Fin4Ag14

All this week, Nairobi plays host to a conference called Fin4Aag14 which has the theme of Revolutionising Finance for Agri-Value Chains.

It started with plug & play session in which 18 companies got to introduce their platforms linking agriculture to finance across Africa. This is the second edition of the session that was introduced at the conference in Kigali last year and proved to be quite popular.

The 18 companies were: 

• Tangaza Pesa: automates the value chain by doing KYC on farmers with bio data, crops produced,  and GPS  to build credit records
• Ensibuuko (Uganda) helps (via web & mobile) to manage rural SACCO’s that can reach many of the rural unbanked farmers 
• FarmDrive (University of Nairobi) enables small farmers to keep basic record by mobile phone and build a credit score 
• Farmers Record Management System (FARMIS) aggregates farmers with financial institutions  to access finance and ensure loans are properly utilized 
• Zoona's eVoucher platform: enables agri-business supply chain payments and insurance 
• Credit Information Sharing: enables information sharing by credit bureaus for lenders to make decisions
• Umati Capital: paperless solution that aims to shorten dairy farmer  payment periods from 6 weeks to 24 hours
• Agrilife - enables farmers to access markets inputs, savings, and asset finance 
• Musoni System: a core banking for SACCO’s and micro-banks, loans, and savings that can also integrate with m-pesa and tablet apps 
• Farmforce (Sygenta) enables traceability of farm produce for quality and for farmers to access small loans 
• e-Krishok: Online & mobile infer for Bangladesh farmers to access information, traders and finance 
• Creditinfo’s Credit Bureau Solution - enables credit bureaus can collect info on farmers so they can access loans without need for collateral 
• Craft Silicon have a platform can link to MFI’s, bank, SACCO’s (Elma?)
• aWhere Platform: with over 1 billion data points collected, enable farmers to be aware of field risks to make smarter decisions. this includes weather data for all of Africa since 1999 and others they pull from mobile services
• AgroCentral - uses ICT to buy produce from farmers
• RiMFin (Ghana): enables rural famers to receive mobile payments and save them in their phones 
• finFinancials (Fintech) core banking platform that can integrate with others for digital or mobile payments

They will be there all week presenting their platforms and engaging the attendees who are from across Africa, Caribbean and Asia and who include development specialists, financiers, policy makers and top bankers who hope to get youth interested in agriculture.

There was a brief session on warehousing that detailed both the challenges and the opportunities for warehousing. Commodity warehousing types include private, public and community. Examples were cited from Tanzania (community food stored in individual houses but linked to MFI’s ), Ivory Coast (large presence in Cocoa Rubber Cashew sectors), Madagascar (communities totaling 80,000 rice farmers in villages part guaranteed by DFI’s cover 2% of the national production but provide price stability), and Nigeria (massive 1.3 million ton silo capacity against  large formal sector demand of 1.9M tons), Burkina Faso and Uganda (2 successful warehouse companies). 

Challenges facing warehousing include high costs (leaving some empty of commodities) fraud, long value chains, and contract defaults (by both small farmers and larger organizations like WFP).

Fin4Ag14 is organized by the Technical Center for Agricultural and Rural Cooperation (CTA),  Central Bank of Kenya and African Rural and the Agricultural Credit Association (AFRACA), and is supported by the FAO, the Rockefeller Foundation and Afreximbank. 

1% Equals 20% and Other Bank Tales

The Central Bank of Kenya's Monetary Policy Committee has launched a KBRR a.k.a. the Kenya Bank Reference Rate and set it at 9.13%. All commercial banks and mortgage institutions are expected to price all their loan products around this. e.g Lend finance to customers at a rate of KBRR (+) or (-) "X" e.g. a loan rate of 15% will be known as KBRR +5.87%. This first rate of the KBRR set at 9.13%, will run from July 2014 to January 2015. 

The KBRR will help end the confusion that customers face with all manner of loans and rates at myriad banks. Different loans are pegged on interest rates that may be flat, fixed, variable, reducing balance etc and are marketed as the same without customers knowing what these measures mean. Yet a fixed loan rate of 1% per month (which some asset finance loans are marketed as) can be equivalent to a loan of 20% that is calculated using the reducing balance method.

The next step on the cards will be for Kenyan banks to adopt an APR (an annual percentage rate calculation) that not only includes the lending rate, but also factors in bank charges like commitment fees, facility fees, and third-party costs like legal charges, mortgage insurance, as well as a standard loan repayment schedule format for all loans.

Mapping Financial Inclusion in Kenya

This week, FSD Kenya launched an interactive  tool called the FinAccess Spatial Map that mapped all the formal financial service points in Kenya.  This has been an ongoing private-public partnership, and it's notable as a previous FSD study on the numbers of 'unbanked' Kenyans became the justification for the relatively unregulated roll out of m-pesa and mobile money in the country.  

The searchable tool interprets data like financial service points (GIS locations of bank branches, mobile money agent), county borders, and local population numbers from the census - to plot some interesting metrics 

The tool tends to find that there are more financial service points in wealthier parts of the country (no surprise), and that more Kenyans live closer to a mobile money point (58% are within 3 kilometers of one), than a bank branch (21%). It can  also pick out useful trends for further research e.g. at the launch, it was mentioned that in Isiolo, 40% of the population own mobile phones, but only 20% use mobile money, while in Nyeri, 75% own phones, but an even larger number - 80% use mobile money.

Partners in the FSD mapping program included the Central Bank of Kenya, Brand Fusion, SpatialDev, and the Bill & Melinda Gates Foundation.

Kenya's Money in the Past: M-Pesa Money Real Quick

This recently published book traces M-Pesa from its origins to the impact it has had on millions of Kenyan users. It has excerpts of interviews with insiders at Vodafone/Safaricom, Kenyan regulators, politicians, entrepreneurs, bankers, and dozens of other people, for who the service has had an impact on their lives.

While mobile money did not originate in Kenya, and the design of M-Pesa was not local, Kenya is the country that, for now, has extended mobile money far deeper than any country, and the book notes developments in other countries to emulate the success and scale of M-Pesa.

M-Pesa was the accidental outcome of a pilot project, but it is ultimately the end result of the hard work, partnerships (such as with Commercial Bank of Africa and DFID, but some broken at Faulu and Equity banks), funding, and decisions of some of the people interviewed. 

It's development process was not widely understood, nor was it universally popular, especially with bankers, who (like almost everyone else) did not forsee the ernomity of what M-Pesa would become in the lives of hithero unbanked Kenyans. 

