Bitcoin Loses 50%, Govt to Guarantee Mobile Borrowers - Money Weekly 

The past few days have been very tumultuous for the financial sector, and particularly the crypto markets, where over $700 billion (Ksh79.5 trillion) in value has been wiped off in what could be the beginning of another crypto winter. 

Below, we take a look at this and other local money news that could affect your wallet as you push through the final days of January. 

Private Hospitals to Deny NHIF Patients Service From Monday

Private hospitals will from Monday, January 30, deny service to National Health Insurance Fund (NHIF) members, the Kenya Association of Private Hospitals has said. 

The decision, the association says, was in protest against the poor handling of private hospital claims by the national insurer. 

It follows the expiry of the extension of terms of agreement between NHIF and hospitals (reviewed every three years), in January 2021 with the fund resolving to review downwards the amount it pays for claims by private hospitals. 

For instance, NHIF will now be paying Ksh6,500 per dialysis session down from Ksh9,500 previously. With a dialysis patient requiring at least two sessions a week, the Ksh,6000 difference per patient per week is a cost private hospitals are not willing to bear - the association says. 

Kenyatta National Teaching and Referral Hospital tops the list of hospitals most paid by NHIF with Ksh1.88 billion in the 2019/2020 financial year. 

It is followed by are Moi Teaching and Referral Hospital (Ksh713 million), Tenwek Hospital Bomet (Ksh438 million), Aga Khan Hospital Nairobi Ksh429 million, Consolata Hospital Nyeri (Ksh351 million), AIC Kijabe Medical Centre (Ksh349 million), Nairobi Hospital (Ksh339 million), S.t. Peter’s Orthopaedics and Surgery Specialty Centre (Ksh282 million), MP Shah Hospital Nairobi (Ksh277 Million), and Nairobi West Hospital (Ksh260 million).  

Claims lodged by NHIF-contracted facilities have risen from Ksh19.7 billion in the 2015/2016 financial year to Ksh54.6 billion the 2020/2021 financial year, Health CS Mutahi Kagwe revealed while accusing rogue hospitals of draining NHIF through fraudulent claims. 

NHIF has 10.13 million principal members out of which only just about half or 5.03 million are active members as of 2021. 

The informal sector accounts for 1.78 million members with only 35.5% active while the formal sector has 3.25 million members with 64.6% active. 

Pain For Crypto Adopters As Bitcoin Tumbles By 50%

Owners of Bitcoin and other cryptocurrencies are reeling in pain following a crash in the crypto markets, which saw some investors lose up to 50% of their holdings.

Earlier this week, the price of Bitcoin (BTC), the most popular cryptocurrency, fell to $32,970 (Ksh3.745 million), the lowest price for the digital currency since July last year.

It is also more than a 50% fall from the all-time high of $69,000 (Ksh7.383 million) the digital currency hit in November last year. The price of Bitcoin has since climbed to $36,575 (Ksh4.155 million) at the time of writing this.

The price of Ethereum (ETH) also fell to $2,463 (Ksh279,796), its lowest since July. In November last year, the price of Ethereum hit an all-time high of $$4,891 (Ksh555,617).

Despite the crypto market crash, crypto investors are still hopeful, since this is not the first time digital currencies have experienced such a crash, only to rebound and rally to all-time highs.

After hitting a high of $230 (Ksh26,128) in 2013 from just $13 (ksh1,476) in January the same year, the price of Bitcoin tumbled to just $68 (Ksh7,724) within a few days. 

Similarly, the price of Bitcoin grew from just $900 (Ksh102,240) in January 2017 to $19,783 (Ksh2,247,348), before tumbling down to $6,200 (Ksh704,320) in Feb 2018 and just $3,300 (Ksh374,880) in December 2018.

Kenya is currently ranked at position 5 in cryptocurrency adoption.

Government To Act As Guarantor For Mobile Borrowers

Imagine borrowing a mobile loan with the government as your guarantor. If you are unable to repay the loan, the government steps in and pays for you. Does this sound farfetched?

Well, the Treasury has introduced a state-backed credit guarantee scheme that will allow small traders to access mobile loans with the state acting as the guarantor. In the event the borrower defaults on the loan, the state will pay part of the defaulted loan amount.

