Somalia's Remittance Lifeline

This week in Nairobi on September 11, there was a discussion forum on the importance of remittances from the Somali diaspora to the people in Somalia and it was attended by representatives of the Rift Valley Institute, ADESO, Oxfam and Dahabshil. 

It was held just a few weeks ahead of a September 30 deadline which Barclays Bank in the UK have set as the date that they will cut off remittances to four companies including Dahabshil and the forum was on the reasons behind that decision and the impact it will have on Somalia.  The country receives about $1.5 billion a year in remittances (with about $150M coming from the UK) – which is more than foreign aid or private investments, and these funds support 40% of the population and amount to a third of the country’s GDP.  Somalia was said to have the largest number of asylum seekers in the world in relation to their population, and they are first generation immigrants with strong links to their home country - hence a higher level of remittances to reduce hardship and insecurity back home. 

The participants at the forum emphasized that the cutoff of vital remittances to Somalia was not triggered by any transgression, but rather it was a knee0jerk reaction to repeated bad news about Somalia and misunderstandinga that remittances support money laundering, piracy or terrorism. Dahabshil and other Hawala-like companies have complied with all requirements set by the UK and US, and conduct due diligence in handling the remittances (which at an average of $300 to individuals are relatively small), in a country without a banking system, commercial courts and no formal identification card systems - using agents, village and clans to triangulate and ensure that money goes to the intended recipients - all without bringing in dollars to the country.  Dahabshil, which the New York Times reported to have 286 locations around Somalia (compared to one for Western Union),  also  know that there are gaps in the system meant to weed out suspicious transactions, that they can work with the UK to fix and improve without facing the threat of closure.

Barclays are the last large UK bank facilitating these transfers to Somalia, and there was some discussion about coming to some accommodation with them such as asking them to delay the cutoff by another 12 months to allow for partner institutions to develop alternatives, as well as the possibility of partner institutions setting up a trust fund to cushion Barclays in the event that the UK authorities levy a fine for continuing to facilitate remittances to Somalia. The finality of all the Barclays decision may be resolved at a  Ministerial meeting on Monday next week in the UK or a later EU meeting in Brussels.

Going App to get better Banking Service

It's been over a a month since Barclays Kenya gave a peek to its' new banking app that can be downloaded from the android and apple stores.  The app offers customers full service in terms of viewing account transaction histories (of up to 3 months), making payments and transfers, and finding Barclays ATM's & branches.  

While other banks have like KCB, Equity and Co-Op have chosen the  agency banking route, Barclays has gone for an app - and with a device like a Samsung Galaxy Tab, other Android phone or Apple device, you can now make payments on the go such for credit card bills, water bills, with a few clicks that take less than a minute to make in lieu of previous visits to banking halls to queue and fill out forms. 

The app works on the premise that you build functions on the Barclays web  platform where you go and setup/add accounts, add payees such as utilities, credit cards, landlords etc. (if they bank with Barclays), and other details.

It is free to use (for now), and one attraction of this app is that it comes at a time when banks are clawing back on services like free monthly statements which are sent to fewer and fewer customers - and yet, oddly, remain a mandatory requirement to bring in to the bank for a loan or credit card application. You can get mini-statements at the ATM, but they fade after a few days in your pocket or wallet. 

The Barclays app is still a test app, on which the Bank hope to build more functions around it with time. It also appears there are working apps for customers in other countries like Ghana, Zambia, UAE, Botswana and Mauritius. 

Some issues to consider so far include; 

- Each time you log in, it asks you to answer a secret question (even if you've entered the password correctly). For this, it's advisable to set your secret answer to be as simple as possible e.g. if you pick out a favourite movie (and year) as a secret answer, just fill in 'Matrix', not  'The Matrix', 'Matrix1999', 'Matrix 99'  or 'Matrix(space)1999' - as if you get it wrong, the system does not provide for an alternate question.

- Statements are not formatted to export or print. You can print or export 3 month old statements in Excel or PDF formats

Snooze and Lose Your Investments

A few years ago, the Government proposed a plan to utilize unclaimed dividends for first proposed - targeting  these dormant funds and have them added to an existing (CMA) investor compensation fund

Shareholders of listed companies duly approved these changes into their company rules, with a bit of debate at more than a few companies annual general meetings (see Diamond Trust 2008 AGM)

Now there are daily ads in the papers urging shareholders to step forward and claim their  past dividends before they are transferred, not to the CMA investor compensation fund to a (Government) Unclaimed Financial Assets Authority.