The book was completed in 2012, a few months before M-Pesa made a bigger foray into the world of banking when, Safaricom and Commercial Bank of Africa launched a SIM based bank account called M-Shwari.

Mobile & Card Payments across East Africa

A new unsecured card solution was launched by afb last week that will allows customers to instantly spread the cost of their purchase at participating shops into affordable 6 month repayments. afb have signed up 52 merchants like Baus Optical, Cambridge Opticians, Fabguru Shoes, Kitengela Glass, and local supermarkets (Tumaini, Home Depot, Homemade) and are also signing up other merchant shops where consumers will be able to apply for cards and get them approved & issued in the stores ahead of making a purchase.  afb settles the transaction amounts directly into the retailers bank account, and the the customer makes repayments via M-Pesa. afb next hope to venture into loans and insurance in Kenya.

How large is the card market? A Central Bank of Kenya reports showed that there were 9 million debit cards and 140, 000 credit cards in use in Kenya in 2012.

In terms of mobile money, CBK data showed that 21 million Kenyans moved Kshs. 141 billion ($1.65 billion) via 53 million mobile money transactions during February 2013.

CBK has also come up with new mobile money rules that target money laundering. They require that operators link different accounts opened by a user with a single ID card, flag accounts that move more than Kshs. 100,000 (~$1,175) per day or 300,000 (~$3,530) per week, have audit trails, institute systems to handle customer complaints and retain transaction data for 7 years. 

KCB and Western Union who have an account-based money transfer service (ABMT) in Kenya will extend it across East Africa this week, enabling KCB customers to receive money from Western Union directly into their accounts.

Kenya Airways has a 1.5% fee on all credit card transactions (owing to high processing bank charges).

Following a spate of fraud incidents last December, the Kenya Bankers Association (KBA) has launched an ATM safety campaign dubbed “Be Alert” or “Kaa Chonjo” which include tips such as cover the PIN with hand, and sharing PIN number with anyone (including spouses) 

KBA also  announced the shift by Kenyan banks to the new Europay, MasterCard and Visa (EMV) technology to ensure better security of cards.

90% of KenyaPower pre-paid electricity tokens are now purchased using #Mpesa - according to an Safaricom Business ad.

Diners can now pay restaurant bills via M-Pesa under a new partnership between Kopo Kopo, Eat Out and Safaricom. Restaurants accept payments at 1.5% per transaction.

 

MasterCard and Equity Bank introduced PayPass enabled debit cards in 5 African markets which will enable merchants to receive payments via low cost add-ons linked to applications on their mobile devices (such as a smart phone or tablet) 

Mastercard and I&M Bank launched a multi-currency (Dollars, Pounds, Euros) prepaid card which enables users to load up  to $10,000 and make foreign currency purchases without incurring exchange rate or other charges.

MasterCard also released a study called the MasterCard African Cities Growth Index that showed that Accra, Lusaka and Luanda offer the highest growth potential in Sub-Saharan Africa. Other ranked cities included Dar es Salaam (4), Addis Ababa (5), Nairobi (6), Kampala (7), Johannesburg  (8), Cape Town (11), Mombasa (12), Lagos (13),  and Khartoum (19).

Credit reference bureaus like CRB Africa and Metropol are expanding across East Africa.

The inaugural Mobile Money Africa Awards will be held in Johannesburg next month, to award the best mobile money app, mobile banking service, and mobile money platform for Africa, among others.  

Nation Hela launched last year has 8,000 active cards in use.

With PesaPal, Kenyans in the Diaspora can send school fees payment directly to 12,000 schools in Kenya using their credit cards (no need for money transfer service). 

Shell Kenya have a visa card promotion to encourage motorists to swipe their cards and pay for fuel The platform is powered by Equity Bank POS at all Shell stations, and station owners are not charged commissions for card sales (Shell pays all commissions).

Tangaza321 is said to be the second largest mover of mobile money behind M-Pesa. The Tangaza system uses biometric data (fingerprints) as many customers don't possess national ID cards and allows them to send money across all networks, even to people who don’t have mobile phones.

A team with the University of Nairobi’s University Students Community Organization (Uniscoo)  has developed a prepaid card for university students. Uniscoo which has 25,000 students seeks to encourage good money management among students through the use of the prepaid card powered by MasterCard.

Blogging in 2012

Top blog posts in 2012

5. Nation Hela to revolutionize revolutionize debit cards & diaspora remittances.

4. A review of the autobiography of Duncan Ndegwa, first governor of independent Kenya's Central Bank.  

3. Discover who created Safaricom's M-pesa.

2. A re-cap of Kenya's top banks in (year) 2011. 

1. The most read blog post (by a large margin) in 2012 was on Safaricom & CBA's launch of M-Shwari. 

Special thanks to @AngieNicoleOD for helping the blog move to a local domain address this year (after a long period of procrastination)

Kenya’s Money in the Past I

Duncan Ndegwa is a former head of the Kenyan Civil Service and Governor of the Central Bank. He published his autobiography Walking in Kenyatta Struggles in 2006.

It’s a tale of history of Kenya, struggle for independence, nation building versus devolution, disengaging Asians from commerce & Europeans from Government while Africanizing the civil service, reigning in unrealistic expectations of newly independent leaders etc. In it, some leaders like Odinga Oginga, Gikonyo Kiano, and Charles Njonjo don’t come out positively and there are a whole lost of personality stories that you won't believe.. There are more biographies and books - some thin on the money talk, and they will be reviewed in a slate condensed format in a continuing series.

