Banks have been slow to evolve, and that has created an opportunity for fintech start-ups to take up a slice of their market share.
Finance & Banking
Username Investment CEO Reuben Kimani has urged the Government to consider Inclusionary Zoning as part of their strategy to offer affordable homes to all Kenyans.
The CEO spoke during the 26th Kenyans Homes Expo, where Username scooped the 1st Prize as the best Land Investment Company, stated that it was time the Kenyan Government considered borrowing housing ideas from states which have been successful in ending their housing crises.
“It is possible to borrow from Maryland’s Inclusionary Zoning model, which has helped the state reduce homelessness to less than 3,000 people. To make affordable housing, which is part of the Big Four Agenda a reality, policymakers will have to enact a Moderately Priced Dwelling Unit Program, which would require developers of mass housing units to incorporate a percentage of low-cost housing in their projects.”
Reuben was referring to a 1974 housing law that was passed by the County of Montgomery, in Maryland, where builders asking for permits, site plan approvals, and sub-divisional approvals to create more than 50 housing units, would have to ensure 15 percent of the units were low-cost.
“To make this plan attractive to private developers, the government should consider incentives such as density bonuses, lower land rates, tax relief, and provision of alternative low-cost building materials in addition to the buy-back proposal made by Housing Principal Secretary, Charles Mwaura. If the Housing Ministry assures developers that they will ease their construction cost, and also buy back the units that do not sell after construction, more people in the private sector will be willing to partner with the government in making affordable housing a reality.”
Reuben was addressing the Kenyan housing crisis. The current housing shortage in the country stands at 2 million units. The proposed housing agenda is set to create 500,000 low-income housing units by 2022, which still leaves a deficit of one and a half million housing units.
“Other Countries have found ways of getting private developers involved in solving the housing crisis for low-income earners. This has benefitted them in eliminating informal settlements (slums), ending homelessness and creating communities which are income integrated. Of course, there will be the challenge of high-income earners wanting to take up these units, but lawmakers can have laws enacted restricting the income gap which one needs to occupy in order to be eligible for the low-income units. We need to define low income by looking at the median household salary earned in each Kenyan town and having households which fall below this threshold getting these units.”
Addressing the competition which has been going on between the NHC and the private sector in the provision of housing, Reuben stated that it was time the two sectors came together and created a workable partnership which will result in low-income Kenyans being able to afford homes. He stated that if the government would offer infrastructure such as access roads, electricity, clean drinking water and fast approval of construction permits, developing mass housing would become achievable.
“Most of the houses being constructed by private developers only benefit middle and high-income earners. To make Affordable Living a reality for all Kenyans, the Government has to partner with private developers.”
The Kenyan Homes Expo provides a platform for Kenyans to access Real Estate investment opportunities. The expo makes it possible for property buyers to interact with realtors, construction contractors and developers, thus demystifying the real estate industry. This year’s first expo, whose theme was Affordable Living, was held between the 12th and 15th of April.
The rise of technology has allowed fintech companies to offer alternative to traditional lenders. Now this firm wants to offer credit to everyone regardless of their status
Like many others, Mary Wafula a small scale trader in Nairobi’s Kenyatta market, struggles with economic slump, growing supplier pricing as well as access to finance to sustain or even grow her business. For small scale traders like Wafula who have very little or no savings, rainy days are all about borrowing money from friends or lending institutions such as banks or credit unions.
But, banks and credit unions have been reluctant to approve any loans for small businesses even those that are considered stable. Their main argument has been that such businesses are risky and often don’t offer many returns.
The reluctance to offer loans to small business or personal loans by banks and credit unions has seen a number of fintech companies come in to save the situation.
Buoyed by the growing mobile and internet penetration, fintech companies are developing products geared towards providing digital loans to the lower cadre population. One such company is Okolea International Limited.
Okolea, is a finance company offering digital loans, money transfer, digital payment and accounting software. According to the companies CEO, Peter Muraya, the company’s goal is to leverage on existing and emerging technologies like artificial intelligence and virtual reality to power innovative financial solutions and improve the day to day lives of people.