Loose Notes at Blancos Restaurant

It gets even more serious with the Barclays Bank of Kenya this wee which also added that the new rule would rope in, not just dividends unclaimed for more than 3 years, but also 

- Bankers cheques & foreign drafts not presented for payment for over 2 years.

- Deposits held in bank accounts that have remained dormant for over 5 years.

- Safe deposit boxes that haven’t paid rental fees for more than 2 years.

This is an unfortunate adaptation of a well intentioned plan and It seems there will be no recourse for shareholders who have been incommunicado for what could be a simple reason of changing a post office box address. (Some people also abandon bank accounts, leaving the funds to run out in lieu of formally closing the account and incurring a (frivolous) bank account closure charge).

There are also dormant 'investor' funds frozen in bank accounts opened during the the pyramid scheme era that preceded the last election, but the bulk of the idle funds could be due to cases of people who died without wills (and the court are trying to sort out their estates) or other undetermined court cases in which none of the parties can access the bank account funds. 

Will the rule also extend to cooperative societies (Co-Op's), the contents of the safe deposit boxes, land companies, and private companies? 

Edit: Via Mark Mwangi, here's a link to the  Unclaimed Financial Assets Bill.

Arranged Corporate Marriages

Some local merger activity of note

 

Barclays of UK and South Africa’s Absa Group are in talks to merge their African operations - but this is not really new as the plan was set in motion six years ago. 

There’s no certainty the talks will lead to any deal, which wouldn’t be completed until 2013, the banks said in a statement. The combination would affect assets in Kenya, Botswana, Zambia, Tanzania and Ghana. 

Barclays, based in London, bought 54 percent of Absa in 2005 for $4.5 billion to expand in emerging markets. Absa dropped its original plan to buy the Barclays assets in 2008 after commodity-driven economic growth in Africa sent their earnings surging, making the businesses too expensive to acquire. Barclays revived the plan in April 2011, aiming to consolidate operations at Absa headquarters in Johannesburg and move other work to Dubai, but Barclays’ listed subsidiaries in Kenya and Botswana will be maintained.

Coca Cola have prepared the Information Memorandum (with D Capital Partners, UK) to persuade local coca cola shareholders to buy into the deal that will see their shareholding in three local bottlers - Mount Kenya Bottlers, Rift Valley Bottlers and Kisii Bottlers merged into a new holding company called Almasi.

Coca Cola dominates the non alcoholic beverage in Kenya with a 78% market share, leaving EABL, Kevian, Del Monte, Excel with 2-4% each. The global giant  has 6 bottling licensing agreements in Kenya with Coastal, Equator, Rift Valley, Mount Kenya, Kisii and Nairobi - which itself was boosted by earlier partnership deals ( with Flamingo Bottlers and East Kenya Bottlers Limited).  The three bottlers each which each sell about 9% of cokes cases, will become Coke's second largest after Nairobi with about 28% of sales. 

Peeling back Almasi

The boards of the three have approved it and now have to sell the deal to their shareholders as a potential value addition through increased revenue and cost savings of Kshs 2.5 billion ($29 million) derived from  lower management costs (single management, single board of directors) shared purchasing, and the IM noted none of the three can afford to invest in new bottling line, or plastic packing lines for soda, juices and water

Mt Kenya has 2011 sales of about $29 million, Rift Valley $21 million and Kisii $18 million, with Mt. Kenya and Rift both having after tax profits of ~$1.3 million. A nominal shareholding of 20,000 (1,000 shares of par 20)  in each, will be worth Kshs 80,000 (11,400 new shares) for Kisii Bottler shareholders, Kshs 526,000 (75,000 shares) for Mount Kenya Bottler and Kshs 112,000 (16,000 shares) for Rift Valley Bottler shareholders. The IM also dangles a carrot that, Almasi could one day be a listed company.

Haco boost?  - Tiger Brands which own 51% of Kenya's Haco are now buying 63% of Dangote Flour Mills in Nigeria. Will Haco get a boost in the food business, exporting to Nigeria?

Kenol  Reassures - Kenol made a surprising (to many)  half year loss  due to foreign exchange hedging contracts. They subsequently issued a statement of reassurance that a planned majority sale to  Puma Energy was sill on, with the due diligence process yet to be completed. Unfortunately, it is likely that, once the deal is done, Puma will also buy out the other minority shareholders and de-list the company - which is a shame, as it was one of the most pro-active companies in shareholder communications

2011 Kenya Bank Rankings Final Word

Local banks rules, but KCB holds off Equity

The top local Kenyan banks as at December 2011, ranked by assets are:

6 (6 last year) CFC Stanbic Bank: Steady assets of Kshs 140 billion ($1.7 billion) and profit of Kshs 3.1 billion ($38 million)

5 (4) Standard Chartered: Assets up 15% to Kshs 164 billion , and profits went up 8% to Kshs 8.25 billion. Deposits grew 22%, and loans went up 48% as they halved their government securities to Kshs24 billion. (Barclays & KCB also reduced their government securities positions compared to December 2010)

4 (2) Barclays: Drop from 4 to 2, but still have the best return on assets at 7.18% on a slightly smaller asset base of Kshs 167 billion. Profits went up 11% to Kshs 12.01 billion, and loans went up 14%, but there was no change in deposits.

