No More Harassment From Digital Lenders - Money Weekly

It has been an eventful week, with the Supreme Court ruling confirming William Ruto as the valid President Elect sending a ripple in Kenya’s business world.

Global economic projections are looking good with the stock market recording the highest single-day jump over the last 4 years.

At the same time, the regulation of the digital lending industry is finally here with us and we’ll look at what this means. For this and more, let us take a recap of the business news that made the headlines over the last week and what this could mean for your pocket.

Gig Work Blossoms in Kenya 

A report by Visa (SSA) shows that the gig economy has been thriving on a broader scale in Kenya over the last 3 years.

According to the report, Kenya ranks 3rd overall in Africa in terms of the total volume of e-commerce transactions in 2019 and 2020. South Africa and Nigeria came first and second – in that order.

The report further pointed out that the most crucial components of the digital gig economy were access to digital payment channels, digital infrastructure, and financial services.

A gig economy is comprised of short-term contracts and freelance work as opposed to permanent jobs. This has enabled Kenyans to increase their income and sustain multiple streams of income.

Uber Matatu?

Users of the taxi-hailing app Uber Kenya are set for a new experience as the company introduces a new feature  - ChapChap Share, that can be likened to the matatu experience.

Users will now enjoy a 25% discount if they choose to share the taxi with other users heading in the same direction. According to Uber Kenya, this new feature is meant to increase the overall income for drivers.

ChapChap Share will be available during the busiest commuting periods (5 am to 6 pm) in the Kenyan capital.

It will act as a kind of carpooling service with the management stating that the slight detour experienced when dropping off passengers at their respective destinations will be covered by the discount.

The move comes at a time when the tax-hailing platform is looking to increase its demand following a slump that was triggered by the rapid increase in the cost of living.

New Economic Outlook For Kenya

Following the peaceful conclusion of the recent general election and the Supreme Court ruling that followed, global economists have adjusted their projections for Kenya.

The consensus growth outlook from a group of the world’s leading banks and consultancies predicts a 5.5% expansion of economic activities in Kenya by the end of 2022.

If accurate, this would be the first time the economy would grow by more than 5% during an election year since the birth of multi-party democracy.

During the 2017 election period, Kenya’s economic growth crawled to 3.82%, from 4.21% a year before.

Notably, the new projection falls short of the 7.5% that was quoted last year, however, the difference has been said to be a result of the rising cost of living and supply chain crisis, lower than average rainfall, and the weakening shilling.

Stock Market Records Highest Single-day Jump 

On September 6, 2022, Kenya’s stock market gained Ksh102.6 billion in terms of investor wealth, making it the largest single-day jump in 4 years.

The fact that this came a day after the Supreme Court’s ruling on the election petition is not a coincidence, as the peaceful nature of the entire process greatly boosted investor confidence.

This could explain why the last time such a huge single-day gain was in March 2018, just after President Uhuru Kenyatta and the former Prime Minister made their historic handshake.

The gains recorded in the market this week were largely characterised by local investors who have been increasing their stake in large blue chip companies.

Safaricom was the biggest gainer during the latest surge in investor wealth, which saw it add Ksh40 billion to its valuation.

Maize Crisis Looming

On September 7, 2022, it was alleged that the Tanzanian government froze the issuance of new maize export permits for Kenyan traders which they have dismissed urging Kenyan traders to follow rules.

Over the last week, local millers have come out and stated that they can no longer bring in the in-demand product from the neighbouring country

This comes when Kenya is facing an acute shortage of the product, with the rainfall failure experienced over the last season only compounding the issue.

Over the last two years, Tanzania has grown to become one of the major suppliers of maize to Kenya. According to data from the East African Grain Council, maize import from Tanzania stood at 469,474 tonnes in 2021, compared to just 98,000 tonnes in 2022.

The price of maize flour peaked at historic heights over the last couple of months, going as high as Ksh237 for a 2kg packet.

Kenya’s Dollar Crisis

Kenya's foreign exchange reserves dropped by $365 million (Ksh44 billion) in August 2022 alone.

This was a result of the repayment of debt to bilateral and commercial lenders, pushing Kenya closer and closer to the edge.

The reserves had dropped below the threshold of 4.5 months of import cover that is recommended by the East African Community, highlighting the Balance of Payments challenges Kenya is facing.