This new scheme comes as the government seeks to boost credit access to small and mid-sized traders, who provide about 75% of jobs in the country and account for over 80% of all businesses.

The first phase of the program started in December 2020, but it was only limited to seven commercial banks. However, in a country where the majority of small traders are unbanked, only a handful of traders took advantage of the state-backed loans.

The state has now moved to make the state-backed loans more accessible to small traders by bringing digital lenders on board. Digital lenders have made credit easily accessible to the millions of Kenyans who do not have bank accounts.

Under the program, the Treasury will pay up to 25% of the loan amount in the event of a default. The scheme allows a single borrower to access loans not exceeding Ksh5 million, with a 36-month repayment period.

The total budget allocated to the state-backed loan scheme this year stands at Ksh4 billion, with plans to push this up to Ksh10 billion over the next few years.

Nairobi Traders Decry New County Levies

Nairobi traders are up in arms against a set of new levies proposed by the county government under the Nairobi County Finance Bill 2021, saying that the levies will make it extremely expensive to do business within the county.

Sharing their views during a public participation meeting on the bill, the traders argued that some of the levies are tantamount to double taxation.

Some of the changes introduced in the bill include increased offloading fees, higher stall charges and increased cess fees. For instance, the new bill seeks to increase stall charges at the Westlands market from the current Ksh500 to Ksh2,000.

Already, traders pay up to three different cess fees – one for transporting fresh produce, one for offloading the produce, and yet another one for selling within the markets. The traders argue that increasing the fees when they are already paying multiple times will end up pushing them out of business.

The traders also argued that despite dutifully paying the current levies, they still have to deal with challenges like dirty markets and uncollected garbage, lack of water, lack of public restrooms, and insecurity.

Should the bill be passed, the new levies will see the Nairobi County Government collect an additional Ksh19.8 billion in annual own-source revenue.

Private Lending Grows By 8.6%

According to recently released data from the Central Bank of Kenya, the rate of borrowing by individuals and private companies grew by 8.6% in the year to December 2021. In comparison, the growth rate stood at 7.8% in October.

The 8.6% growth rate is the highest since February 2021, which is an indicator of economic recovery amid increased business activity in different sectors. However, the growth rate still remains below the 12% - 15% growth rate targeted by CBK.

Despite the positive numbers, the growth of private credit might experience a slump in the first half of this year due to pre-election jitters. Research by Renaissance Capital shows that the uncertainty associated with the polls will lead to decreased lending by banks in the first half of the year.

Kenyans Transact Ksh17 Billion Daily On Mobile Channels

Data from the Central Bank of Kenya (CBK) shows that Kenyans transacted an average of Ksh17 billion through mobile money channels every day between January and November 2021. 

This is a 24% increase from the Ksh13.7 billion worth of mobile money transactions made daily in a similar period in 2020.

This increase is an indicator of Kenyans’ growing preference of mobile money over cash transactions. In the 11-month period between January and November last year, Kenyans made mobile money transactions totaling to Ksh5.7 trillion, or about Ksh519.6 billion every month. In October last year, mobile money transactions hit a record Ksh618.1 billion.

Other Money News

• Even after President Uhuru Kenyatta issued a directive for the cash reporting threshold to be increased from the current Ksh1 million, CBK is yet to implement the directive. This is because the directive runs contrary to the anti-money laundering and anti-terrorist financing (AML/ATF) rules set by the global Financial Action Task Force (FATF), which require cash transactions over $10,000 to be reported.
• The State Department of Housing has announced that all civil servants living in government-owned housing will pay 10% more rent starting from April 1st, 2022. Currently, the government owns a total of 56,892 houses across the 47 counties, which bring in a monthly rental income Ksh127,048,750 million or just over Ksh1.5 billion annually when fully occupied.
• The International Monetary Fund (IMF) has warned that the cost of living in the country will continue rising this year, majorly due to a weakening shilling, supply chain disruptions due to new Covid-19 variants, poor agricultural performance, and rising fuel and gas prices.
• The CBK has maintained the base lending rate at 7%. This is the 12th time in a row that the benchmark lending rate has remained unchanged.