WhatsApp Banking Launches as Push to Make NHIF Compulsory Fails - Money Weekly

In a bid to curb the spread of the deadly Delta variant, President Uhuru Kenyatta yesterday extended existing Covid-19 containment measures for another 60 days, a move that will put further strain on Kenyans, who were hoping that the curfew – among other restrictions – would be lifted.

As we brace for another 60 days of the curfew and limitations on gatherings, let’s get up to date with the biggest money news from the last 7 days.

Dawn of Risk-Based Lending 

The Equity Bank Group, on Tuesday announced that it was close to adopting risk-based lending following talks with the Central Bank of Kenya (CBK).

CEO James Mwangi said that the talks were nearing conclusion and expected that the CBK would allow the bank to start pricing loans based on the borrower’s risk profile.

This, he said, would give riskier borrowers better access to credit and boost private sector credit growth, which has never surpassed 10%.

Risk based lending is an approach that allows lenders to offer a tiered pricing structure based upon the borrower’s risk, with riskier borrowers paying higher interest rates. 

This makes it possible for banks to lend to people with less than perfect credit histories, who would have otherwise been snubbed by formal lenders and forced to seek credit from informal lenders who typically charge higher rates.

This comes with a backdrop of warnings from investment experts against the adoption of this loan-pricing model over fears that it may provide loopholes for the exploitation of borrowers.

''Although charging borrowers based on their credit history is democratic, stronger modalities must be put in place to ensure fairness,'' Investment Banking firm EFG Hermes experts said.

Since 2019, the CBK and the Kenya Bankers Association (KBA) have been fronting this model with a report by the International Monetary Fund (IMF) expressing similar fears as EFG halting the process. 

''It is hard to regulate this kind of loan pricing model,'' IMF said while opposing the risk-based loan pricing model over the likelihood of fueling exploitation.  

Meanwhile, the I&M Bank has received $50 million (Ksh5.5 billion) from the International Finance Corporation (IFC) and Dutch-based FMO. The funds will help the bank boost its capital position and provide it with more money to lend to SMEs in the trade, manufacturing, and construction sectors. Access to more credit will help more SMEs weather the ongoing Covid-19 crisis.

The two financial institutions will also provide I&M Bank with training on green financing, which will allow the lender to offer better support to sustainable investments, such as climate-smart agriculture and renewable energy.

Absa Kenya Customers Will Now Be Able To Transact On WhatsApp

Absa Bank has launched a new innovation that will make it possible for customers to access their accounts and make transactions through the WhatsApp mobile app.

Dubbed Abby, this new innovation is a conversational bot that is powered by artificial intelligence. By interacting with the bot on WhatsApp, Absa Kenya customers will be able to check their account balances, transfer money to other accounts, transfer money from their accounts to mobile wallets, and make bill payments.

This new feature is amazingly easy to use. To get started, all a customer needs to do is save Abby’s number (0710 130 000) on their phone, and start a chat with Abby on WhatsApp by texting the word “Hello.” 

Abby will then take over and guide you on how to register for WhatsApp banking and start transacting.

The Housing Finance Group was the first lender to introduce WhatsApp banking in the Kenyan market in 2019 dubbed HF Whizz where similarly, users only needed to save the number +254719597315, open a chat and type SETUP. From WhatsApp, HF customers can enjoy money transfer and deposits, bill payments, loans and account services, all on WhatsApp.

NSE Bosses Other African Bourses

The Nairobi Stock Exchange (NSE) All-Share Index gained 18.7% year-to-date to hit 180.5 points, putting it ahead of its Africa peers, including the Johannesburg Stock Exchange (JSE), as well as the bourses in Egypt, Morocco, Tunisia, Nigeria, Uganda, Tanzania, and Rwanda.

This impressive performance is directly attributed to the exceptional performance of large blue-chip stocks, particularly Safaricom, Equity Bank, KCB, and EABL, which account for close to 80% of the bourse’s market cap. Year-to-date, the four stocks saw gains of between 16% and 37%.

A rally by Safaricom and bank stocks on Tuesday the 17th of August saw the value of the NSE grow by Ksh70.24 billion, pushing the market cap of the bourse to Ksh2.921 trillion – an all-time high in its history.

