Category Archives: CBK

Urban Inflation Index: September 2011

One year after the euphoria of a new constitution, the direction of the economy is uncertain as seen in the weakening Kenya shilling, tangles in implementation of the constitution, and rising food prices. It has been a year of some price controls in the fuel, and possibly in the food sector whose parliamentary price control bill was signed into law last week by the President.

Comparing prices to six months ago and last year. On to the index

Gotten Cheaper: Nothing really.

About the same:

Communication: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings ($0.03) per minute to call across networks. It is unclear what will happen with call rates, as the smallest company in the market, Yu, launched free daytime phone calls, Airtel Kenya lost a CEO, and Safaricom has indicated that they may raise their call rates, as has happened in Uganda with MTN . The real battle is in data, where prices have not really dropped but companies are offering more speeds for less. The market here is divided between the companies with 3G (Orange & Safaricom) who compete on speed, and those without 3G(Airtel & Yu) who offer cheap internet rates of about Kshs 50 (~$0.5) per day for unlimited use.

Another communication developments that, in a way, lower the cost of business include the launch last week at G-Kenya of GKBO, which encompasses free website creation tool, domain registration, and site hosting for small companies by Google in Kenya.

Utilities: The bill on pre-paid electricity is still at about Kshs 2,000 ($21) per month, and getting about 30 – 35 units per buy via M-Pesa. However that is expected to go up after notice was issued for rates to go up 22% per kwh unit. So what alternatives are there? In a somewhat timely move, Samsung launched the NC215, a solar powered netbook laptop last week. It gives 1 hour of power for every 2 hours of charge in the sun, has a 15-hour battery life, and is able to charge other devices by USB even when it is off.

Also got a gift of a solar phone charger (T2126 Hemera from Hirsch) that works quite well; it takes about 12 hours to charge in the Sun or 2 hours via USB, has a flash light and can charge a variety of phone models.

But when you look at the rapid advances in laptop batteries and cell phone batteries over the lasts decade, you get the feeling that there has been a lag in the pace of solar devices, and that more solar based solutions and advances should be emphasized.

More Expensive

Fuel: A litre of petrol fuel, which is regulated by the Government, now costs 117.75 (~$5.6 per gallon) in Nairobi. Regulated fuel has proven to be more expensive than unregulated fuel, and while this can be attributed to the weaker shilling and fluctuating oil prices, the formula used to arrive at the price remains vague, and the limit on margins (stipulated buying and selling price of petrol, diesel, kerosene in each town) appears to have hurt small oil industry companies, more than large ones. However, among the listed companies, Kenol appears to have weathered the regulatory regime better than Total, by having diverse operations in other countries in East and Central Africa that remain unregulated.

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg bag which cost Kshs. 80 six months ago, and Kshs 65 a year ago, is now Kshs 119, the highest it has been in the short history of this index.

Other food item: Sugar : A 2 kg. Mumias pack which has hovered at about Kshs 200 for the last years, now costs Kshs. 385 (90% more than last year) and . The sugar sector has really gone full circle causing many to questions its relevance, recurring shortages shortage (why all factories close at the same month for maintenance), why sugar is grown in a food producing area and how many items we can consume without having to use sugar as a sweetener e.g. tea without sugar, or use of honey as a substitute.

Foreign Exchange: 1 US$ equals Kshs 95.6 compared (now 96.8) to Kshs 80.8 a year ago (and 83 in June 2011) – a loss of almost 20% in a year. It’s unclear of this has been a concern to the Central Bank which has made other confusing policy moves as related to interest rates at a time of mounting government debt and their laxity has enabled banks to spot and take advantage of an arbitrage opportunities to trade with government money.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($1.9) (at a local pub) a slight increase from compared to Kshs. 170 a year ago. However beer has become out of reach for many poorer Kenyan who have resorted to drinking unsafe local brews, which in some unfortunate cases have resulted in blindness or even death.

situs gacor

rtp slot

slot gacor

Cheque Truncation Part II

The deadline of new cheque modernization passed this week, on June 1. Yet many bank customers had not yet received new chequebooks, and many more were not fully versed with the process, which entailed a change of chequebooks.

