Category Archives: Remittance

Nation Hela to revolutionize remittances & debit cards in Kenya?

On August 15, 2012, Kenya’s Nation Media Group (NMG) launched NationHela in partnership with Diamond Trust Bank and Craft Silicon. NationHela had been first unveiled the previous week when NMG announced 14% revenue growth to Kshs 5.8 billion and a 23% rise in profits of Kshs 1.37 billion and an interim dividend of Kshs 2.50 per share  for the first half of 2012.

Why NationHela? For NMG that has millions of online newspaper readers every month, a good fraction of who are in the diaspora, and who also send remittances to Kenya, the platform is a chance for them to send money without leaving their computer (or logging off the newspaper site)  – by entering debit or credit card numbers to send to a Kenyan phone number. 

At the launch, a Central Bank of Kenya a figure was cited of remittances of $590 million in the year  to June (up from $409 million the previous year) through formal money transfer channels.

 
Senders also get value as NationHela can be 30% cheaper overall (charging $12.5 to send $200 compared to $15 for other services), while for  the recipient it knocks out the necessity of taking a matatu (vehicle) to town or finding a Western Union agent to withdraw cash. 

Diamond Trust who are the 7th largest bank, and the largest agent of Western Union in Kenya, handled the banking regulatory and approvals, and will also do the backoffice processing of money movement, agents, currency exchanges, float etc., while Craft Silicon provided the mobile interface (familiar to anyone who’s used their Elma) through which users will access Hela by USSD on a mobile phone to get notifications, send or receive money through mpesa to other card users, pay some utility bills, block a lost/stolen card, see a mini statement /balance among other features.

Some cited uses of the card include:

  •  Make online purchases as a visa debit card
  • Move money to or from mpesa
  • Withdraw cash at any ATM via visa
  • Use the debit card in a supermarket to make payments
 
Other future or potential uses include:
  •  Pay dividends straight to cards (maybe starting with Diamond Trust and NMG shareholders)  
  • Kenyans with paypal can move their online money on to the card and cash out payments
  • Senders will also be able to see how card recipients use the money they have sent (perhaps answering along standing issue about the misuse of remittances.
  • Take NationHela to Tanzania and Uganda where both the Nation and Diamond Trust are
  • Pay staff travel  allowances and imprest at companies (said to happen at NMG)
 

Outlook: Some concerns have been expressed, that NationHela may not work out, or that it’s going to distract NMG  from its core media business. Also the web interface needs some tweaks to make the card easier to work.

While the awareness and usage of debit and credit cards in Kenya has been low, for NationaHela there  are plans for online education & marketing campaigns targeted at the diaspora, combined with roadshows and town hall meetings around Kenya to register users, convert agents, and show how to use it on a day to day basis – and we’ll see where they are in a year. 

Online Share Trading in Kenya

Tonight CFC Stanbic Financial Services launched online share trading which they say is the first online share trading platform in the country. The actual ceremony was conducted by Information Permanent Secretary Bitange Ndemo (a Mumias shareholder through CSFS) who noted that while Diaspora Kenyans remitted $2 billion per year, they hand no true seamless mechanism to buy shares – until now.

It’s a light-weight system accessible to CSFS customers to make trade orders – buy, sell, cancel, monitor volumes, settlements, & trade live at the Nairobi Stock Exchange in real time as well as get statements & portfolio valuations.

Disclaimer: I’ve been a long-term investor through CSFS primarily through e-mailing trades, and this has been quite satisfactory. Enabling online share trading is a service which several brokers have promoted, but delivery has been spotty. The CSFS system is available even on Smartphones,and while SMS and mobile money are not highlighted, these will be features to push for and the service is one to try out and see.

Money Transfer in Kenya Evolves

Part 5

Since the last look at mpesa developments in mobile money, there have been another raft of new deployments as Kenya’s two main mobile companies – Safaricom and Zain who have been signing up partners for their respective MPesa and Zap money transfer platforms. Here’s a recap

