Category Archives: SME solutions

Banking Week: Interest caps go and Stawi starts

Interest-Caps: This week saw the end of the era of capping of interest rates, that was seen as a populist three-year experiment to reign in large banking-sector profits.

The Government had tried to repeal this, without success, several times over the last few years, and bankers and the IMF have also been vocal about the unintended, and detrimental effects of the caps, on the economy.

Parliament stuck to its guns to the last minute, making farcical attempts to keep the caps in place. But as only 161 MP’s were present to vote, they could not proceed to over-ride the President, as they needed 2/3 of Parliament to be present. While some lawmakers have in the past argued that this high constitutional threshold (of requiring a vote of 233 MP’s) gives the President power to make laws, this has been upheld by the Courts.

The caps did not stop the “super profits” at large banks, but they did weaken smaller banks by limiting their interest-income growth. In the interest capped era, large banks found shifted their lending lend to a national government with an insatiable borrowing appetite, as opposed to small businesses, and when these credit lines shut off, small banks were hit with a rise of non-performing loans.

Stawi: This week also saw the formal launch of Stawi after a pilot phase in which that 80,000 had signed up for this banking industry response to the mushrooming of unregulated loan apps.

Stawi aims to promote savings and lending for small businesses. It is a bank account, opened and operated on phone, and owners can move money through M-pesa (for a flat fee of Kshs 42) and Pesalink. Stawi is hosted by the Commercial Bank of Africa, and, like with its M-shwari product, banking services are only rendered on the app, not at branches.

Users of Stawi have to be registered and in business for six months. New users are encouraged to make Stawi their primary account and to channel transactions through it to get a borrowing limit.

On downloading the app, one is assigned a loan limit based on credit their credit history. Stawi offers unsecured loans of between (~$292) KSh30,000 to (~$2,432) KSh250,000 that can be repaid between one to twelve months at rates of 9% per year.


How can the US engage in Africa, and go around China?

.. Extracts from “Deconstructing the Dragon: China’s Commercial Expansion in Africa,” a recent report by Aubrey Hruby that postulates what the United States can do to reposition its influence in Africa whose governments have received extensive assistance from China, mainly in terms of infrastructure projects.

The looks at the nature of infrastructure deals that have come to be dominated by China state-owned enterprises through a combination of feasibility studies, negotiations financing through Chinese loans, and eventually mobilization to start construction. Quick-decision making is a factor and McKinsey found that over half of investment decisions for Chinese construction and real estate companies were made in under a month.

The US can counter to these mainly be through US government to African business initiatives, while contracts with China’s “government to government programs.

Recommendations include:

  • Niche infrastructure that fall within the US competitive advantage like renewable energy, oil exploration and urban/smarter city solutions. However on the last one, the report points out that China has made significant inroads in media, telecommunications and security services.
  • Push for anti-corruption agenda, as this will level the playing field for US companies. This can be through supporting African government efforts to investigate and prosecute corruption cases.
  • Generate a pipeline of projects, data, and trade links to assist US businesses to invest in Africa. This can be through sponsoring competitions and investor trips.
  • Support the creativity and education sectors. There is an opportunity in the entertainment spaces as recent deals involving Netflix, Mavin Records and the National Basketball Association have shown. Also a quarter of African children (66 million) could be studying in private schools by 2021.
  • US financial institutions can work towards providing working capital, which remains a great challenge for individuals and small businesses in Africa.

It also notes that more US intuitional investors have opened up to putting more funding to African venture. These include the New York State Common Retirement Fund, which has allocated $6 billion to investments in Africa and the Chicago Teachers Pension Fund that have invested in two African private equity funds.

EDIT: A story in the Africa Report shows how a new US Development Finance Corporation (DFC), which combines the Overseas Private Investment Corporation (OPIC) and the Credit Authority of the U.S. Agency for International Development’s (USAID) is part of the broader economic and trade battle led by the USA against China.  

The new organization has more latitude than its predecessors in that, it will be able to make equity investment in private firms (previously they were restricted to debt) and a restriction that OPIC could only support projects with “a significant link with the American private sector” has been removed.

Africa Netpreneur Prize Initiative (ANPI) 2019 finale set for Accra

The Africa Netpreneur Prize Initiative (ANPI) series for 2019, will conclude with an “Africa Business Heroes” televised gala in Accra, Ghana in November where ten finalist entrepreneurs will pitch Alibaba founder Jack Ma, Strive Masiyiwa and other judges.

The overall Netpreneur winner will get a grant prize of $250,000, the second place one receives  $150,000, with $100,000 to the third place one. These are among the largest financial prizes offered to African entrepreneurs and the other finalists will also receive financial grants.

