Category Archives: credit reference in Kenya

This time around: Kenya Stockbroker collapse, Report leaks, Credit Reference Live

Time for another this time around post which looks at stories that recur in the business environment

Mars Group Kenya: The an anti-corruption watchdog group is the wikileaks for Kenya, re-publishing hitherto top-secret government reports at their website.

Mars Group research and produce their own reports, but their archives contain a growing list of reports of corruption in Kenya that is worth checking out. This week they have reports done by PricewaterhouseCoopers for the government of Kenya on the collapse of Triton Oil Company and on the misuse of funds for Maize famine relief in 2008. Last month they also released the report on the sale of the Grand Regency hotel. The Triton report shows that:
– At Kenya pipeline company (KPC) the oil collateral agreement was poorly drafted and ambiguous. Also managers had great discretion, procedures were lax /there was inter-departmental conflict (oil was released without verification) and documentation was poor (since documents would get lost at KPC, financers would exchange documents then present them all to KPC at once)
– Triton was aggressive with financing and would arrange for shipment before they got financing. They were stuck at some point and KCB entered into a finance agreement for goods when the ship was already in Kenya
Bad banking Ecobank have no claim against KPC, while the Fortis claim against Triton is suspect. Also Glencore had stopped financing Triton in June 2008 as they were suspicious about KPC fuel stock claims
– KCB and other financiers did not cooperate with the PWC investigators
– The debt owed to KCB may be substantially lower than KCB claims and they have provided little information to assist in verification of the Triton debt.
– Kenya anti-corruption commission should investigate further staff named in the report

GoK Bond The Government of Kenya is going to raise Kshs 14.5 billion for infrastructure via a third infrastructure bond. How does that compare to a similar bond a year ago?
2009: Kshs 18 billion ($240 million), interest rate 12.5%, minimum bid Kshs 100,000 (~$1,250), maturity 8 years, principal repaid in 2015, 2017, 2021. Funds used for road, geothermal, water projects
2010: Kshs 14.5 billion ($188 million), interest rate 9.75% tax exempt, minimum Kshs 100,000, maturity 8 years, principal repaid in 2016, 2018. Funds used for water, sewer, irrigation, road, and geothermal projects

The 2009 bond was over-subscribed and the only notable difference in 2010 is the lower interest rate offered. The CBK has decided the high cost of loans offered by commercial banks and perhaps by offering the same banks a lower return on government bonds; they will offer more competitive borrowing rates to the public

Credit Reference: February has also seen the licensing of Kenya’s first credit reference bureau – CRB Africa by the bank regulator, the Central Bank of Kenya. Following this, commercial banks have apparently commenced sharing information with the agency. Some of the rules governing sharing of data were highlighted when the credit reference rules were gazetted almost two years ago. These include
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects) and must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral.
– If a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer
So what information will they compile?
For individuals: Name Citizenship ID / PIN Postal/ Telephone Credit history (as reported) Court judgments (as reported) Referees
– For companies: Company registration details postal/physical/telephone Credit history (as reported), Court judgments (as reported), Guarantees
Shareholdings/directorships

Stockbroker collapse: This month saw the placing of another stockbroker under statutory management – this time its Ngenye Kariuki Stockbrokers [Last year in March it was Discount stockbrokers that was placed under statutory management]

Despite strong defense from the Kenya Association of Stockbrokers & Investments Banks – KASIB who say the brokers problems were manageable and did not warrant the intervention of the authorities the broker was in a weak financial position.
A summary by Faida Investment Bank, based on the published un-audited results of Ngenye Kariuki showed this
Half year June 2008 versus 2009
June 08 income 35m, expenses, 21 million, pre-tax profit of 10 million
June 09 income 3 million, expenses 10, pre-tax loss of 11 million

Share capital of 50 million, capital reserves of 251 million (which many brokers draw from the sale price in 2006 of Francis Thuo stockbrokers) [and the same amount appears as an intangible asset) at June 2009, the broker had an overdraft position of 63 million and receivable of 127 million which KASIB is laying at the feet of Citibank for withholding funds from the 2008 Safaricom IPO that are owed to several stockbrokers.

Old Mutual, Credit Reference, Insular TZ

Old mutual loosens up: Old Mutual , the pioneer of unit trusts in Kenya has made some radical changes to it contractual savings plans to cope with a changing market place with many unit trust choices from a competitive fund and insurance industry. Changes include;
– Plans will no longer lapse if premium payments are stopped. E.g. when people get retrenched
– Savings (in a lapsed plan) will remain invested until maturity or can be paid out early
– If your saving plan was terminated without a payout, consider it reinstated!

Credit reference rules: Former finance minister Amos Kimunya was able to gazette the rules for operations of credit reference bureaus in Kenya before he left office. Provisions include;
– Bureaus will be licensed by the central bank
– Signup costs are 100,000 shillings ($1,500), a bank guarantee for 1 million and another fee of 100,000 per year
– Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
– They may only share information for business decision making (evaluate credit prospects)
– Bureaus must keep track of all information they share
– Customers are entitled to one free report a year, and within 30 days of a negative referral
if a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer

Undugu at work: More Tanzanian IPO news with the upcoming sale of 21% of the Tanzanian Government shares of the National Microfinance Bank (NMB) to raise 63 billion shillings ($54 million) and later to be listed on the Dar es Salaam Stock Exchange. But the offer is open to to individual Tanzanians and companies that are whole owned by Tanzanians – unlike Stanbic (Ug) and Safaricom (Ke) (which Tanzanians were also barred from subscribing to)

The Trouble with Celtel

Are free calls enough?