The Kenya Bankers’ Association (KBA) left the public relations of the process to its’ member banks resulting in low awareness and did not communicate till May 31 with adverts in the newspapers re-assuring customers and the public that the old cheques will be used for an indefinite period. This paled in comparison to the introduction of mobile number portability (MNP), in which the regulator (CCK), service providers, and mainly mobile companies carried numerous advertisements about the transition to the new service. (Mobile companies ran extensive promotions to retain their customers or win over their competitors’ subscribers).

There are still many unresolved questions, even with the extenstion:

– Old chequebooks were issued though the month of May, but customers then had to get the new chequebooks at month end. Who bears the cost of printing books that were about to be phased out?
– Do the new cheques clear faster? e.g. 1-day for Nairobi cheques? Speed is important for payments in the age of M-Pesa. The last statistics from the Central Bank (CBK) showed that in 2008, about 50,000 cheques were being cleared daily. Many suppliers now insist on getting paid by M-Pesa (which takes less than a minute) or by real time gross settlement (RTGS a.k.a corporate m-pesa done by banks – but this also carries a high risk of fraud risk of fraud – at 69% of bank crimes)
– What happens to post-dated cheques? These are used for debt repayments and for motor insurance loans (some banks use these for collateral over up to 10 months)
– There is no apparent difference in the design of the old and new cheques. So what has changed to warrant the exercise?
– Are cheque printers (mainly De la Rue) able to print enough chequebooks for a smooth roll out next time?
– Some banks said that old cheques will still be honoured in-house i.e. if drawn to people who also use the same bank, while others told their customers they would not be honored. KBA should communicate a clear deadline when all banks & customers must switch.

For now, the old and new chequebooks are in circulation, but more information has to be provided to resolve the cheque truncation process.

situs gacor

slot gacor

Your Bank, Your Neighbour

Agency banking came of age today with launches of agency banking by both KCB (‘KCB Mtaani’ – translation KCB in your neighbourhood) and Co-Op (‘Co-op Kwa Jirani’ -translation Co-Op in your neighbourhood) which are the largest and third largest banks by assets respectively. They follow in the steps of Equity Bank who have had agency banking for several months

Why Agency Banking? If 3 of the country’s 5 largest banks with the largest branch footprints chose to go agency banking. Agency banking expands the reach of the bank about 100-200 branches to anywhere from 1,000 to 20,000 outlets through the agent model Speaking at an investor briefing last year, Equity Bank CEO James Mwangi spoke of the extra reach would bring for them and which signaled an end to the rapid branch and staff expansion that the bank had been known for.

Equity initially looked like they would partner with Safaricom’s strong M-pesa agent network (22,000 agents) for their banking extension, but that partnership seems to have hit a brick wall) and now the field is open to dukas, bookshops, and grocery stores, kiosks, hardware & phone sales shops, and others established shops especially in remote villages where banks are unlikely to open branches.

The shops must fit the criteria set by Central Bank of Kenya (CBK) for bank agents (more here) – including that they cannot be mutually exclusive. (Not being tied to one bank can be an opportunity for established village business owners to act as agents for several banks)

What can agents do for bank customers?
Co-Op: Cash deposits, cash withdrawals, school fees payments, utility payments, balance enquiry, issuance of mini-statements.
KCB: Deposit taking and withdrawals. In future, balance enquiries, loan repayments and requests for chequebooks & account statements.
Equity Bank: Deposit taking, cash withdrawals, as well as origination of account opening & loan applications.

situs gacor

Cheque Truncation

There’s an ongoing exercise within the Kenyan banking fraternity (KBA) to standardize cheques issued in the country under a process known as cheque truncation – and this will enable transfer of electronic images of customer cheques replacing the current process of physical of exchange of cheques by different banks at a central clearing house

Odd and large size cheque will be withdrawn between March and May 2011 and replaced by standard size cheques that are 7” by 4” inches in size and with enhanced security features by June 1.

The new system may halve the time spent in cheque clearing, which is currently about four (4) working days for most people. This has made cheques uniquely unpopular for small people, not just because of the cost of operating a bank account, but because of the cumbersome week-long time delay in the age of instant money transfers such as M-pesa.