“Our goal is to offer loans to everyone without prejudice. We believe no one should be discriminated against regardless of their social class.”
Digital lending products have been growing in popularity over the last few years. They have been known to offer smaller amounts of loans compared to micro-finance institutions.
Customers accessing higher amounts mostly invest into business while those qualifying for smaller loans often spend on consumption, emergencies and recurring expenses such as rent.
“One of the key things we have been focusing on has been quick turnaround time. The ability to get loans instantly without documentation at any time is what Okolea appealing to the market.”
For one to qualify for Okolea instant loan, all they have to do according to Muraya, is to download the app on android play store. Once, you have downloaded, you pay facilitation fee of KSh100 to access loans. The facilitation fee according to Muraya is meant to enable the company carry out a due diligence process and check applicants credit worthiness.
“This amount is to enable us conduct a background check on the borrower’s details and status from the Credit Reference Bureau (CRB).” Once the process is complete, the borrowers can access as little as Ksh150 and a maximum of KSh100, 000. Loan limit increases with the applicant’s ability to pay previous loan.
According to Muraya, the company like most digital credit companies, relies on mobile based data such as users M-Pesa transaction records to determine their credit score and loan amount.
The annual percentage range from 20 to five per cent based on the repayment period for the borrowers. Repayment period is within a month.
Those that default on their loans are blacklisted by CRB and locked out from further accessing loans. This does not only apply to loans from Okolea but other digital credit companies. Research by Microsave an international financial inclusion firm show that about 2.7 million Kenyans have been listed in the last three years. Out of these over 400,000 have been listed for amounts less than USD2.
Since inception, Okolea has been able to disburse over 500, 000 loans to its 80,000 registered members. The average amount of loan according to Muraya is KSh1200 though this figure could change in the future.
Muraya says the busiest months for the lender is during the months of January and February. “During this time people are looking for money to take their children to school after spending most of their cash on Christmas holiday. “
Kenya has more than 20 digital credit offerings with the number growing every day. This Muraya says is fueled by a growing demand for instant loans as well as the increasing popularity of mobile money transfer services.
Mshwari is currently the most popular providing both savings and loans through M-Pesa platform. Others include California backed digital lender Branch, Equitel, Tala and Saida. A growing number of loans issued with Mshwari at 63million, KCB Mpesa at 4.1million and Equitel at 3.6million.
Similar to Okolea, these apps allow users to download the app then link it with their social media accounts. The app the uses algorithms to analyse data from the user’s handset to determine their credit score.
Industry data show that 90 per cent of loans in Kenya are currently disbursed via mobile phones. Data from the Central Bank of Kenya indicate the volume of cash moved through mobile money transfer platforms in 2016 grew by a fifth to cross the KSh3 trillion mark.
Though these services have offered a solution to one of the teething problems to the common man. They have not been without challenges.
The default rates are high, says Muraya. “Most people fail to pay their loans out of ignorance, some see the loans as too little for lenders to follow up.”
There are also cases of multiple borrowing. Over time with the growing number of products and services, it has been difficult to know how many other loans borrowers have taken. This means borrowers taking more credit than they can manage. It is common for borrowers to take up a loan to pay another. This creates a debt cycle that in the end increases their default rate.
For Muraya and his team, the target is now set on growing the company’s market share. This he says will be through offering products that resonate with the market demands and trends.
Please Note. On our print edition we indicated that facilitation fee was Ksh150 and the repayment period to be 12 months. This has since been corrected in our online version to reflect the true figures. The facilitation fee is Ksh100 while the repayment period is within one month.
Retirement schemes’ equity allocation increased over the quarter ending 30 June 2017. This was mainly caused by the rally in the stock market over the period.
The Zamara Consulting Actuaries Schemes Survey (Z – CASS) for the second quarter of 2017 shows that the allocation of equity investments increased to 21.5 per cent from 19.1 per cent in the first quarter as prices of the held investments increased.