Applications for this year’s ANPI opened on March 27 and over 10,000 entries were received from entrepreneur applicants. These were narrowed down by different evaluators through a vetting process and this week twenty finalists, drawn from across Africa, are doing interviews with,  a panel of expert judges at the Nailab in Nairobi. Bethlehem Tilahun Alemu, Fatoumata Ba, Fred Swaniker, Hasan Haider, Marième Diop, Peter Orth, and René Parker form the semi-finalist judging panel for this year’s ANPI. 

This all comes two years after Jack Ma’s first visit to Africa as a UN special advisor for youth entrepreneurship and small business. Dr Mukhisa Kituyi suggested that he visits Kenya as one of the countries he toured and he became inspired by a team of entrepreneurs he met at the Nailab. He then decided to support African entrepreneurs through his Jack Ma Foundation.

This is the Foundation’s first project outside of China the Prize has a mission to shine a spotlight on African entrepreneurs to be leaders of their societies in the future. It is especially focused on traditional, informal and agricultural industries and sectors, and encourages women to participate. This is a deviation from other sectors like digital, fintech, and mobile  that have attracted a lot of attention and funding on the continent. ANPI hopes to find and support 100 entrepreneurs over the next decade to be leaders across Africa.  

Through the program, they offer training at the Alibaba headquarters in Hangzhou, China, free of charge and several entrepreneurs, through the Nailab, have made that trip there. The ANPI competition remains to open to entrepreneurs in all 54 African countries, including Northern African and Western (Francophone regions). Jack Ma is expected to continue his philanthropic efforts, through the foundation, even after he steps down from being Alibaba’s Executive Chairman in October 2019.

Spanish delivery company Glovo enters the Kenyan market.

Glovo is a four years old Spanish delivery company started by Oscar Pierre and Sacha Michaud. Its headquarters are in Barcelona, Spain and Glovo has been expanding globally, and just recently begun operations in Kenya five months ago, with Morocco and Nigeria being the other two African countries using the Glovo app services.

Glovo actually means balloon in Spanish to signify the way a balloon moves easily from one place to another. Kenya has seen some new delivery companies but is yet to experience one which can deliver even a personal item that you forgot at home. We are used to the traditional delivery of items by people we know but now this app will very well facilitate an easier way. The one challenge being how safe or how trustworthy Glovo delivery people are which, and the company has placed safeguards for this.

The Glovo app is found on Google play store for Android and App Store for IoS and it doesn’t take more than five minutes to start using the app. What makes them even more competitive is their pricing which is quite the saver.

Glovo performance is improving by the day. William Benthall, the General Manager for Kenya stated that the number of Glovo bikes he’s seen around town keeps increasing with time. Just like other delivery services, with Glovo, interested partners sign up their machines, for instance, bikes, to the app and can from there, connect with clients who need items delivered.

A guest post by @themkare 

CBK launches Stawi SME pilot credit facility

The Central Bank of Kenya has launched a pilot credit facility targeting informal unbanked traders in partnership with local institutions.  This will be through an app, marketed under the name “Stawi”, that will initially be managed by five banks – Commercial Bank of Africa, Cooperative Bank, Diamond Trust, KCB Bank and NIC Group.

The pilot phase lasts two weeks and will involve 3,500 traders without bank accounts, who have turnover of Kshs 30,000 to Kshs 250,000 (~$2,500) per month and who are at least six months old. To register, besides providing their ID details, traders will need a valid business permit and an email address to create an account – this is an unusual as mobile apps just require a national ID number to match with the phone number of the loan applicant.

The businesses will be able to borrow between loans of Kshs 30,000 to 250,000 (~$2,500). Loan charges are at an interest of 9% per annum, plus a facility fee of 4%, insurance fee of 0.7% and excise tax on the facility fee – all adding up to about 14.5%.

Other features of Stawi:

  • Loans are repayable between 1 – 12 month and borrowers can top up loans once 80% has been repaid. Loans are only disbursed through the app as will all repayments be done
  • The loan rates are not cheap, but they are mild, and this program is targeted at the unregulated lenders who charge as much as 300% p.a. There was a draft financial markets conduct bill formulated to protect consumers from such practices.
  • There are also transfer fees and Stawi customers can also link up with Pesalink which allows much greater daily transfer amounts (up to Kshs 1 million) than the mobile money wallets.  
  • For now, there is no Stawi in the Google store as the program is still in a test phase. (There is an app called Stawika that has no affiliation)
  • A second round of the pilot will target 10,000 other traders.

While trying to forestall the arrival of interest rate caps back in 2016, banks, through their umbrella Kenya Bankers Association committed to set aside Kshs 30 billion for lending to SME’s including Kshs 10 billion to micro-enterprises owned by women and youth and lend to them at no more than 14%. They also committed to rank borrowers by high, medium and low risk and to work to reward low-risk borrowers with low-interest rates. To date, the credit reference bureaus piling up data on loan defaulters which good borrowing records are ignored or not rewarded with lower interest rates.