Banks using M-pesa: Commercial banks have been long whispered to have a lot to fear from m-pesa but I disagree. Yes bank are going to have to step up and use the mobile phone to reach their customers better, and they are in a better position to do this than mobile companies. Mobile money itself is not the sole reason for the loss of relevance of some banking products since fraud, insecurity, transport costs and transaction costs have also contributed e.g. banker’s cheques have been plagued by fraud which means that banks now subject them to the usual 4-day clearing cycle, while landlords and schools now ask clients to deposit funds in their (own) payee accounts and furnish deposit slips as proof of payment.
Banks have gone the option of launching their own mobile applications for their customers including include Barclay’s m-money and these include Barclays, Equity, Family Bank, ABC and others. A few others have gone on to collaborate with mobile companies. Two notable ones are:
1. Consolidated Bank whose customers can transfer money from their bank accounts to m-pesa
2. CFCStanbic whose customers can pay their suppliers by mpesa from their bank accounts: more here

Investor Relations: Pay Dividend payment by mobile phone – last week, Safaricom shareholders approved the payment of dividends from the company to their fellow 830,000 shareholders via m-pesa. This will happen in November 2009.

More corporate partners a glance at Safaricom mpesa list of partners now includes airlines (jetlink, safarilink, east African safari air), micro-finance institutions (Kadet, Kenya women finance trust), media houses (Nation Media Groups to pay for classifieds), KBC, Family TV, , banks (ABC, CFC, Family, Postbank), government agencies (youth enterprise development fund, national hospital insurance fund, higher education loans board) , and several insurance companies and SACCO’s (savings & credit societies)

Airlines last is the airline, because it shows again, the difference between zap and mpesa. Monday’s Nairobi Star had an advert from Jetlink showing that their passengers could now pay for airline tickets by M-pesa– up to the maximum m-pesa limits of Kshs. 35,000 ~$500.

That should have been the end of the airline section, but I was reading the latest issue of African Business magazine which had an interview with Tito Alai where he mentioned that Zain had signed up Coca Cola, and – Kenya Airways (KQ) saying “a passenger can book a KQ ticket online, pay by zap, and check in at airport with his mobile phone” great right? But Kenya Airways have not launched this program – and their customer care told me to only pay by cash or credit card. Kencell/celtel/zap have a history in Kenya of coming up with innovative products, but Safaricom market/apply theirs better. Is this another case with KQ? That the company is up for sale (again) is not a positive sign for development of new partnerships & products. Then on the news of August 24, it was reported that Zain Kenya had launched 3 Zap applications – zap distro (web tool to manage dealerships), zap transact (collect cash from numerous sources direct into bank accounts), zap master pay (ease cash administration – so a company pay up into up to 1,000 zap accounts at a time). Maybe now KQ and Coca Cola will reveal their plans for Zap

User innovations:
But as many innovations as the large corporates come up with for mobile money, the users are the ones who will come up with the innovative, creative ways of adapting them to their lives. Here are a few examples

24 hour M-Pesa had a lunch at a joint that had a rather rude manager, after he spotted me taking a picture. Anyway, many mpesa dealerships tend to close at 5PM, while others like Uchumi (supermarket) can do transactions up to about 8 PM. But now bars, who are open for many more hours e.g. Taidy’s (Nairobi west), are offering 24 hour mpesa banking.

Overcoming challenges Also, while the country is ongoing a power rationing for the next few month, M-Pesa is largely unaffected, as it is not dependent on electricity which the banks are. But M-pesa down time & system outages, agent, and lack of float for several hours a day may compromise its integrity in the eyes of consumers, who may see Zain’s Zap as a reliable back up channel

Money transfer across networks: since their introduction, the mobile companies have been walled in I.e. M-Pesa can only be sent to Safaricom customers, while Zap money to zain users. There have been calls for cross-network transfers to be allowed, with appeals to the regulators (CCK, CBK) to force this to happen. But in this market regulation trails innovation, and this wall has been broken down,- as explained by @Gishungwa “from zain you can send money to Safaricom, it costs the sender 10 shillings, but the recipient pays 30 shilling to withdraw cash and it works well”

Other Uses
– harambee (fundraisers) where more money is sometimes raised by m-pesa than from cash collections at the event. This is also safer and money goes direct to the intended recipients
– Televangelists: every Sunday morning religious show on TV will have a prominent display of mpesa and zap numbers for viewers to send in cash for prayers
– Others are dowry payments, bar bill payments, petrol payments at fuel stations

Mobile phones lower the cost of business

Money Transfer Within Kenya Part 3

A comment from @alykhansatchu on Money transfer lead to an update of the first post about money transfer from about 3 ½ years ago before the advent of mobile money transfers.