“The Nairobi Securities Exchange (NSE) has rallied since April of this year mainly driven by Banking Stocks delivering profits, strong sustained performance from Safaricom which led to increased local and foreign investor confidence. The offshore asset class also performed well over the 12 month period. Although following the results of the supreme court judgement nullifying the election results on 1 September, the stock market took a plunge, ”said Zamara Group Chief Executive Officer Sundeep Raichura.
Fixed income assets accounted for 72.9 per cent of the average pension fund allocation followed by property at 4.3 per cent and offshore at 1.3 per cent.
The Z-CASS Survey additionally showed that participating schemes had a median return of 14.3 per cent over a one-year period and a 9.4 per cent return over a three-year period. Schemes in Kenya have varying risk profiles, the survey classifies the schemes in to three categories – Conservative, Moderate and Aggressive. During the 12 month period, schemes with moderate risk had the highest median performance and conservative schemes had the highest 3 year median performance.
Offshore investments, despite the low asset allocation, had the highest median return over a one-year period at 22.6 per cent followed by fixed income at 15.2 per cent and equity at 12.5 per cent.
Fixed income assets recorded the highest return over a three-year period at 12.9 per cent, followed by offshore investments at 10.1 per cent and equities at 1.7 per cent.
At least 382 Schemes were covered in the in the Z – CASS Survey in the second quarter of 2017 and the assets under management covered by the survey were at Ksh655 billion.
The Z- Cass Survey enables trustees to compare the performance of their retirement scheme relative to their peers within the broader retirement scheme industry.
Diversified investments company, FEP Holdings Ltd has recorded an 87 percent reduction in consolidated loss before tax for the financial year ending December 2016, moving from Ksh866 million in 2015 to Ksh108 million in 2016.
The company announced a profit after tax of Ksh106 million for 2016 compared to a loss after tax of Ksh905 million in 2015 due to a favourable tax position.
Speaking when he released the financial results, Maurice Korir, the FEP Holdings Chief Executive Officer said the company’s performance was buoyed by prudent management of operating costs and strong results from its real estate and microlending units.
“We have had improved business efficiency across the board owing to operational restructuring and better internal controls after the installation of a Sage Evolution Enterprise Resource Planning (ERP) system. Our operating expenses have reduced by 16 percent,” said Mr Korir.
The Group’s gross margin excluding interest on short-term deposits improved from 26 percent in 2015 to 34 percent in 2016. Since FEP Holdings embarked on a turnaround programme in the last quarter of 2014, the company has been cutting back on administrative costs by reducing the number of regional offices and adopting technological innovations across the business units.
Fountain Credit Services Limited (FCSL), a microfinance subsidiary of FEP Holdings has introduced Instaloan, a mobile lending platform that helps disburse loans faster and more cost effectively.
“We introduced Instaloan after acquiring a robust IT system dubbed IMAB that has made it easier to access data necessary for the disbursement of loans at the click of a button. This has helped us reduce our physical branch presence and the attendant costs that come with it”, said Mr Korir.
Improved sales for the Group’s real estate division, Kisima Real Estate, also shored up FEP Holdings Performance. The FEP Holdings subsidiary has grown by over 400% recording Ksh106 million in sales in 2016 as compared to Ksh 21 million in 2015.
“This has largely been through progress in processing title deeds and improved customer relations through one-on-one engagement forums,” revealed Mr Korir.
The Group however registered a 24 per cent dip in revenues as some of the strategic business units did not realize the projected performance targets. “Some project under Fountain Technologies Ltd (FTL) are still ongoing and there is over Ksh1 billion which we will invoice across 2017 and 2018,” added the CEO.
Last year, FTL secured a tender to implement a Ksh 1Bn energy infrastructure project for Rural Electrification Authority amongst other projects.
“For us to post better results in 2017, we need to recapitalize some of our subsidiaries as well as the holding company. We had a rights issue which was undersubscribed, having raised Ksh120 million against a target of Ksh2.6 billion,” revealed Mr Korir.
The company has already identified a strategic investor for Fountain Technologies and will appoint an advisory firm to raise external capital for the holding company.
Digitization of payments has helped farmers in Kenya boost their income and combat poverty, a new case study by UN based Better Than Cash Alliance has shown. The study which focused on One Acre Fund an agricultural NGO, revealed that digitization had helped boost transparency and efficiency in the payment system. As a result, this drove economic opportunity and financial inclusion for thousand of smallholder farmers and their families.