Reigning in budgets & spending
- Ndegwa argues that the uncontrolled government spending was the disease that crippled Kenya in the 1980’s leading to paralysis in the early 1990’s (444). (Earlier), Kenyatta supported a balanced budget and gave strict instructions to permanent secretaries - if you over-spend, you will be the first to go (485)
- Britain gave Kenya a 60 million pound golden handshake at independence But 12M went to settlement schemes, 13M to pensions of expatriates, 10M to technical assistance, and the balance to the military (312)
-The coffee boom of the 1970’s enable the government to buy embassy properties in New York, Washington & London, and aircraft for East African Airways (494)
- Devaluation of the British pound in 1967 had an impact on all the East African whose currencies were pegged to the pound (478). The government also had to come up other measures forex such as discouraging luxury imports when the country reserves dwindled after the oil crisis (470)
- Some foreign companies were borrowing all their working capital in Kenya, while repatriating all their profits abroad (476)
- Ndegwa came up with a blueprint for the government in 1962 that he called the Kazi plan that emphasized labour intensive schemes (Page 240)
- He proposed that Kenya print her own currency and manufacture bullets (simple technological processes that would save foreign currency) but both projects were shot down by President Moi on advice of Njonjo (461)

Africans in Business: - The Crown Land Ordinance of 1915 deprived Africans of land ownership . in the 1960’s Africans were allowed to grow coffee under a (government) Swynnerton plan that also included issuance of free title deeds (232)
- Njenga Karume was one of the first Africans to be allowed to own a chequebook (472)
- Ndegwa chaired the commission that allowed civil servants to engage in private business and own property like any other citizen(497). He maintained that the greatest danger the civil service faced was pressure from politicians (500)

East African affairs: - Kenya sought military assistance from Uganda & Tanzania to send troops to Somalia which also refused to cease hostilities in cross-border matters (352)
- Britain offered Kenya as a second home for Jewish settlements, but people like Delamere kept Kenya from becoming a Jewish settlement ( 368)
- The Kenya Attorney General appeared determined to sabotage the East African community (401)

Eccentric Cabinet & Ministers: - Presidents should not be shown the central bank vaults - Kenyatta saw the CBK’s and shooed away his security men so they would not be tempted (460) while Uganda's Amin demanded that their vault money be put into circulation - over-riding the advice of his governor who paid with his life (471)
- Was Odinga really a Marxist? Up till the 1960’s he was a struggling capitalist trying to build a viable trading company (363)
- Mwai Kibaki & Munyua Waiyaki kept out of full cabinet positions until they moved away from Tom Mboya (376). Earlier, Kibaki & Mboya came up with a highly respected development blueprint for the country.
- The Finance Minister missed the opening ceremony of the Central Bank (282) and later denied that he had a drinking problem (43)

Kenyan Vitalstatistix

Sample these common humorous quotes about statistics: Definition - the science of producing unreliable facts from reliable figures; 98% of all statistics are made up; statistics are like bikinis - what they reveal is suggestive, but what they conceal is vital

As Kenyans celebrate the open data movement of 2011, some in the finance and planning department of banks, and many companies and offices involved in analysis are probably lamenting the loss of one of the most useful statistical publications that the Kenya Government used to put out – the Monthly Economic Review from the Central Bank of Kenya.

The document was a treasure of vital information such as from GDP growth by sector, monthly inflation comparisons (over several years), overnight & inter-bank rates, bad loan positions, Kenya's monthly exports & imports (numbers and sectorial components), tourist visitor numbers, manufacturing output, vehicle imports, Kilindini port volumes, composition of Kenya local and foreign debt, gold holdings, money supply etc. that many found to be very useful.

The last report put out was in August 2011, and while there's little doubt that such information is still being collected, for some reasons it's not being shared anymore. And this may have coincided with the shillings’ haywire.

The report compiled reports form diverse parts of the economy and published them in a nice easy to use format compared to some difficulty obtaining the same from the official Bureau of Statistics or having to wade through speeches of Ministers or Permanent secretaries for the information.

Cheque Truncation Part III

The much vaunted cheque truncation may be here at last after a notice at the bank branch that it will be in effect from Monday - January 16 - six months later than scheduled. Cheques may now take as little as one day to clear. However the notice also reminds & cautions bank customers that even cheques they write will hit their account within a day of presentation - and that they should watch that they don't get inconvenienced .i.e. issue cheques that bounce (bad for them, good for the bank which will hit them with more charges)

Having cheques clear faster is also a matter of necessity for banks if they hope to have cheques remain relevant and preferred for small payments. The number of cheques used in Kenya in 2010 (15.7m) and 2011 (16.7) was lower than the 16.8 million used in each of the two years before - and having a cheque book is less of factor when people open personal accounts.

The volume of transactions and money moved by M-Pesa and other mobile money systems show they are the preferred way for instant payments. Banks did not help themselves in this by relegating banker's cheques (previously the preferred way of paying school fees) to a slower clearing cycle - same as other regular cheques (to guard against fraud), even before direct deposits (to school accounts) and M-Pesa established themselves. By having cheques clear faster ensure they don't go the way of the travellers' cheques.

More on cheque truncation in Part I and Part II

Urban Inflation Index: December 2011

What a year it has been, mostly not for the better with petrol and dollar prices setting records, and accompanied by other shortages. The Kenya government started a military anti-terror expedition in Somalia, and as war expenses can drastically alter government spending budgets, it was recently decided to bring the mission to the United Nations and have them offset the war cost to some extent.

On to the index comparing prices to three three months ago and year ago!

Gotten Cheaper:
Foreign Exchange: 1 US$ equals Kshs. 84 compared to Kshs 95.6 three months ago and 80.5 a year ago. That snapshot does not capture the roller coaster quarter the shillings has hard, dropping to an unprecedented level of Kshs. 107 to the dollar (and being ranked as one of the worst performing currencies in the world) before the Government instituted an interest rate hike and cut back liquidity to the banking sector. While the shilling was in free fall, and few could explain why, a World Bank blog post revealed that Kenya's exports were (at the time) not enough to meet the country's fuel bill, (Three years ago it cost Kshs 79 /$)

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg pack costs Kshs. 113, down from a record high of 119 in September, but still almost double the Ksh.s 69 cost in December 2010 (Three years ago it cost Kshs 97)

Other food item: Sugar : A 2 kg. Mumias pack which was Kshs. 385 in September is now 375, but still almost double the Kshs 195 of last December. In other news Kenya seems to have applied for another extension of a COMESA import cap, denying consumers the option of cheaper sugar imports to protect the largely uncompetitive local producers who have trouble ensuring adequate supply of sugar into supermarkets.

About the same:
Communications: These are largely unchanged though Safaricom announced a modest price increase by of voice call tariffs (which Orange are itching to follow) and @Kahenya says that corporate m-pesa tariffs have also been increased.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($2) (at a local pub) , unchanged from three months ago. The alcohol sector has a lot of competition now with the new brands being launched (Miller Genuine Draft) and others revived/getting new marketing pushes (Redds, White Cap Light, Heineken, Windhoek, Sierra) in a realignment of brands and owners between East African Breweries (EABL) and SAB Miller.

