Category Archives: credit reference in Kenya

New Credit Cards from NIC and Equity banks

This week, NIC Bank launched a platinum credit card and Equity Bank formally announced their expanded impressive card portfolio that now includes American Express. 

The NIC Bank Visa Platinum credit will be offered to a select few clients like professionals, senior government employees, business leaders, and entrepreneurs. The card comes with a variety of privileges in terms of shopping discounts, priority pass access to 600 VIP airport lounges in 100 countries (with complimentary snacks, free internet at many, and cardholders can bring in companions), a portfolio relationship manager, and purchase protection for 90 days. 

For frequent travelers around the world, it also provides useful facilitation in emergencies like payment of hospital deposits of up to $2500 and arranges for emergency evacuation, legal advice, transport of companions or children.The annual fee is Kshs 6,000 (~$70) and there is no joining fee. NIC will also have a rights issue and a bond issue that shareholders will kick-off next week at an EGM.

Equity Bank is signing up merchants to accept American Express cards – for which they are the exclusive card issuer in Kenya. They have already signed on Nakumatt,  ArtCaffé, Heritage Hotels, Best Western, Laico Regency, Leopard Beach, Boma and some other hotels.

Speaking when he confirmed the development, Equity Bank Managing Director, James Mwangi, said “the bank is now a partner for American Express, Visa, MasterCard, PayPal, Google, China Union Pay, SWIFT, JCB, VFX (Equity Direct) and Diners Club.” As per Central Bank stats, Kenya had about 162,000 locally issued credit cards as at February 2014, compared to 114,000, three years ago.

Mobile & Card Payments across East Africa

A new unsecured card solution was launched by afb last week that will allow customers to instantly spread the cost of their purchase at participating shops into affordable 6-month repayments. afb have signed up 52 merchants like Baus Optical, Cambridge Opticians, Fabguru Shoes, Kitengela Glass, and local supermarkets (Tumaini, Home Depot, Homemade) and are also signing up other merchant shops where consumers will be able to apply for cards and get them approved & issued in the stores ahead of making a purchase.  afb settles the transaction amounts directly into the retailer’s bank account, and the customer makes repayments via M-Pesa. afb next hope to venture into loans and insurance in Kenya.

How large is the card market? A Central Bank of Kenya reports showed that there were 9 million debit cards and 140, 000 credit cards in use in Kenya in 2012.

In terms of mobile money, CBK data showed that 21 million Kenyans moved Kshs. 141 billion ($1.65 billion) via 53 million mobile money transactions during February 2013.

CBK has also come up with new mobile money rules that target money laundering. They require that operators link different accounts opened by a user with a single ID card, flag accounts that move more than Kshs. 100,000 (~$1,175) per day or 300,000 (~$3,530) per week, have audit trails, institute systems to handle customer complaints and retain transaction data for 7 years. 

KCB and Western Union who have an account-based money transfer service (ABMT) in Kenya will extend it across East Africa this week, enabling KCB customers to receive money from Western Union directly into their accounts.

Kenya Airways has a 1.5% fee on all credit card transactions (owing to high processing bank charges).

Following a spate of fraud incidents last December, the Kenya Bankers Association (KBA) has launched an ATM safety campaign dubbed “Be Alert” or “Kaa Chonjo” which include tips such as cover the PIN’s with their hands (at ATM’s), and not sharing PIN numbers with anyone (including spouses). 

KBA also announced the shift by Kenyan banks to the new Europay, MasterCard and Visa (EMV) technology to ensure better security of cards.

90% of KenyaPower pre-paid electricity tokens are now purchased using #Mpesa – according to a Safaricom Business ad.

Diners can now pay restaurant bills via M-Pesa under a new partnership between Kopo Kopo, Eat Out and Safaricom. Restaurants accept payments at 1.5% per transaction.

MasterCard and Equity Bank introduced PayPass enabled debit cards in 5 African markets which will enable merchants to receive payments via low-cost add-ons linked to applications on their mobile devices (such as a smartphone or tablet) 

Mastercard and I&M Bank launched a multi–currency (Dollars, Pounds, Euros) prepaid card which enables users to load up to $10,000 and make foreign currency purchases without incurring exchange rate or other charges.