3 (3) Cooperative: Was leap-frogged by Equity Bank, but gained a place thanks to shrinking Barclays. Steady but slow growth as assets grew by 9% to Kshs 167 billion, deposits grew by 15% and profits by 11% to Kshs. 6.16 billion as the bank still seeks to move beyond the cooperative sector.

2 (5) Equity Bank: Leap from No. 5 to 2 after reporting assets of Kshs. 177 billion and profits of Kshs. 12.1 billion, signifying growth of about 32%. for each. The years of annual 100% growth are over but as John Staley the Director of Mobile Banking and Payment Innovations, told attendees at HP leadership event dubbed Staying Ahead of the Pack, the bank has grown ten-fold every five years leveraging on technology and always with the mission to provide affordable financial services which they now plan to take beyond Uganda and Sudan.

No.1 (last year No. 1) KCB assets of 282 billion ($3.45 billion) and profit of Kshs. 14 billion ($172 million) KCB remains at number and matched Equity, growing deposits by 29%, loans 31%, and profits by 22%.

Kenya's Top Banks

as at June 2010

Bank Assets Pre-Tax-Profit
1. Barclays Kshs 173 billion ($2.16 billion), profit of Kshs 4.75 billion ($59.3 million)
2. KCB assets of Kshs 207 billion ($2.59 billion), profits of Kshs 4.34 billion ($54 million)
3. Equity 117,578 4,282
4. Standard Chartered 131,348 4,037
5. Cooperative 133,322 2,848
6. Diamond Trust 54,109 1,508
7. Citibank Kenya 63,812 1,499
8. Commercial Bank of Africa 60,229 1,465
9 Investment & Mortgages 56,630 1,239
10. National Bank of Kenya assets of 59,390 million ($742 million) and profits of Kshs 1,200 ($15 million) - then CFCStanbic (falling out of the top 10), NIC, Baroda, Imperial, and Bank of India.

Notes- KCB is the largest bank (and group) but is less profitable than Barclays which is the most profitable bank
- Equity may be the most profitable bank by next year: Five years ago (2006) they had 1/6 (Kshs 500m) of Barclays profits (Kshs 3 billion), now mid-way into 2010, they are the country's 5th largest in assets, and 3rd in profits - and are about 7X large by both measures compared to five years ago, while KCB is 1.5X larger and Barclays is 0.5X larger than it was in 2006.
- Equity is perceived better in market terms than KCB though its half its size and has the same profits this year.

Changes since last year
- Credit sharing between banks is now being enforced
- Anti-money laundering law now in effect
- The Government of Kenya has set out to raise Kshs 31 billion ($388 million for infrastructure projects; Kenyan banks currently have almost half as much money invested in government securities as they do with loans to customers
- The new constitution passed this month means we will have currency without the face of a president (virtually all existing currency bear the portraits of Kenya's past presidents)

- Equity and several other Kenyan banks have decided to embrace and work with M-Pesa and other mobile money channels instead of fighting them
- Micro-finance institutions (MFI's) are stepping up into the commercial banking sphere

Incoming banks (all of which have micro-finance origins)
- Faulu Kenya
- Jamii Bora (formerly City Finance)
- KWFT

Gone banks
- Southern Credit (bought by Equatorial)
- S&L (absorbed into KCB)

Barclays no longer flat

A few years ago Kenyan banks rolled out a variety of flat fee accounts; this was at a time that there was an outrage in the country over bank charges pumping up bank super-profits.

The flat accounts offered a range of services at one flat fee. NIC was the first with MOVE, then Diamond Trust, Standard Chartered with Diva (for Women) and later X Account (for Yuppies), while Barclays had Bouquet accounts that cost Kshs 490 ($6.5), 590 and 690 ($9.2) per month.

They are few now left. Diamond Trust took their fee lower, and NIC went higher to ease out the flat tariff. Now Barclays have joined suit; for a while, they may have felt they were being taken for a ride by their customers (perhaps business owners who funneled large volumes of transactions through the flat fee account, and a few months ago) they tried to disguise an increase in the minimum fee flat fee from 490 to 590, by claiming that they had added ‘free’ mobile banking.