More Expensive
Fuel: A litre of petrol was Kshs. 124 up from 117.7 in September and 94.3 last December. Two days ago, in reaction to threats of transport operators to go on strike during Christmas week, the Energy Regulatory Commission (ERC) announced the first ever price reduction since the introduction of the price control regime - and for Nairobi the cost of petrol will be Kshs 119 (~$6.2 per gallon) till January 15 2012. (Three years ago it cost Kshs 92.7)

Utilities: Pre-paid electricity is about Kshs 2,500 per month (up from the regular purchases totaling 2,000). There are rolling blackouts as seen in the ads run by the Kenya Power company, spreading the shortfall across the country.

LPG - Cooking gas has been in short supply in different parts of the country, with many sellers in Nairobi not having any stock to sell for weeks. Those that do are selling them at increased prices - e.g. cylinders that used to costs Kshs 2,500 for 13KG, are selling at between Kshs 3,200 - 5,000 if you can find them.

Urban Inflation Index: September 2011

One year after the euphoria of a new constitution, the direction of the economy is uncertain as seen in the weakening Kenya shilling, tangles in implementation of the constitution, and rising food prices. It has been a year of some price controls in the fuel, and possibly in the food sector whose parliamentary price control bill was signed into law last week by the President.

Comparing prices to six months ago and last year. On to the index

Gotten Cheaper: Nothing really.

About the same:

Communication: All Kenya’s mobile phone companies have call rates of about Kshs 3 shillings ($0.03) per minute to call across networks. It is unclear what will happen with call rates, as the smallest company in the market, Yu, launched free daytime phone calls, Airtel Kenya lost a CEO, and Safaricom has indicated that they may raise their call rates, as has happened in Uganda with MTN . The real battle is in data, where prices have not really dropped but companies are offering more speeds for less. The market here is divided between the companies with 3G (Orange & Safaricom) who compete on speed, and those without 3G(Airtel & Yu) who offer cheap internet rates of about Kshs 50 (~$0.5) per day for unlimited use.

Another communication developments that, in a way, lower the cost of business include the launch last week at G-Kenya of GKBO, which encompasses free website creation tool, domain registration, and site hosting for small companies by Google in Kenya.

Utilities: The bill on pre-paid electricity is still at about Kshs 2,000 ($21) per month, and getting about 30 – 35 units per buy via M-Pesa. However that is expected to go up after notice was issued for rates to go up 22% per kwh unit. So what alternatives are there? In a somewhat timely move, Samsung launched the NC215, a solar powered netbook laptop last week. It gives 1 hour of power for every 2 hours of charge in the sun, has a 15-hour battery life, and is able to charge other devices by USB even when it is off.

Also got a gift of a solar phone charger (T2126 Hemera from Hirsch) that works quite well; it takes about 12 hours to charge in the Sun or 2 hours via USB, has a flash light and can charge a variety of phone models.

But when you look at the rapid advances in laptop batteries and cell phone batteries over the lasts decade, you get the feeling that there has been a lag in the pace of solar devices, and that more solar based solutions and advances should be emphasized.

More Expensive

Fuel: A litre of petrol fuel, which is regulated by the Government, now costs 117.75 (~$5.6 per gallon) in Nairobi. Regulated fuel has proven to be more expensive than unregulated fuel, and while this can be attributed to the weaker shilling and fluctuating oil prices, the formula used to arrive at the price remains vague, and the limit on margins (stipulated buying and selling price of petrol, diesel, kerosene in each town) appears to have hurt small oil industry companies, more than large ones. However, among the listed companies, Kenol appears to have weathered the regulatory regime better than Total, by having diverse operations in other countries in East and Central Africa that remain unregulated.

Staple Food: Maize flour, which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2kg bag which cost Kshs. 80 six months ago, and Kshs 65 a year ago, is now Kshs 119, the highest it has been in the short history of this index.

Other food item: Sugar : A 2 kg. Mumias pack which has hovered at about Kshs 200 for the last years, now costs Kshs. 385 (90% more than last year) and . The sugar sector has really gone full circle causing many to questions its relevance, recurring shortages shortage (why all factories close at the same month for maintenance), why sugar is grown in a food producing area and how many items we can consume without having to use sugar as a sweetener e.g. tea without sugar, or use of honey as a substitute.

Foreign Exchange: 1 US$ equals Kshs 95.6 compared (now 96.8) to Kshs 80.8 a year ago (and 83 in June 2011) - a loss of almost 20% in a year. It’s unclear of this has been a concern to the Central Bank which has made other confusing policy moves as related to interest rates at a time of mounting government debt and their laxity has enabled banks to spot and take advantage of an arbitrage opportunities to trade with government money.

Beer/Entertainment: A bottle of Tusker beer is Kshs 180 ($1.9) (at a local pub) a slight increase from compared to Kshs. 170 a year ago. However beer has become out of reach for many poorer Kenyan who have resorted to drinking unsafe local brews, which in some unfortunate cases have resulted in blindness or even death.

Cheque Truncation Part II

The deadline of new cheque modernization passed this week, on June 1. Yet many bank customers had not yet received new chequebooks, and many more were not fully versed with the process, which entailed a change of chequebooks.

The Kenya Bankers’ Association (KBA) left the public relations of the process to its’ member banks resulting in low awareness and did not communicate till May 31 with adverts in the newspapers re-assuring customers and the public that the old cheques will be used for an indefinite period. This paled in comparison to the introduction of mobile number portability (MNP), in which the regulator (CCK), service providers, and mainly mobile companies carried numerous advertisements about the transition to the new service. (Mobile companies ran extensive promotions to retain their customers or win over their competitors’ subscribers).

There are still many unresolved questions, even with the extenstion:

- Old chequebooks were issued though the month of May, but customers then had to get the new chequebooks at month end. Who bears the cost of printing books that were about to be phased out?
- Do the new cheques clear faster? e.g. 1-day for Nairobi cheques? Speed is important for payments in the age of M-Pesa. The last statistics from the Central Bank (CBK) showed that in 2008, about 50,000 cheques were being cleared daily. Many suppliers now insist on getting paid by M-Pesa (which takes less than a minute) or by real time gross settlement (RTGS a.k.a corporate m-pesa done by banks - but this also carries a high risk of fraud risk of fraud - at 69% of bank crimes)
- What happens to post-dated cheques? These are used for debt repayments and for motor insurance loans (some banks use these for collateral over up to 10 months)
- There is no apparent difference in the design of the old and new cheques. So what has changed to warrant the exercise?
- Are cheque printers (mainly De la Rue) able to print enough chequebooks for a smooth roll out next time?
- Some banks said that old cheques will still be honoured in-house i.e. if drawn to people who also use the same bank, while others told their customers they would not be honored. KBA should communicate a clear deadline when all banks & customers must switch.