There has also been a spike in the demand for the US dollar by local importers and manufacturers, which has seen the shilling’s value drop to historic levels.

Being a net importer of intermediate goods and raw materials for industrial use, Kenyans are usually the ones who end up bearing the burden of an increase in the cost of basic goods.

A Flood of Fish From China

Kenyans consumed Chinese fish worth Ksh 2 billion by the end of 2021, amidst muffled grunts from local suppliers.

This follows an increase in the export quantity from China which went from 13,514 tonnes in 2020, to 14, 847 tonnes in 2021, representing a 10% year-on-year increase in the quantity of fish exports to Kenya.

Data from the State Department of Fisheries shows that China’s market share in the fish industry in Kenya grew from 70% in 2020, to 83% a year later.

Other market sources for fish during the period were Norway (Ksh96 million), Tanzania (Ksh92 million), India (Ksh78 million), and Uganda (Ksh57 million).

In an interview with the Business Daily, a local player in the fish industry stated that the consignments from China were hard, near impossible, to compete with in terms of pricing.

For example, a local fish that retails at Ksh250 is up against a similar-sized one from China that retails locally at Ksh150.

No More Harassment From Digital Lenders

Digital loans industry firms have just 2 weeks left in which to apply for new licenses that will usher in a new era for Kenyans.

For example, digital lenders will no longer have the right to harass or call up a borrower’s friend or relatives when they default on a loan.

Also, hidden charges will be a thing of the past as mobile money lenders will now be expected to disclose all charges for their loans ie interest, late payment, and rollover fees before disbursing the money to a client.

The new consumer protection rules were introduced under the Digital Credit Providers Regulations, 2021.

On September 17, 2022, the Central Bank of Kenya (CBK) is expected to publish a fresh list of all the newly compliant digital lenders in the Kenyan market, with all non-compliant firms to be shut down.

KCB Goes Slow on Defaulters

KCB has taken a new approach when it comes to loan defaults, signalling a slowdown in property seizure and auctions.

KCB’s Chief Executive – Paul Russo, explained that in its new approach, the bank would be looking to aid defaulting firms by restructuring their debt and helping them raise fresh funds in order to turn things around.

According to the bank's records, companies involved in road construction, hospitality, and the manufacturing sector are the biggest defaulters.

KCB maintained that it is now looking into ways of helping these businesses turn things around so that they can meet their debt obligations, as opposed to seizing their assets and auctioning them off.

The bank's share of non-performing loans was recorded at 21.5% of its gross loans on June 2022, well beyond the banking industry’s average of 14.73%.

Kenya's Tainted Roses Raise Alarm 

Over the last few years, a surge in the cases involving chemical residue found in Kenya’s roses and other horticultural export crops has led to stricter checks in destination countries.

For example, the European Union has lowered the requirements on chemical residues to a bare minimum. An increase in the number of intercepted crops that are deemed to have too much chemical residue means the country of origin runs a risk of being banned from the market altogether. 

The announcement by Europe that it will begin testing flowers for high levels of chemicals is a first for Kenya's horticulture sector, and it applies specifically to roses.

Kenya Health Inspectorate Service (Kephis) has expressed concerns and has asked the appropriate organizations to increase farmer awareness.

The agency further stated that farmers should be trained on how to handle export crops, how to use the proper chemicals, and how long it should be before the product is ready for harvest after spraying.

In August 2022, Japan raised an alarm about Kenyan coffee, citing high levels of chemical Chlorpyrifos- an active ingredient found in insecticides used in coffee plants.

Kenya’s Exploding Mobile Money Sector

According to the latest data published by the Central Bank of Kenya (CBK), One in every three shillings spent by consumers, businesses, and the government,  in the first half of 2022 went through mobile money.

Mobile money agents handled Ksh 3.8 trillion during this period, which can be equated to a third of Kenya’s GDP in 2021 which was recorded at Ksh12 trillion.

The number of mobile money wallets surpassed 70 million in May 2022, going up to 70.3 million at the end of the first half of the year.

The number of mobile agents in June 2022 was 304,693, and it has been increasing, indicating the service's importance in Kenya's economy.

According to the Fintech Survey 2021, mobile money has played a significant role in the country's financial inclusion, which stands at 84%, the highest in Africa.