MasterCard also released a study called the MasterCard African Cities Growth Index that showed that Accra, Lusaka and Luanda offer the highest growth potential in Sub-Saharan Africa. Other ranked cities included Dar es Salaam (4), Addis Ababa (5), Nairobi (6), Kampala (7), Johannesburg  (8), Cape Town (11), Mombasa (12), Lagos (13),  and Khartoum (19).

Credit reference bureaus like CRB Africa and Metropol are expanding across East Africa.

The inaugural Mobile Money Africa Awards will be held in Johannesburg next month, to award the best mobile money app, mobile banking service, and mobile money platform for Africa, among others.  

Nation Hela launched last year has 8,000 active cards in use.

With PesaPal, Kenyans in the Diaspora can send school fees payments directly to 12,000 schools in Kenya using their credit cards (no need for money transfer service). 

Shell Kenya have a visa card promotion to encourage motorists to swipe their cards and pay for fuel The platform is powered by Equity Bank POS at all Shell stations, and station owners are not charged commissions for card sales (Shell pays all commissions).

Tangaza321 is said to be the second largest mover of mobile money behind M-Pesa. The Tangaza system uses biometric data (fingerprints) as many customers don’t possess national ID cards and allows them to send money across all networks, even to people who don’t have mobile phones.
A team with the University of Nairobi’s University Students Community Organization (Uniscoo)  has developed a prepaid card for university students. Uniscoo which has 25,000 students seeks to encourage good money management among students through the use of the prepaid card powered by MasterCard.

Credit Scoring the Informal Worker

Documenting the informal economy has been a challenge, the importance of which is increasingly being seen in recent banking, real estate, consumption and other economic statistics that, thanks to data from Telco’s about m-pesa and other money transfer systems, shows up as a grey ocean of money flowing (daily) through the economy that amounts to a significant fraction of Kenya’s GDP.
But how about the users who are moving this money? Can they derive creditworthiness value from this information that is being captured? i.e. These are the self-employed workers, and people without payslips or steady banking habits, but who have some scanty history with banks, savings societies, church groups, or utility companies. 
But now with services such as SelfCare from Safaricom, one can see three months of M-Pesa transactions – and in the last three months, funding a project outside Nairobi, I’ve deposited about $3400, sent about  $2800, withdrawn $200, received $150, and bought $100 of airtime.

All that should qualify for more than a Khs 2,000 ($25) instant loan from Safaricom/CBA’s, M-Shwari, but since it’s a new system, it may be too early to determine the creditworthiness of a borrower, using their  M-Pesa history alone. Selfcare could, with time, become more useful, allowing users to export or print statements,  older than three months, and other financial institutions to access & review the data  – and with that, a hawker, taxi driver, or other self-employed worker, without a formal banking history could generate a decent, mature,  credit position to discuss with a new bank. 

Kenya’s Top Banks

as at June 2010

Bank Assets Pre-Tax-Profit
1. Barclays Kshs 173 billion ($2.16 billion), profit of Kshs 4.75 billion ($59.3 million)
2. KCB assets of Kshs 207 billion ($2.59 billion), profits of Kshs 4.34 billion ($54 million)
3. Equity 117,578 4,282
4. Standard Chartered 131,348 4,037
5. Cooperative 133,322 2,848
6. Diamond Trust 54,109 1,508
7. Citibank Kenya 63,812 1,499
8. Commercial Bank of Africa 60,229 1,465
9 Investment & Mortgages 56,630 1,239
10. National Bank of Kenya assets of 59,390 million ($742 million) and profits of Kshs 1,200 ($15 million) – then CFCStanbic (falling out of the top 10), NIC, Baroda, Imperial, and Bank of India.