For now, the old and new chequebooks are in circulation, but more information has to be provided to resolve the cheque truncation process.

Your Bank, Your Neighbour

Agency banking came of age today with launches of agency banking by both KCB (‘KCB Mtaani’ - translation KCB in your neighbourhood) and Co-Op ('Co-op Kwa Jirani' -translation Co-Op in your neighbourhood) which are the largest and third largest banks by assets respectively. They follow in the steps of Equity Bank who have had agency banking for several months

Why Agency Banking? If 3 of the country’s 5 largest banks with the largest branch footprints chose to go agency banking. Agency banking expands the reach of the bank about 100-200 branches to anywhere from 1,000 to 20,000 outlets through the agent model Speaking at an investor briefing last year, Equity Bank CEO James Mwangi spoke of the extra reach would bring for them and which signaled an end to the rapid branch and staff expansion that the bank had been known for.

Equity initially looked like they would partner with Safaricom’s strong M-pesa agent network (22,000 agents) for their banking extension, but that partnership seems to have hit a brick wall) and now the field is open to dukas, bookshops, and grocery stores, kiosks, hardware & phone sales shops, and others established shops especially in remote villages where banks are unlikely to open branches.

The shops must fit the criteria set by Central Bank of Kenya (CBK) for bank agents (more here) - including that they cannot be mutually exclusive. (Not being tied to one bank can be an opportunity for established village business owners to act as agents for several banks)

What can agents do for bank customers?
Co-Op: Cash deposits, cash withdrawals, school fees payments, utility payments, balance enquiry, issuance of mini-statements.
KCB: Deposit taking and withdrawals. In future, balance enquiries, loan repayments and requests for chequebooks & account statements.
Equity Bank: Deposit taking, cash withdrawals, as well as origination of account opening & loan applications.

Cheque Truncation

There’s an ongoing exercise within the Kenyan banking fraternity (KBA) to standardize cheques issued in the country under a process known as cheque truncation – and this will enable transfer of electronic images of customer cheques replacing the current process of physical of exchange of cheques by different banks at a central clearing house

Odd and large size cheque will be withdrawn between March and May 2011 and replaced by standard size cheques that are 7” by 4” inches in size and with enhanced security features by June 1.

The new system may halve the time spent in cheque clearing, which is currently about four (4) working days for most people. This has made cheques uniquely unpopular for small people, not just because of the cost of operating a bank account, but because of the cumbersome week-long time delay in the age of instant money transfers such as M-pesa.

Why are cheques good? They are easy to use, offer verifiable proof, security, and credit. While some buyers wants to stretch payment, and sellers wants immediate payment, both buyers and sellers have been tripped up by the four day cheque clearing cycle, sometimes to the benefit of bank - and a reduction in the cheque cycle could mean more income for them. Of Equity Bank's income in 2010, Kshs 1.1 billion ($14 million) was from temporary overdrafts/un-cleared effects – which means you wrote a cheque, didn’t have cash in account, but Equity cleared (did not bounce) the cheque and charged a fee for the service.

Agency Banking and Micro-Savings

Banking Hall Woes: Last week I spent about 6 hours in 6 different banking halls, trying to deposit or withdraw cash, make cross-bank transfers, utility payments and complete other bank transactions. Some observations:
- Banks with several empty ‘teller’ windows even as customers queues get very long
- Employees who sit at the front desk but don’t serve customers as they do back office transactions, reports & reconciliations
- Disinterested employees who’d rather gossip in vernacular than serve customers
- @kainvestor tweeted: it takes 1 hour, 2branches and 4 tellers to get one foreign bankers cheque done at #StanChart. Still waiting #fail
- Customers who ‘book’ places in the queue. As the queue shortens near the front, they walk up from where they have been sitting and edge back in front of the person, who they had queued with thirty minutes earlier
- Older banks like Barclays as you to being a passport photo and get a referee signature to open an account, while new banks like equity bank and family staff will snap your picture with a digital camera.
- There are no more developments in e-banking being rolled out in Kenya; new bank - customer interface deployments are in the areas of phone/mobile/m-banking
- Despite the millions of masses on mobile banking, the bulk of business in Kenya is cheques-based. Cheques remain awkward, prone to errors, and are resented as a form of payment as recipients have to wait for up to four working days to get money from the date they present their cheques. Assuming there are no r errors clear over four working days
- From a Central Bank of Kenya 2009 2009 supervision report you can get an idea which banks halls are likely to be crowded going by their number of deposit customers: Equity Bank is No. 1 with 4.0 million followed by Co-op bank with 970,000, KCB 751K, Barclays 748K, and Family 574K. Least crowded may be banks like City Finance 654, UBA 832, Development bank 1,022, Middle East 1,462, and Equatorial 1,981.
(images from Afromusing’s post on how to get Safaricom 3G on your ipad)

Mobile money banking solutions Banks have tried to minimize the prevalence of queues, usually longest at month ends rather than mid-month, by offering alternative channels such as mobile banking and ATM facilities. A few years ago, the push was to develop Internet based banking, but that seems to have been set aside by the industry to focus on (mobile) phone-based avenues.
Last month also brought M-kesho, a partnership between mobile giant Safaricom and a leading bank Equity Bank. This one was very notable as it was marketed as one in which Equity Bank account holders could earn interest on money saved through their mobile phone - and this has been widely written about widely:

From the blogs - Idd Salim. Nothing new, Zain Zap has done this since 2007, but Safaricom is like Man U. They have ‘refs‘ who favor them game after game and win battles that are not even their own.
- Kainvestor: Too complex and not particularly new
- Rombo , Safaricom's 17,500 M-Pesa agents will now operate as part of Equity Bank (account opening, withdrawal/deposit) which has 80 branches countrywide
- Majibu: (after M-kesho) Safaricom can do better - by working with local developers and allowing them to develop on their platform. Safaricom needs to learn from the likes of Apple, the success of the iStore is because each developer is given an equal chance.
- White African: As others have pointed out, this isn’t exactly groundbreaking and new. Why is it big then? It’s big because of who is doing it: the giants of the banking (equity) and mobile sector (Safaricom).
- @wanjiku suggested that her bank, Family bank should partner with Zain

Others - A comment at the CGAP who advised on the creation of M-pesa noted that hopes that system failures that plague m-pesa will be a thing of the past
- Equity Bank’s CEO made one comment on TV, about how this made sense as they (Equity) had launched a mobile banking application (EAZZy), but they found over time that could not compete with M-pesa so were folding it to join M-pesa.