One Acre Fund, digitized its loan repayment enabling farmers to easily make loan repayments via mobile money instead of cash. This helped reduce the uncertainty, inefficiency, insecurity and high costs previously caused by cash transactions.
One Acre Fund can now reach more farmers with greater reliability, and staff can spend almost half as much time collecting payments in cash. Inn addition they can use the extra time to help farmers increase their incomes through training and educational programs.
According to the study, One Acre Fund’s package of services, including training and inputs like seed and fertilizer, the average farmer participating in the program earned nearly 50 percent more than peer farmers who do not participate.
“We’re excited to be working at the forefront of this technology in the smallholder agriculture lending sector. In our experience, farmers were empowered to thrive in these communities. Clients receive immediate confirmation of payments as they happen, enabling them to better manage their businesses and family finances,” said Mike Warmington, the Director of Microfinance Partnerships at One Acre Fund.
“For companies and nonprofit organizations who want to work in rural Africa, this success story is a must-read,” said Oswell Kahonde, Africa Regional Lead at the Better Than Cash Alliance.
“Digital payments are essential to building sustainable business models and creating long-term impact. By enabling smallholder farmers to make and receive payments digitally, we are creating transparency and accountability which translates to numerous benefits and empowers people to take control of their finances.”
Key Highlights from the study:
- Increased participant satisfaction due to transparency and convenience.
- Eighty-five percent decreased instances of repayment fraud.
- Reduced processing time for each repayment from 12-16 days to 2-4 days; farmers now know immediately when their payment is received, eliminating the worry about whether it arrived.
- Eighty percent decrease in repayment processing costs.
- Forty-six percent of time reduced for staff working on collections, allowing for more time helping farmers improve agricultural practices.
- Women farmers benefited especially, feeling safer about payment deliveries.
Click here to download the case study http://APO.af/v5Wxdm
Equity Bank Rated the Most Socially Devoted Financial Brand in Kenya
Equity Bank has been recognized as the world’s 5th most socially devoted financial brand and the best in Kenya. This is according to the latest Q4 2016 rankings released by Socialbakers, the world’s leading social media analytics provider.
The report indicates that Equity Bank got a 77% total response rate on Twitter and a 98% total response rate on Facebook. It also points out that it had an accumulated response time of 215 minutes across Facebook and Twitter platforms.
Commenting on the award, Equity Group CEO, Dr. James Mwangi said that the Bank is greatly honoured to receive such recognition as it reinforces its efforts in transforming the customers’ journey on how they access banking services. He re-emphasized that socially devoted brands get 3.5 times more interactions than their less responsive counterparts.
“Social Media has grown from being a mere digital channel for “socializing” to one of the most powerful digital marketing tools for brands. It has also proven to be a very cost-effective way of communicating to a global audience,” said Dr. Mwangi.
”Social Media networks have the potential of empowering especially the youth, by enhancing their access to information on financial services and products. We have seen an increase in our social media engagement where more and more customers are realizing that they can effectively communicate with us through social media and expect timely feedback, he added.
Late last year, Equity Bank launched its Eazzy Banking suite of digital products, solutions aimed at offering customers easy and comprehensive banking experiences. The suite of products consists of 7 different services that allow the customers to pay for bills, goods and services; apply for instant loans; manage chama/group account transactions; corporates to manage cash and liquidity and so much more.
Eazzy Banking App is one of the only few apps in the world and certainly the only one in Kenya with integration to WhatsApp, Facebook and Twitter having the ability to send money using these platforms. This was informed by the fact that more people are using Facebook, Twitter, You Tube and Instagram to research and buy products and services.
The Bank continues to invest heavily in social and digital platforms in a bid to reach out to its targeted audience and meet business objectives in different locations given its presence in six African countries and a wide network of branches. The Bank understands the shift in customer care and is of the belief that the most responsive and dynamic audiences are on social media.