Why are cheques good? They are easy to use, offer verifiable proof, security, and credit. While some buyers wants to stretch payment, and sellers wants immediate payment, both buyers and sellers have been tripped up by the four day cheque clearing cycle, sometimes to the benefit of bank – and a reduction in the cheque cycle could mean more income for them. Of Equity Bank’s income in 2010, Kshs 1.1 billion ($14 million) was from temporary overdrafts/un-cleared effects – which means you wrote a cheque, didn’t have cash in account, but Equity cleared (did not bounce) the cheque and charged a fee for the service.

situs gacor

Agency Banking and Micro-Savings

Banking Hall Woes: Last week I spent about 6 hours in 6 different banking halls, trying to deposit or withdraw cash, make cross-bank transfers, utility payments and complete other bank transactions. Some observations:
– Banks with several empty ‘teller’ windows even as customers queues get very long
– Employees who sit at the front desk but don’t serve customers as they do back office transactions, reports & reconciliations
– Disinterested employees who’d rather gossip in vernacular than serve customers
– @kainvestor tweeted: it takes 1 hour, 2 branches and 4 tellers to get one foreign bankers cheque done at #StanChart. Still waiting #fail
– Customers who ‘book’ places in the queue. As the queue shortens near the front, they walk up from where they have been sitting and edge back in front of the person, who they had queued with thirty minutes earlier
– Older banks like Barclays as you to bring a passport photo and get a referee signature to open an account, while new banks like equity bank and family staff will snap your picture with a digital camera.
– There are no more developments in e-banking being rolled out in Kenya; new bank – customer interface deployments are in the areas of phone/mobile/m-banking
– Despite the millions of masses on mobile banking, the bulk of business in Kenya is cheques-based. Cheques remain awkward, prone to errors, and are resented as a form of payment as recipients have to wait for up to four working days to get money from the date they present their cheques. Assuming there are no errors, clear over four working days.
– From a Central Bank of Kenya 2009 supervision report you can get an idea which banks halls are likely to be crowded going by their number of deposit customers: Equity Bank is No. 1 with 4.0 million followed by Co-op bank with 970,000, KCB 751K, Barclays 748K, and Family 574K. Least crowded may be banks like City Finance 654, UBA 832, Development bank 1,022, Middle East 1,462, and Equatorial 1,981.
(images from Afromusing’s post on how to get Safaricom 3G on your ipad)

Mobile money banking solutions Banks have tried to minimize the prevalence of queues, usually longest at month ends rather than mid-month, by offering alternative channels such as mobile banking and ATM facilities. A few years ago, the push was to develop Internet-based banking, but that seems to have been set aside by the industry to focus on (mobile) phone-based avenues.
Last month also brought M-kesho, a partnership between mobile giant Safaricom and a leading bank Equity Bank. This one was very notable as it was marketed as one in which Equity Bank account holders could earn interest on money saved through their mobile phone – and this has been widely written about widely:

From the blogs – Idd Salim. Nothing new, Zain Zap has done this since 2007, but Safaricom is like Man U. They have ‘refs‘ who favor them game after game and win battles that are not even their own.
– Kainvestor: Too complex and not particularly new
– Rombo , Safaricom’s 17,500 M-Pesa agents will now operate as part of Equity Bank (account opening, withdrawal/deposit) which has 80 branches countrywide
– Majibu: (after M-kesho) Safaricom can do better – by working with local developers and allowing them to develop on their platform. Safaricom needs to learn from the likes of Apple, the success of the iStore is because each developer is given an equal chance.
– White African: As others have pointed out, this isn’t exactly groundbreaking and new. Why is it big then? It’s big because of who is doing it: the giants of the banking (equity) and mobile sector (Safaricom).
– @wanjiku suggested that her bank, Family bank should partner with Zain

Others – A comment at the CGAP who advised on the creation of M-pesa noted that hopes that system failures that plague m-pesa will be a thing of the past
– Equity Bank’s CEO made one comment on TV, about how this made sense as they (Equity) had launched a mobile banking application (EAZZy), but they found over time that could not compete with M-pesa so were folding it to join M-pesa.