More mobile variants: What does that mean for other banks? Despite @wanjiku’s earlier suggestion Family Bank went ahead and signed with Safaricom, not Zain, upgrading their existing mobile application into one called existing mobile banking application into new called Pesapapwhich also allows transfer from account to/from m-pesa and mobile service providers Cellulant rolled out at the same time with one called lipuka

Other thoughts on agency banking Vis a Vis m-kesho - Safaricom has very subdued brochures about M-kesho – with which one can transfer funds to from their bank account at Equity and all the benefits (micro savings) andproduct hype is by the Equity side. Odds are that most of Equity’s 4 million customers are M-pesa account holders already
- M-pesa cash has been held in trust by CBA Bank since its inception. Will Equity angle for a piece of that?

Enter Agency Banking: The sub-text of M-kesho and other variants is the emergence of agency banking in Kenya, a process endorsed by the Government of Kenya to bring more banking services to more of the (unbanked) population. Agency banking is supposed to take customers out of the bank halls and out to kiosks and villages; as @Rombokins noted, Equity Bank scales up from having 80 branches, and can now (potentially) sell its products through 17,000 agents of M-pesa.
CBK recently published their Agency Banking Gudelines which include provisions on what agents can and can do

Can Do: - Agents can be limited liability companies, cooperative societies, parastatals, trusts, partnerships or individuals. Agent applicants are judged based on their network (number of agents per province), services to be provided, anti-money laundering procedure, strategy and financial projections envisioned from agency business. Other factors considered will be company registration documents, audited accounts, availability of funds, bad credit reference, reputation, unclear source of funding, or criminal prosecution – which are some of the reasons for an application to be struck out. Also a license can be withdrawn if an agent is loss making, or a sole proprietor passes on
- agent may provide services to multiple institutions (no contract between institution and agent shall be exclusive and an )
- All agent settlements must be in real time
- Agents must receipt all transactions
- Some of the services agents can perform include cash deposit/withdrawals, loan repayments, bill payments,
Salary payments, debit cards, collection of mail

Can’t do: Faith based, non-profit, non government organizations are not eligible to engage in agency banking
- Agents may not use such names as 'bank', 'finance' in their brands
- agents may not charge customers for services directly
- Agents may not transact when system is not operating (e.g. m-pesa downtime?)
Agents may not open accounts, offer guarantees, or appraise loans
- agents may not undertake cheques deposit or encashment (cash only) and may not transact in any foreign currency

Summary: Banks still require that customers come to the halls, for most services, but with agencies can they get served better (and perhaps cheaper) elsewhere? The use of dealers and agents helped transform the telecommunications sector in the span of a decade - from having a monolithic giant (Kenya post & telecommunications) where Kenyans had to queue and buy lines, pay for equipment and other bills (and which served ~100,000 customers) to now where customers able to do the same at kiosks all around the country (serving 20 million customers) Can banks mirror the phone model of growth through agents? It’s a tough call as the safekeeping of money or the incurring of a debt (by taking a loan) is one that calls for caution on the part of the customer.

But taking a loan is a sophisticated process - as most customers need to ask the loan officer what rate am I getting? what is the payback and installment? Even if someone is desperate and signs for a loan without reading an agreement, or swipe a credit card readily, they will over time come to learn the cost of transacting as they will read and review documents, especially if they feel the are being shortchanged. It seems that lending is beyond the training and capacity of agents - and the CBK has recognized this by limiting them to being amedium for repayments. So if you want to get a loan with m-kesho, you get that information from a (trained) Equity loan officer, not an M-pesa agent.

Finally, micro-savings or savings by poor people is more about the principal, not interest. i.e there has to be a mandatory obligation to save, which is difficult for someone trying to build up savings to revoke. E.g. group schemes, chamas, investment clubs, SACCO’s have an obligation to save that binds its members through a social bond of their mutual up-liftment. An obligatory commitment is also a factor in larger savings programs like mortgages or pensions.

This time around: Kenya Stockbroker collapse, Report leaks, Credit Reference Live

Time for another this time around post which looks at stories that recur in the business environment

Mars Group Kenya: The an anti-corruption watchdog group is the wikileaks for Kenya, re-publishing hitherto top-secret government reports at their website.

Mars Group research and produce their own reports, but their archives contain a growing list of reports of corruption in Kenya that is worth checking out. This week they have reports done by PricewaterhouseCoopers for the government of Kenya on the collapse of Triton Oil Company and on the misuse of funds for Maize famine relief in 2008. Last month they also released the report on the sale of the Grand Regency hotel. The Triton report shows that:
- At Kenya pipeline company (KPC) the oil collateral agreement was poorly drafted and ambiguous. Also managers had great discretion, procedures were lax /there was inter-departmental conflict (oil was released without verification) and documentation was poor (since documents would get lost at KPC, financers would exchange documents then present them all to KPC at once)
- Triton was aggressive with financing and would arrange for shipment before they got financing. They were stuck at some point and KCB entered into a finance agreement for goods when the ship was already in Kenya
- Bad banking Ecobank have no claim against KPC, while the Fortis claim against Triton is suspect. Also Glencore had stopped financing Triton in June 2008 as they were suspicious about KPC fuel stock claims
- KCB and other financiers did not cooperate with the PWC investigators
- The debt owed to KCB may be substantially lower than KCB claims and they have provided little information to assist in verification of the Triton debt.
- Kenya anti-corruption commission should investigate further staff named in the report

GoK Bond The Government of Kenya is going to raise Kshs 14.5 billion for infrastructure via a third infrastructure bond. How does that compare to a similar bond a year ago?
2009: Kshs 18 billion ($240 million), interest rate 12.5%, minimum bid Kshs 100,000 (~$1,250), maturity 8 years, principal repaid in 2015, 2017, 2021. Funds used for road, geothermal, water projects
2010: Kshs 14.5 billion ($188 million), interest rate 9.75% tax exempt, minimum Kshs 100,000, maturity 8 years, principal repaid in 2016, 2018. Funds used for water, sewer, irrigation, road, and geothermal projects
The 2009 bond was over-subscribed and the only notable difference in 2010 is the lower interest rate offered. The CBK has decided the high cost of loans offered by commercial banks and perhaps by offering the same banks a lower return on government bonds; they will offer more competitive borrowing rates to the public