In 2015, Equity Bank was recognized when it won Social Media Awards (SOMA) trophy for Financial Services under the Social Corporate Category. The SOMA Awards are used as a platform to celebrate individuals and corporate institutions which have contributed towards improvement of lives through good use of various social media platforms.
Equity Group’s mobile money platform, Equitel has registered increase in value and number of mobile money transactions, the latest data from the Communications Authority of Kenya (CA) indicates.
According to the stats, Equitel processed transactions worth Ksh251.6 Billion in the second quarter of the 2016-2017 fiscal year, a 15 per cent increase from Ksh219.6 billion that was transacted in the quarter before.
Overall, the mobile money platform increased its market share in the value of mobile money transactions to 22 per cent from 20 per cent over the same time.
The firm additionally increased the number of transactions processed through the platform to 89.6 million up from 63.9 million which is a 40 per cent growth. Equitel’s share in the number of transactions now stands at 20 per cent up from 16 per cent recorded in the previous quarter.
Other gains for Equitel include the increase in loans disbursed. Earlier in the year Equity Bank while releasing the 2016 full year results, announced that the mobile money platform had advanced loans worth Ksh 38.5 billion up from Ksh5.4 billion in 2015. This represents a 618 per cent increase.
Equitel was launched in July 2015 and is an integral part of Equity Bank’s digitization strategy which the group has touted as a game changer in the finance industry.
Consumer goods manufacturer, Bidco Africa has appointed Chris Diaz as Group Sales and Marketing Director. The appointment comes at a time when Bidco is expected to launch several new products in Kenya.
Prior to his appointment, Diaz was the Marketing Director at Kenya Airways and is also a director at Brand Kenya and Brand Africa.
“Chris is a brilliant and experienced marketer with the capacity to bring the kind of strategic leadership we need to realize our growth ambitions especially as we venture into new categories,” Bidco Africa CEO Vimal Shah said.
Diaz will lead the sales and marketing functions for the entire group including corporate communication, distribution and customer strategies across the consumer markets.
“I am delighted to join Bidco Africa at such an exciting time. I look forward to working with the team to deliver the company’s goals particularly the entry into new product lines,” said Diaz.
Bidco Africa houses multiple manufacturing units including a beverage plant which is expected to begin production later this year. The manufacturer exports products to over 16 African countries.
Financial service provider, Unaitas Sacco has recorded a Ksh 267.8 million profit for the 2016 financial year, buoyed by cautious approach to lending and provisioning of loan losses in light of the tough lending environment.
The Sacco also announced an increase in its asset base standing at Ksh10.7 billion in assets as at the end of 2016.
On the other hand, member’s deposits increased by 20 per cent to stand at Ksh6.46 billion from Ksh5.38 billion over the same period.
During the same year, the lender invested heavily on a robust ICT infrastructure that is likely to propel it to profits, as it is envisage increasing business efficiency.
The Sacco said, in a statement that the strategic approach to improve the quality of the loan book resulted in slower disbursement of credit to members as well as providing for higher levels of provisioning, which was done to reflect the state of the general economy that was challenging in 2016.
“As a responsible and sustainable business we decided to improve the quality of our loan book and this had an impact on our profitability. Going forward we intend to maintain this strategy that focuses on loan book quality, increasing non-funded income and cost management,” said Unaitas Chairman Joseph Kabugu
Kabugu added that Unaitas plans to marshal more deposits and grow its membership through branch expansion and marketing campaigns that will attract a wider and diverse membership base.
Unaitas plans to open at least 7 new branches across the country and the management has already identified Meru, Kisii, Kisumu, Eldoret and Embu which are expected to boost membership and deposit mobilization.
The Board has additionally decided to roll out agency banking as a means of further increasing accessibility of financial services and convenience to our members.
Unaitas will additionally carry out marketing initiatives such as the popular “Top Chama Show” in 2017, which is meant to attract a more diverse and younger membership base.
Kabugu noted that these initiatives will support Unaitas’ performance in 2017, a year that is expected to be a challenging due to uncertainties in the economic environment.
The Board has recommended a dividend of Ksh192 million for the year which represents 7 per cent of investment shares.