At that time, the cost of sending 10,000 shillings (then about $136) within Kenya was Kshs. 1,700 ($23) with Western Union and 1,850 ($25) with Moneygram – working out to a remittance cost of about 17% – 19% for an instant money transfer. This was mostly done at a few commercial bank branches, some foreign exchange bureaus, and at post offices around the country within banking hours.

90% savings: A lot has happened in the last few years mainly in the form of the arrival of money transfers via mobile phones by MPesa from Safaricom and more recently Zap from Zain.

A recent post last week noted that Western Union in Kenya have just lowered transfer costs to flat rates of 2% i.e. almost 88% cheaper than what they were at the time.

In the last few years, millions of Kenyans have moved on to mobile phones for money transfer and I can’t recall anyone who uses banks for these transactions. Mobile phone have maximums of about $430 (35,000 shillings) for money transfers, but this is more than enough to cater for most remittances, including the emergencies that necessitate instant transfers.

And mobiles are still cheaper; the 2% western union charge to transfer 10,000 shillings works out to about 200 shillings. A transfer of the same amount by Zap costs 75 shillings (0.75%) and 105 shillings (1.05%) by M-Pesa (after combining sender and receiver fees)

International remittance to get cheaper?: Zain hope to link Zap to allow transfers to customers of Zain in different African countries. And Safaricom are setting up a link for transfers from the United Kingdom to Kenya. When these are established, we should also see the cost of internal remittances, whose sometime high cost is a cause for complaint for many Africans in the Diaspora, also drop significantly.

Kutwa Tuesday

West to East: Following Bank of Africa (2004) and Ecobank (taking over EABS), West African’ leading bank, United Bank of Africa (UBA) is making an entry to East Africa starting with Uganda and have also applied for a license to bank in Kenya.

Venture Capital Fund: From the East African Development Bank (EADB) is now operational, with small and medium enterprises (SMEs) in East Africa are eligible for funding.

Uchumi’s turnaround : Uchumi have finally published their financial results of the receivership period from 2006 to 2008. The turnaround has been remarkable and in the half-year ending December 2007, they surpassed full-year sales from 2006 (year of collapse). The current ratio is still poor (less than 1), but that’s about three times better than it was when the company sunk.

The company lost 751 million in June 06, which improved the first year of receivership to a loss of 257m in 07 – and are on track to make a profit in 2008 – while operating fewer stores. It’s probably too soon to be re-listed (there would only be sellers, no buyers) and a dividend would not be likely for 5 years as the company still has an accumulated loss (negative reserves) of about 1 billion shillings ($15 million)

peeves two things irritate me though at Uchumi (i) their cashiers never have any shilling coins and insist on giving out sweets in lieu of change (ii) Cashiers’ who take advantage of my not having a u-card to top up their accounts with points I pay for.

Insurer collapses: Invesco assurance finaly goes under. The company which insured many matatu’s is now under statutory management and can’t make any policy payments or sign up new business. And when the history of the company is written, one paragraph must address why almost every insurance company (including Invesco) decided to put up an expensive office building in the Upper Hill area of Nairobi, far away from their core clientele.

Kenya Re profits: How much did Kenya Re earn in 2007? An interesting discussion at stockskenya.

Diaspora dollars: How much do Kenya’s abroad remit to the country (through official channels)? CBK reports $54 million in January 2008 and the country is on track for an increase from the $573 million sent in 2007.

Dollar launderer: A Nation report cites US concern about money laundering in Kenya which has weak laws regarding the crime. The State Department report notes the difficulty as Kenya is a hub that mixes regional trade with exports to East & Central Africa, donor aid & NGO’s (managing over U.S. $1 billion annually), remittances from expatriate Kenyans estimated at $680-780 million annually, and Eastleigh Estate which handles unofficial remittances by the Somalia Diaspora. Also, though banks maintain records of transactions over U.S. $100,000 and international transfers over U.S. $50,000 (and report them to the CBK) they fear customer reactions to such release of information – and this was hammered home by a November 2007 court award that ordered Barclays Bank to pay a customer 400,000 shillings ($5,700) for providing customer details to the British High Commission.

New boards
– The Kenya college of communication and technology (KCCT) board now has Michael Joseph, Nick Nesbitt, Naushad Merali and Paul Kukubo to guide some relevance in communications training.
– The Resettlement fund (for election victims) has retired archbishop Ndingi, former minister Akaranga, and retired athlete Kipchoge Keino on board.