Kenya’s External Debt Hits All-Time High

The first six months of 2021 saw Kenya’s external debt hit $37.23 billion (Ksh4.1 trillion), up from $33.01 billion (3.6 trillion) at the end of June last year. This pushed the country’s total public debt to Ksh7.7 trillion, a 15% increase from the Ksh6.7 trillion owed at the end of June last year.

The increase is a result of the government’s increasing expenditure, coupled with dwindling revenue. 

In the first six months of 2021, the IMF issued Kenya with a $307.5 million (Ksh33.7 billion) loan for budgetary support, while the government issued a fourth Eurobond in June, which netted $1 billion (Ksh109.5 billion).

Kenya also received a $750 million (82.1 billion) loan in June from the World Bank, aimed at helping the country boost its recovery from the Covid-19 crisis.

Ngong Emerges Top In Nairobi Land Appreciation

If you are looking to invest in land, Ngong is one of the towns you might want to look at, due to its attractive rate of land appreciation. Over the past one year, the price of land in Ngong increased by close to 20%.

This increase in the value of land in the town has been attributed to better accessibility due to the completion of the Southern Bypass, the reconstruction of Ngong Road, and the tarmacking of the Ngong-Suswa Road, as well as the increasing subdivision of land by a new generation who inherited huge tracts of land.

The average price of an acre of land in Ngong today is Ksh25.4 million, up from Ksh21.5 million at a similar time last year. This translates to an 18% increase in value, significantly higher than the average 2.3% one-year increase in land prices in Nairobi’s satellite towns.

Other Satellite towns recording high rates of land value appreciation are Ongata Rongai, with an 11.8% increase, and Kiserian, with a 9.3% increase.

Banks Register Increasing Profits Despite Covid

Equity Bank posted a pre-tax profit of Ksh23.8 billion in the first half of 2021, which is close to double the Ksh12.0 billion pre-tax profit the financial institution posted in a similar period last year.

The impressive growth in profits came both from interest and non-interest income, with interest income bringing in Ksh42.7 billion in revenue in the first six months of the year, up from Ksh32.8 billion in the first six months of 2020, a 30% increase. 

In the first half of 2021, the bank’s non-interest revenue increased to Ksh20.8 billion, a 44% increase from the Ksh14.4 billion posted in the first half of 2020.

Meanwhile, Co-operative Bank posted a Ksh7.4 billion net profit in the first half of 2021, a 2.3% increase from the Ksh7.1 billion net profit posted in the first half of last year.

Co-op Bank’s increase in profit has been attributed to an 18% increase in interest income from Ksh18.8 billion, with loan uptake in the bank increasing by 11%. 

The institution’s non-interest income in the first half of the year hit Ksh10.3 billion, a 24% increase. 

However, the high income was offset by an increase in the bank’s loan loss provision, which expanded overall operating expenses.

M-Pesa to Remain In Safaricom, Legislators Decide

The National Assembly shot down a bill that aimed to compel Safaricom, Airtel and Telkom Kenya to break their mobile money units from their telecommunications businesses.

Sponsored by Gem MP Elisha Odhiambo, the Kenya Information and Communications (Amendment) Bill sought to control the powers of Safaricom, which is the dominant player in mobile data, voice, and mobile money.

However, only 2 MPs showed interest in debating the bill, putting huge doubts to the possibility of the Bill being passed into law.

Push to Make NHIF Compulsory Fails

In a proposed law, the government wanted National Hospital Insurance Fund (NHIF) contributions to be made compulsory for all Kenyans over the age of 18. 

However, MPs have rejected the Bill, suggesting instead that the bills for the 5.1 million poor households in the country should be footed by the national and county governments. 

The bill also sought to compel employers to match workers’ monthly contributions, a proposal that was also rejected by parliament.  

The rejection of the bill means that NHIF membership will remain voluntary for informal workers, with the minimum monthly contribution at Ksh500.

This comes at a time when the fund is reporting that over half of members have stopped making their contributions after receiving treatment with the help of the fund. 

The increase in default rates is a direct indication of the struggle Kenyan households are undergoing due to the Covid-19 crisis.