More mobile variants: What does that mean for other banks? Despite @wanjiku’s earlier suggestion Family Bank went ahead and signed with Safaricom, not Zain, upgrading their existing mobile application into one called existing mobile banking application into new called Pesapapwhich also allows transfer from account to/from m-pesa and mobile service providers Cellulant rolled out at the same time with one called lipuka

Other thoughts on agency banking Vis a Vis m-kesho – Safaricom has very subdued brochures about M-kesho – with which one can transfer funds to from their bank account at Equity and all the benefits (micro savings) and product hype is by the Equity side. Odds are that most of Equity’s 4 million customers are M-pesa account holders already
– M-pesa cash has been held in trust by CBA Bank since its inception. Will Equity angle for a piece of that?

Enter Agency Banking: The sub-text of M-kesho and other variants is the emergence of agency banking in Kenya, a process endorsed by the Government of Kenya to bring more banking services to more of the (unbanked) population. Agency banking is supposed to take customers out of the bank halls and out to kiosks and villages; as @Rombokins noted, Equity Bank scales up from having 80 branches, and can now (potentially) sell its products through 17,000 agents of M-pesa.
CBK recently published their Agency Banking Guidelines which include provisions on what agents can and can do

Can Do: – Agents can be limited liability companies, cooperative societies, parastatals, trusts, partnerships or individuals. Agent applicants are judged based on their network (number of agents per province), services to be provided, anti-money laundering procedure, strategy and financial projections envisioned from agency business. Other factors considered will be company registration documents, audited accounts, availability of funds, bad credit reference, reputation, unclear source of funding, or criminal prosecution – which are some of the reasons for an application to be struck out. Also a license can be withdrawn if an agent is loss making, or a sole proprietor passes on
– The agent may provide services to multiple institutions (no contract between institution and agent shall be exclusive and an )
– All agent settlements must be in real-time
– Agents must receipt all transactions
– Some of the services agents can perform include cash deposit/withdrawals, loan repayments, bill payments,
Salary payments, debit cards, collection of mail

Can’t do: Faith-based, non-profit, non-governmental organizations are not eligible to engage in agency banking
– Agents may not use such names as ‘bank’, ‘finance’ in their brands
– agents may not charge customers for services directly
– Agents may not transact when the system is not operating (e.g. m-pesa downtime?)
Agents may not open accounts, offer guarantees, or appraise loans
– agents may not undertake cheques deposit or encashment (cash only) and may not transact in any foreign currency

Summary: Banks still require that customers come to the halls, for most services, but with agencies can they get served better (and perhaps cheaper) elsewhere? The use of dealers and agents helped transform the telecommunications sector in the span of a decade – from having a monolithic giant (Kenya post & telecommunications) where Kenyans had to queue and buy lines, pay for equipment and other bills (and which served ~100,000 customers) to now where customers able to do the same at kiosks all around the country (serving 20 million customers) Can banks mirror the phone model of growth through agents? It’s a tough call as the safekeeping of money or the incurring of a debt (by taking a loan) is one that calls for caution on the part of the customer.

But taking a loan is a sophisticated process – as most customers need to ask the loan officer what rate am I getting? what is the payback and installment? Even if someone is desperate and signs for a loan without reading an agreement, or swipe a credit card readily, they will over time come to learn the cost of transacting as they will read and review documents, especially if they feel they are being shortchanged. It seems that lending is beyond the training and capacity of agents – and the CBK has recognized this by limiting them to being a medium for repayments. So if you want to get a loan with m-kesho, you get that information from a (trained) Equity loan officer, not an M-pesa agent.

Finally, micro-savings or savings by poor people is more about the principal, not interest. i.e there has to be a mandatory obligation to save, which is difficult for someone trying to build up savings to revoke. E.g. group schemes, chamas, investment clubs, SACCO’s have an obligation to save that binds its members through a social bond of their mutual upliftment. An obligatory commitment is also a factor in larger savings programs like mortgages or pensions.

situs gacor

Bankelele

Nairobi writer on Banking, Finance, Technology, and Investments

Category Archives: CBK

Urban Inflation Index: September 2011

Cheque Truncation Part II

Your Bank, Your Neighbour

Cheque Truncation

Agency Banking and Micro-Savings