Credit Reference: February has also seen the licensing of Kenya’s first credit reference bureau – CRB Africa by the bank regulator, the Central Bank of Kenya. Following this, commercial banks have apparently commenced sharing information with the agency. Some of the rules governing sharing of data were highlighted when the credit reference rules were gazetted almost two years ago. These include
- Bureaus may share info only with a customers’ permission (which happens when you sign for a loan)
- They may only share information for business decision making (evaluate credit prospects) and must keep track of all information they share
- Customers are entitled to one free report a year, and within 30 days of a negative referral.
- If a customer complains, and bureau not able to complete an investigation of disputed information within a month, information will be deleted as request by customer
So what information will they compile?
- For individuals: Name Citizenship ID / PIN Postal/ Telephone Credit history (as reported) Court judgments (as reported) Referees
- For companies: Company registration details postal/physical/telephone Credit history (as reported), Court judgments (as reported), Guarantees
Shareholdings/directorships

Stockbroker collapse: This month saw the placing of another stockbroker under statutory management – this time its Ngenye Kariuki Stockbrokers [Last year in March it was Discount stockbrokers that was placed under statutory management]

Despite strong defense from the Kenya Association of Stockbrokers & Investments Banks - KASIB who say the brokers problems were manageable and did not warrant the intervention of the authorities the broker was in a weak financial position.
A summary by Faida Investment Bank, based on the published un-audited results of Ngenye Kariuki showed this
Half year June 2008 versus 2009
June 08 income 35m, expenses, 21 million, pre-tax profit of 10 million
June 09 income 3 million, expenses 10, pre-tax loss of 11 million
Share capital of 50 million, capital reserves of 251 million (which many brokers draw from the sale price in 2006 of Francis Thuo stockbrokers) [and the same amount appears as an intangible asset) at June 2009, the broker had an overdraft position of 63 million and receivable of 127 million which KASIB is laying at the feet of Citibank for withholding funds from the 2008 Safaricom IPO that are owed to several stockbrokers.

Savings Accounts that Save Part II

Commercial Bank of Africa (CBA) recently infomed their customers about changes in their savings accounts. They quoted market & customer research, and recent amendments to the banking act which required that banks are to pay interest on savings accounts as long as customers maintain the account minimums and banks are not to levy charges on saving accounts, or fixed deposit.

CBA resolves this matter, by giving their savings account customers two options to convert their accounts into either
- A low cost account transactions account (called Freedom) that charges 200 shillings ($2.67) per month but comes with unlimited ATM withdrawals and a waiver of first year of a credit card fee.
or
- A Savings account (called Nufaika) that has a minimum balance of 3,000 ($40), pays interest semi-annually and also comes with the offer of a personal loan amount bases on 75% of savings. It has not fees, no bank charges, but interest will only be paid on balances above 30,000 shillings ($400)

And while CBA is not known to be a low cost bank, they will by default, move all their savings accounts holders into the Freedom a/c (i.e. (low balance, no interest paid out, but steady monthly income for bank), unless the customers opt for the Nufaika a/c option.

CBA is being upfront about the banking act, something most banks are not being forthright with their customers about. Banks have a variety of charges levied against savings accounts including withdrawal of cash over the counter or by ATM, a fee when the a/c balance drops below the ‘minimum’, interim statement (per page), new ATM card or replacement, and closure of account. All this means that the banks profit from charges while depositors have holes through which their savings leak out instead of grow

bank charges are savings holes
The relevant clause on Savings Accounts in the Kenya Banking Act (PDF),is 16 (A) which states:

No institution shall impose any form of charges on a savings, seven day call or fixed deposits account. and an institution shall, in respect of a savings account, pay interest accruing, to that account as long as the minimum balance is maintained.

CBA is complying now, but its’ clear that banks have been flouting the act for some years now, despite repeated pronouncements for them to comply with the savings rules.

The Central Bank Governor has also made futile calls for banks to increase their deposit payment rates to match their lending rates, or vice versa - lower their lending rates (12% to 25% to be in line with the low rates they pay on deposits (2-7%)

What savings account charges (if any) are levied at your Bank?

Urban Inflation Index December 2009

Comparing changes to three months ago - September 2009 and a year ago - December 2008

What’s gotten more expensive

Fuel: A litre of petrol is Kshs 83.5 (~$5.0/gal) up slightly from 80.9 three months ago, but still about 10% lower than the 92.7 of last December.

Entertainment: A bottle of Tusker beer (at local pub) is now Kshs. 140. This is up from 120 price of three months ago and also a year ago. There is a proliferation of new pubs all the time in Nairobi - and as others shut down, more entrepreneurs step up (with a new name, coat of paint and furniture) to take their turn behind the bar counter. The median price in Nairobi now seems to be 150 shillings ($2) for a beer, as Tusker brewer east African Breweries (EABL) remains untroubled by Summit of Keroche (what’s to blame? - poor distribution, dirty tactics by EABL, poor marketing?) or by the reports that South African giant SAB Miller may choose to re-enter the re-enter the Kenyan market following collapse of an EABL-SAB agreement in Tanzania.

Electricity/utilities: this month’s electricity bill is Kshs 2,100 ($28) compared to the 1,900 of three months ago, as well as last December. 2009 has been a year of harsh reality checks for Kenyans with the failure of rains, drying of dams and water & electricity rationing programs. And while electricity rationing has ended, water rationing is still on in urban areas, and in rural areas, water sources are diminishing and the usage of water is becoming a cause for tension among communities and neighbours. The government has set out to reclaim and restore water towers in the country, notably the Mau Forest, and has made investment in geothermal energy and is linking up with neighbouring country grids (Ethiopia, Tanzania) ; unfortunately wind and solar energy are not considered to be viable large scale avenues worthy of requisite investment.

about the same

Food: though the inflation impact of food items has been played down by the Central Bank (CBK) who said food prices distorted inflation figures, there has not been much change in the last quarter.

food is bad for inflation
Staple Food: Maize flour which is used to make Ugali that is eaten by a majority of Kenyans daily. A 2 kg. Unga pack at Uchumi today costs Kshs. 83 compared to 84 three months ago. But this is much better for consumers than the 97 shillings of a year ago.

Other food item: Sugar (2 kg. Mumias pack) is Kshs. 200 up, unchanged from 3 months ago, but 25% higher than the 160 shillings of a year ago.

Consensus among farmers and traders is that 2010 will be a worse year for food production in the country, so we’ll see where prices are next year.