[I am not a customer, but I have probably bought and discarded three of their SIM cards to coincide with some ongoing promotions. Too many people I call are on Safaricom, and until number portability comes along, (carrying my number to another network) I am stuck with Safaricom.]

Beside number portability, there are other things they need to sort out; Celtel has been losing customers (23% down from a year ago), executive staff (compared to the ‘stable’ team at Safaricom and direction. The change of brand from Kencel to celtel to Zain only benefits paint and marketing companies (but there’s already a ‘Z’ brand in Tanzania and a couple of other African countries)

My biggest peeve with them is there are too many products; these are never promoted long enough to mature or register with subscribers and potential customers.

This week
– For internet/data users – they have Uhurunet – unlimited internet service, whose equipment is a USB modem costing 6,000 shillings [$95] and 3,000 [$48] per month for unlimited internet which is not bad [and this compares well against Safaricom]

– For callers: Earlier this week they launched a six-month tariff with free airtime for people who purchase cheap phones (targeted at rural subscribers). And now from the skunkworks group we learn that they have another new tariff with Free calls from 6 a.m. to 6 p.m. every day (top up with 100 shillings to take advantage) – will this be the one that gives them an edge over Safaricom? That’s the problem with Celtel – great products, big marketing budget, but jumbled messages that confuse subscribers. In the last year they have advertised their lowest rate at 6 shillings (Mambo 6), 4 shillings (to 3 preferred numbers) and now 3/= ($0.05)per minute. That is three times cheaper than Safaricom, but who has the masses and who has the right message?

Other tales

Opportunity: Nominate a worthy Kenyan to the Generation Kenya program

– From Uganda and GTV comes pre-paid premium TV – subscribers can pay for their GTV pay TV packages using scratch cards

Experian Kenya: joining the Kenyan credit reference pool is Experian in partnership with Quest Holdings.

Day 19 of the Safaricom IPO has 4,121 deals, worth 342 million ($5.42 million) Closing 7.20 High 7.40 Low 7.00 Last 7.20 and volume of 47.5 million shares. It’s well supported and Buyers must be sniffing out a conclusion to the de-leveraging process. Commentary and data from Rich.co.ke – NSE data vendor [with Free real time prices between 0930 -1500]

Record Bank profits expected

No doubt, there will be very strong, embarrassingly record profits (esp. from Equity Bank), which will shock Kenyan’s but the results are for the year (2007) which was virtually over by the time that the country plunged into chaos. The impact of the economic disruptions, violence, and framework may not be seen at banks until after June 2008. Meanwhile one bank that was in expansion mode has put off the program and staff recruitment until further notice.

SME Finance: EABS Bank, soon to be Eco Bank (after the West African bank takes over 75%), has partnered with Enablis to provide young and upcoming entrepreneurs with bank loans this year.

Check your own credit: what has been personal right for millions of US consumers is now available in Kenya – the self credit check. The service is offered by CRB Africa, Kenya’s leading credit reference bureau, but many here have no credit at all. Still it’s a free service, which someone should try out.

Corporate governance; KCB has an ethics help desk at its site to receive confidential reports on fraud and workplace abuses within the organization.

Bug-me-not: From the bankwatch blog comes results of a survey that shows bank customers do not want bothersome SMS’s sent to their phones that don’t add value or inform them much e.g. account balance messages that cost 30 shillings ($0.4). I think it would be useful to have services that tells you when a cheque is about to bounce, or the CFC chip card alerts which inform account holders each time their credit card is charged

opportunities
EADB: Project Officers, Senior Project officers,
I&M Bank: Credit Officer, Treasury Dealers/Officers, (Asset) Relationship Manager, (Liability) Relationship Manager, and Relationship Officer
Inter Region Economic Network (IREN) : Webmaster, HTML text editors, Editor, Marketing Manager, and 3-month internships for year 2008. Apply to the Programs Manager, info@irenkenya.com by 15/2

Money Transfer within Kenya – Part II

Part I has come to pass with Safaricom’s new M-Pesa service enabling money transfer via cell phone.

Mzansi Kenya: The new technology does not pose a threat to banks as it operates outside banking circles. What banks should look out for is a populist attempt introduce mzansi style banking as they continue to report super profits year after year which are unfairly attributed to excessive fees they levy on their customers.

Visa, watch out: The next group to watch out for what’s happening at Safaricom should be Visa and other credit card manufactures in Africa. Cell phone airtime is virtual money – which is what debit and credit cards are – enabling customers and merchants to exchange virtual payments settled days later – at a substantial fee to both parties.

With cell phones, this is already happening but it’s just not formalized. The Option – Safaricom’s free magazine publication has a letter to the editor this month from Joe Nickson of Kerugoya (central Kenya) who paid his fare in a matatu (bus) by transferring 50 shillings airtime to the conductor’s phone and he received 30 shillings actual cash as change.

Airtime offers many more possibilities – 7 million cell phone (including more post-paid cell phone customers) vs. 100, 000 credit card users in Africa. Alongside his credit card terminal, a merchant can have a terminal with a dedicated cell phone line to receive virtual payments of airtime from Safaricom users making small purchases. At the end of the day, he’ll be able to check his virtual balance – and either re-sell the airtime to customers or use it to purchase other goods.

Another advantage of cell phone payments is they require no background checks or credit history.

Could Safaricom go to a higher level and enable online payments to enable their subscribers to buy over the web and pay by transferring payments to a website like Mamamikes or is that already happening?