One problem with flat fee accounts for some sustomer who underutilized the accounts (like myself) was that they were limiting in that you paid much more than you used and you could not get additional services without paying extra; flat fee accounts could not be altered, e.g. to get a cheque book or set up a standing order you had to move to a higher priced account

Last weekend Barclays did a system upgrade and one end product seems to be a removal of the flat fee monthly accounts in exchange for a more conventional transactional charge for each over the counter or ATM transaction. The new accounts are called bank account (reduced ATM fees), bank account plus (free banking if over 50,000 [$625] in account), business flexi (cheque book) and business bouquet (first 20 transactions free). They also have tie-in discounts with Tamasha/buffet Park. Nike shop, Nairobi sports house and Sherlock’s den

2010 Bank AGM's

a guest post by Kainvestor

Barclays Bank AGM:
Besides the ordinary issues of election of directors, approval of financial statements, dividends and director remuneration, there was also special business items on the agenda of amendment of articles to allow for electronic statements and transfer of dividends via mobile money.

As expected, shareholders approved everything and further approved selling the Bank's custody business, though some thought the bank was selling (itself) out to Stanchart.

Q&A
- Why a very big amount in non-performing loans and why are they not up-dated consistently every year? Response was BBK has loaned out over Kshs 100 billion and only about 2b have a paying problem, and most of them are secured so can still recover money by sale of collateral. They collected over kshs 200m from impaired loan accounts in 2008 and over Kshs 400m in 2009.
- What is the bank planning to do with loans secured by fake titles for grabbed land that the government is likely to repossess when the new constitution is passed? The bank doesn’t have such loans and if by bad lack such unfortunate events take place, they believe they will have recourse in the courts.
- Why is annual report font too small to read?
Future annual reports will have fonts that are legible to read
- Since the bank is making a lot of profit with ever growing retained earnings and they are selling the custody business, why can’t they give out more dividends and a share bonus?
Selling of the custody business will be concluded in October this year so money has not been paid to the bank yet. Even so the amount will be used for expansion of the bank. The bank has also been increasing the amount of dividend paid out considerably, by 25% this year from Ksh.2.0 in 2008 to Ksh.2.50 in 2009, and this will be the trend as the bank makes more profits. A bonus might be given next year if the business continues performing well.
- Why are Q1 results late and when are they going to be released? The bank is within the required reporting period and the results will be published Monday next week
humorous moment: Mama Helena, a 94 year old lady from Muranga, said (in kikuyu, translated by Director Judy Nyaga) that she’s too old to wait for the bonus next year and wanted the directors to give her bonus this year.This was supported by several old shareholders.
Goodies: a BBK labeled bag and packed lunch

Family Bank AGM:
... Got in late when they were discussing the only special business agenda. The bank was seeking shareholders approval to offer and allotment of unissued shares. This was approved, though one share holder asked if it meant that the bank would be going public on the NSE to which one director declined saying if that was the case shareholders will be informed first.... later got feeling that some shareholders are not for the idea to have the bank list on the NSE as they feel that they will loose out to new investors.

- Ng’ang’a Muchai retired after serving the bank for 26 years as a director.
- Goodies: a bottle of mineral water, cup of coffee/tea and snacks afterwards.
thanks Kainvestor, other guest posts are also welcomed

Kenya Bank Rankings 2009: Final Word

From the earlier estimates now there’s a complete list of the published accounts for all commercial banks as at December 31 2009.

Bank Assets Profit before tax
1. KCB assets of Kshs. 172,384 ($2.23 billion) [pre-tax profit of Kshs. 6,426 ($83.4 million)]
2. Barclays
3. Standard Chartered
4. Cooperative
5. CFC Stanbic
6. Equity Bank assets of 96,512 [$1.25 billion) and [5,627, $73 million profit]
7. Commercial Bank of Africa
8. National Bank of Kenya
9. Citibank Kenya
10. Diamond Trust
11. NIC
12. Investment & Mortgages
13.Prime
14.Baroda
15.Housing Finance
16.Bank of Africa
17.India
18.Imperial
19.Ecobank Kenya
20.Family Bank
21.Chase
22.Fina
23.ABC
24.Development Bank of Kenya
25.Gulf African
26.Habib AG Zurich
27.K-Rep
28.Giro
29.Consolidated
30.Guardian
31.Fidelity
32.Victoria
33.Habib Bank
34. Equatorial
35. First Community
36. Faulu Kenya
37. Credit
38. Transnational Just concluded a rights issue
39. Middle East
40. Paramount Universal
41. Oriental
42. Dubai
43. UBA Kenya new in Kenya
44. City Finance acquiring muicro-financeier
-- Southern Credit being bought out by Equatorial