Gotten cheaper

Communications: there have been lots of developments towards reducing the cost of communications as competition in the sector heats up.
- Mobile giant Safaricom, who told institutional investors that they aim on becoming the ISP of choice for Kenyans, have been pushing out internet devices at a rapid pace. The company earned 7.2 billion ($96 million) from SMS and data in H1 of 2010 (up from 2.1 billion a year ago). They have now partnered with Equity Bank to get laptops computers (with free modems) to thousands of consumers by way of bank loan
- Both Safaricom and Orange (Telkom Kenya) are selling 3G modems’ at a cost of Kshs 2,000 (~$26) – these used to cost 4,00 before. And with Safaricom you can cash in just 2,000 bonga (loyalty) points and get the modem, which used to cost 15,000 bonga points a year ago.
- ISP’s respond Wananchi have lowered Internet prices of their broadband zuku packages since the arrival of fibre cable connection in Kenya. Meanwhile KDN is offering free butterfly service over Christmas and have a program with family bank to offer free wifi services to their customers.

Foreign Exchange: 1 US$ equals Kshs. 75.62 compared to Kshs. 75.93 three months ago and 79.08 a year ago.

CBK Profits II

Reading the tea leaves at Central Bank

The Central Bank of Kenya (CBK) FY 2009 (PDF) results are out and, compared to last year, it’s a different story.

Banking on other Income: CBK is another institution that has had other income yield great returns. While net interest income was down from 10.3 to 8.4 billion, and commission income on treasury bills and bonds was flat at 3 billion (investors opting for corporate bonds), CBK booked a forex gain of 13 billion ($173 mullion) up from 54 million on revaluation (a 25,000% gain) and 4.8 billion from the controversial $45 million sale of the Grand Regency Hotel. So profit for the year was 23 billion ($306 million), up from 9 billion in the year before, and CBK paid a dividend of 7.2 billion ($96 million) to the Government of Kenya (GoK) (up from 4 billion). And while CBK is exempt from income tax, KRA (the tax man) is not letting go of a Kshs. 22 million employee tax dispute with the CBK.

Make it Rain: Kenya has Kshs. 108 billion (~1.4 billion) worth of currency in circulation (up from 100 billion in ‘08). Currency costs (sourced from De La Rue) were 1.1 billion (~15 million) to produce new notes (up from 330 m).

Generous Creditor: CBK lends to employees at 3% (perks of banking) and charge the government 3% on their overdraft. In a July 07 agreement GoK agreed to pay CBK 1.11 billion p.a. over 32 years at 3% to settle a GoK overdraft dating back to 1997. The CBK act limits the GoK overdraft to 5% of gross recurrent revenue (so currently this should not exceed 17 billion)

UK assets: CBK has 194 billion in assets held with united kingdom banks, that’s even more than Kenya (66 billion), or the rest of Europe (31), and USA (20) while all their 312 billion liabilities are in Kenya. This was even after they increased euro and dollar assets, and reduced sterling pounds, compared to '08.

Loans & Rates: CBK loans to commercial banks stood at 15 billion ($200 million), up from 8.5 billion. They lent money to commercial banks at 8% p.a and earned 6.64% on treasury bills/bonds.

No Gold Standard: CBK gold holdings are just 34 million (less than $500,000) up from 28m year before. In comparison, just this week, India pipped China in the gold race buying $6.7 billion worth of gold from the IMF in hard currency (but is still only 10th largest holder)

Pyramid Schemes in East Africa

Back in October 2006, I wrote two posts about pyramid schemes that had mushroomed and would eventually ‘burn’ thousands of investors in Kenya.

And the last year has revealed bigger pyramid scams in the form of Bernie Madoff and Alan Stanford, and just yesterday in the Kenya Parliament, some political leaders were un-masked as some of the master minds behind some of the collapsed Kenyan schemes.

Image of pyramid investors from another business daily newspaper article on pyramids

So what was the genesis of the schemes and how they ended? And more important, can they happen again?

Pyramids Rise
- Early investors reaped, and told others about their success - i.e. doubling, tripling or even greater returns in a few months span
- Some schemes were promoted by churches (who received tithes in return)
- Pyramids opened new offices and hired new staff all around the country
- New pyramids opened up cloning existing ones, but promoting a slightly different product/concept
- People took loans to invest in pyramids
- Peoples sold land/ shares / other assets to invest in pyramids
- Pyramid investors cut across all sectors from rural farmers to bank managers

Pyramids Peak
- Early investors reaped, but were greedy and ploughed back as much as they won
- Pyramids grew so big they overwhelmed their managers – some stopped accepting new depositors (but not new deposits which were essential to the chain)
- Banks complained they were losing deposits at a time when interest rates were very low
- With IPO's few and far between, stockbrokers complained they were losing investors during a bull market period

Pyramids Fall
- Banks put the squeeze on pyramid schemes, by freezing these recipient accounts with the funds in them
- Pyramids without cash, tried to switch to different banks and accounts to process their funds
- Banks warned other banks and the Central Bank issued some cautionary notices on schemes
- Some pyramids tried to convert into cooperative societies
- Some schemes bad-mouthed other pyramid schemes as unstable
- When locked out of banks, pyramids moved to safe houses in residential areas where they continued to receive/pay cash
- media coverage kicked in; some angry investors complained on TV about lost money and brought media crews to the safe houses showing other angry investors
- Deposits dried up, and investors demanded their cash.
- Pyramid schemes all collapsed largely at the same time in 2007

Sifting the rubble

Could they have been prevented?
- They were unregulated: Neither the central bank, capital markets or co-operative sector regulator had over-sight over the schemes. Parliament was focused on micro-finance and anti money-laundering regulation bills.
- KYC: Schemes relied on the banking system to move around the money; and if banks applied true know your customer (KYC) principles, they’d have smelled a rat - with hundreds of people queuing in their halls to deposit funds into a single customers account

Unanswered questions
- What happens to the millions of shillings frozen in bank accounts?
- What happened to employees of these schemes? And if rogue stockbrokers were partly brought crash down by thefts from within (internal fraud /‘robbers robbing robbers’) could this also have happened at some schemes?
- Legal grey area still exists. Have any promoters being charged in court? Can any investors sue promoters for losses? The Cooperatives Ministry Task Force is looking at how to compensate investors - but is this justifiable?
- Can schemes rise again? History teaches us that pyramid/ponzi schemes will happen again and again. Maybe using the mobile money transfers, or next time there’s an election. The Business Daily mentions they may have spread to neighbouring countries