Notes– KCB is the largest bank (and group) but is less profitable than Barclays which is the most profitable bank
– Equity may be the most profitable bank by next year: Five years ago (2006) they had 1/6 (Kshs 500m) of Barclays profits (Kshs 3 billion), now mid-way into 2010, they are the country’s 5th largest in assets, and 3rd in profits – and are about 7X large by both measures compared to five years ago, while KCB is 1.5X larger and Barclays is 0.5X larger than it was in 2006.
– Equity is perceived better in market terms than KCB though its half its size and has the same profits this year.

Changes since last year
– Credit sharing between banks is now being enforced
– Anti-money laundering law now in effect
– The Government of Kenya has set out to raise Kshs 31 billion ($388 million for infrastructure projects; Kenyan banks currently have almost half as much money invested in government securities as they do with loans to customers
– The new constitution passed this month means we will have currency without the face of a president (virtually all existing currency bear the portraits of Kenya’s past presidents)

– Equity and several other Kenyan banks have decided to embrace and work with M-Pesa and other mobile money channels instead of fighting them
– Micro-finance institutions (MFI’s) are stepping up into the commercial banking sphere

Incoming banks (all of which have micro-finance origins)
– Faulu Kenya
– Jamii Bora (formerly City Finance)
– KWFT

Gone banks
– Southern Credit (bought by Equatorial)
– S&L (absorbed into KCB)

Data Collected but Not Processed

So much data is being collected from Kenya citizens these days at various points of transactions by citizens. This is largely in the form of being asked to produce more and more documents to authenticate/verify information that some of the organizations already know or have in their archives – these include:

– Last week (June 30) marked the tax filing deadline Kenyans who rushed to the revenue authority offices and returned forms, while some even managed to file online
– Government workers & civil servants have been filing their annual income and asset returns for about six years now in a wealth declaration exercise – but the forms are just filed away, and for some who participate such as members of parliament, the rules stipulate that no one can look at their forms ever!
– Mobile phone companies have began to comply with a directive (not a law) that asks mobile phone subscribers to register and verify their data in a bid to crack down on terrorism, money laundering, hate crimes etc. A lot of this information’s is already in the hands of the companies e.g. with Safaricom, post-paid subscribers, M-pesa users and any shareholder who registered for dividends by m-pesa last year has already given all of this information – and Safaricom have now issued a statement that m-pesa and post-pay customers won’t have to re-submit their information. Kahenya views the mobile phone registration exercise as being for national security to build a database on citizens that they can tap into if/when they choose to scrutinize.
– From July this year, it has been mandated that there will be Kenya banks share information in a program to improve the assessment of borrowers capability to repay loans and which is hoped will lower the cost of credit (to good re-payers) and amount of bad debts at banks (by filtering out bad re-payers)
– Some banks have changed, others have not. Some like Barclays ask you to bring in a passport photo to open an account, while others like Equity snap your digital picture in their banking hall after you fill out the forms. Still in a single bank you may have an account, but to open another savings or credit card account, you may be asked to produce photocopy of ID, passport photo, and your bank statement
– My problems with custody registrar services who are one of the largest collectors of photocopies of documents, continues to this day; and CRS appear to have been vindicated by the Kenyan stockbrokers fraternity who have endorsed the Kenya capital markets proceeds of crime and anti-money laundering efforts by way of obtaining as much information as they can to ascertain a customers risk profile, nature of business, sources of funds and they are also to report any transactions greater than $10,000 (~Kshs 800,000)

A lot of the information is in paper photocopy form, and in application forms which thousands of people fill out without reading the fine print of what the information can be used for e.g. Safaricom m-pesa dividend mobile phone dividend payment form explicitly stated

Safaricom recognizes the importance of protecting privacy (3.1)… Safaricom collects personal information that we use to profile m-pesa users (3.2) and administer accounts …Safaricom does not share your information with unauthorized persons (3.3)…and you expressly consent and authorize Safaricom to disclose data relating to your dividends to (among others) Kenya police, central bank of Kenya, Kenya anti corruption commission, the central depository & settlement corporation (11.2)

So there is a massive amount of information being collected, but is it being processed? No and Yes. No because it may at most be at most scrutinized at the point of receipt/approval (mainly only in the case of banks) and then filed away to only be retrieved if an account goes bad.