile phone number) and a PIN. Even from the outside, you get to see a lot of what account holders can do – merchants, ticket sasa, you can search for branches and ATM’s , and they show up on a map, after which you can enter a starting point (in lieu of it pulling your phone location data) and it will give you driving directions, and even traffic information enroute, (Google has activated for Nairobi). It has the crucial m-pesa link (bank account to m-pesa, and m-pesa to bank account) and if you click to contact the bank, one click starts a call to the bank or creates an email message to the bank.

Bank of Africa (BMobile): Also asks for the voluminous info as some of the other apps, but you can bypass that request. Once you get to the products, the navigation is not very good as the menus are limited, but if you get stuck there’s a home button which takes you right back to the start. It also has a few dead menus like the debit and credit card types.

Sidian Financing for Entrepreneurs

Some of the Sidian loan products for entrepreneurs include:

  • Retail business loans of Kshs 2 million to Kshs 10 million repayable over 5 years.
  • SME corporate loans of Kshs 10 million to Kshs 300 million, repayable over 8 years.
  • Chama Biashara loans – for members of chamas (investment groups) in which individual members can borrow up to Kshs 500,000 which are guaranteed by their groups.

Lady, #OwnTomorrow

  • Kilimo Plus Micro – for farmers to finance land preparation, inputs, machinery etc.
  • For individuals, there are both (i) emergency loans of up to Kshs 500,000 (repayable in one year) and (ii) check off loans up to Kshs 3 million for salaried employees (that are repayable over 6 years).
  • They also have other loans for medical sector entrepreneurs (MCF Medium) under which the medical assets  purchased can be used as collateral, for water service providers (Maji ni Maisha), for small (e.g. kiosk) entrepreneurs to buy business stocks (Jaza Stock Loan), and for tea farmers (chai loan).

$1 = Kshs 102

Easy Taix

Bank Capital Raising Season

Away from the Chase Bank saga, banks continue to raise money to support their fast growth in recent years. It’s a bit harder to raise money and it’s clear the Imperial Bank fallout affected other bond and stock offerings that came in its wake.

In the News

  • Family Bank has a rights issue coming up, to be approved by shareholders.
  • Duet Private Equity Limited, part of the Duet Group, will inject Ksh1.9 billion into Fidelity Commercial Bank to strengthen the Bank’s core capital, and support its local and regional growth strategy.
  • EDIT Jamii Bora Bank just raised $12 million through two Private Equity funds – Equator Capital Partners  (through its managed fund, ShoreCap II) and Progression Capital Africa  (through through its managed fund, Progression Eastern African Microfinance Equity Fund). 
  • KCB Group shareholders are to approve a rights issue and (another) name change to KCB Plc. KCB is also paying shareholders a Kshs 2 dividend, with Kshs 1 in cash, and the other Kshs 1 as a scrip dividend. The intent of this is to allow its Shareholders to derive value on account of higher dividend in future due to increased shareholding. This is automatic, but shareholders have the option to receive the Kshs 1 in cash by  filling and returning a scrip election form to the bank by June 17. If all shareholders opt for the scrip, and get new shares at a price of Kshs 38 per share, this will increase the number of KCB shares by 2.5%.
  • National Bank was expected to have a rights issues in 1Q2016, and the government expected to raise Kshs 4.99 billion from a the issue in February 2016. The process has been delayed and it now appears that NBK may still be combined with two other smaller state-controlled banks –  Consolidated Bank and the Development Bank of Kenya.
  • Sidian Bank (formerly K-Rep), is expecting its minority shareholders to  provide Kshs 400 million capital to support its growth plans.The new capital comes after the majority shareholder, Centum Investment, injected its share of Kshs 1.2 billion last year after raising its stake in the lender to 67.5%.. Sidian chief executive officer Titus Karanja said  “They gave us their commitments and we are expecting the money by end of May.”
  • SMEP Microfinance Bank shareholders are expected to have a rights issue to increase their  share capital, issue a bonus (1 for every 6 held), and also create an employee share option program (ESOP). They  will target less than 100 people or institutions for the privately placed capital raising.
  • EDIT Credit Bank expects that Fountain Enterprises Programme (FEP Holdings) will pay Kshs 5.4 billion for an additional 70% stake in the bank..via a private offer priced at Kshs180 apiece and limited to members of the chama (investment club) which has a large following in the UK and US.

Away from right issues, some banks have recently signed funding deals:

  • CfC Stanbic Bank signed a $135 milllion dual tranche term loan facility in which Emirates NBD Capital Limited (ENBD) and Mashreqbank PSC were the Initial Mandated Lead Arrangers and Bookrunners of the financing. The financing, which will be used for general corporate purposes, including, trade-related finance, was oversubscribed from the initial launch amount of US$ 100,000,000.
  • Commercial Bank of Africa (CBA) and Standard Bank of Southern Africa (SBSA) executed a $25 million cross-currency repo transaction.  The deal, facilitated and guaranteed by Frontclear, is a first of its kind transaction and paves the way to a more robust, stable and inclusive interbank market in Kenya. In the transaction, CBA receives $25 million in 1-year funding from SBSA and provides Government of Kenya Bonds as collateral.
  •  The African Development Bank (AfDB) recently extended a $40 million, 10-year line of credit to the East African Development Bank (EADB) towards support of regional infrastructure, manufacturing, agribusiness and education sectors with a bid to increase economic and government revenue growth in the member countries.
Not forgetting Chase Bank:
  • The Chase Bank bond that was oversubscribed last year was suspended. The bank had also undertaken a private placement in which high net worth investors bought shares at Kshs 2,760 each. Chase Bank had said that proceeds of the private offer would be used to shore up the lender’s thinning capital ratios, grow the loan book and invest in technology.

What other bank rights issues are there?

 $1 = Kshs 102.