Kenya Bank Rankings 1968 Edition

From reading a 1968 book Who Controls Industry in Kenya - a report of a working party comes some history of the Kenyan banking sector. It mentions that in 1968;

- Kenya had 10 banks and all but 3 banks were foreign bank off shoots.
- They had given loans of loans of £70m, deposits of £83m – a book ratio of 83% - compared to US or US which had rations of between 33% to 50%
- Depositors received 3-4% interest on deposits, and paid interest of 7-8% on loans [today deposit rates are about the same but loan borrowers pay 12 - 25%]

There were two tiers of banks then;

The Big 3 Banks which 3 held 80% of deposits and 85% of bank assets amounting to K£111 million in 1966 were
- Barclays Bank – had assets of UK£1.4 billion and had 83 branches, and Kenyan directors included Michael Blundell, S. Waruhiu and J. Opembe. Today it has 111 branches
- Nation & Grindlays (now KCB) had assets of UK £401 million and after tax profit of £1.2 million. It had 50 branches, and 16 directors who were all British. Today KCB has 165 outlets in Kenya
_ Standard Bank (now Standard Chartered) with assets of UK £892 million and a net profit of £3.1 million. It had 41 offices, 22 directors all British.

Next 7 Banks
- Bank of Baroda
- Ottoman bank
- Bank of India
- African Banking Corporation (subsidiary of standard bank)
- Commercial bank of Africa
- Algemene bank (General Bank of Netherlands)
- Habib bank

Other institutions
- Cooperative Bank of Kenya (established in 1967)
- National Bank of Kenya (established in 1968)

Finance houses
- Big 3 (licensed as banks)

- National industrial credit (then 40% owned by Standard Bank, now NIC)
- United Dominions Corporation
- Credit finance company (now CFCStanbic)

Others registered as ordinary companies
- Transaction finance corporation (subsidiary of cooper motor corporation CMC)
- Industrial promotion services (Now IPS, was est. in 1963 by the Aga Khan)
- Africindo industrial development (powerful Asian industrialists seeking credit facilities for exports o India with training for Kenyans there)

Development corporations
The big 3 commercial banks also owned development corporations to undertake longer-term investments than normal banks accepted; these were Barleys Overseas Development [assets of B£9m and 88 projects in east Africa], National & Grindalys Finance and Development [B£3m] and Standard Bank Development Corporation

Building societies
As at 1964 they had loaned k£3m more than they had in deposits; this was after sudden withdrawal in 1959 of £4m savings by European and Asian depositors
- Savings & loan society
- East African building society
- First permanent (east Africa)
- Kenya building society (subsidiary of commonwealth development corporation CDC)
- housing finance company of Kenya (now Housing Finance)

CRS frustrating NSE Investors

There’s a fascinating banking book called Blood Money about how Swiss banks collaborated to with German army to rob Jewish citizens during World War II – and after the war they made it very difficult for survivors to claim money or assets in their vaults, denying it was there it was in their custody or by asking survivors to provide documentary evidence that their (deceased) relatives were even customers of those banks etc.

I’ve had a few unpleasant encounters with custody registrar services custody registrar services (CRS) of late that need to be vented out. (Note they haven’t harmed anyone as far as I know )

CRS are registrars they handled registry matters for several Nairobi Stock Exchange companies like blue chip Bamburi, BAT, East African Breweries (EABL), Kenya Airways (KQ) Nation Media Group (NMG), Barclays (BBK) and others like Centum, Express, EA Cables, Crown, Sameer Africa, Olympia, Rea Vipingo, Kakuzi etc.
CRS has a tortured history. It was formerly a unit of Barclays bank, known as Barclays Registrars (BARS), but BARS got embroiled in what was massive insider fraud case ( chronicled here) a few years before stockbrokers become the no. 1 villain. Barclays then sold the unit to former employees and new shareholders (called CAPSEC). They remained in Barclays Building before moving to their current offices at Bruce House Nairobi, which still has a Barclays like feel.

My beef with CRS is this; they now are the ultimate custodians of shares, who put shareholders of KQ, BBK, and NMG etc through hoops to get anything done at their sixth floor office. CRS are supposed to do the following for their corporate clients (registration of share transfers, processing & distribution of dividend payments, share register maintenance, unclaimed dividends processing) but in doing so:

• They ask for documentation that is none of their business – and which is not required by the Capital Markets authority (CMA), Nairobi stock exchange (NSE) or central depository & Settlement Corporation (CDSC).
• They are not the frontline of customer service but act like they are, and yet no shareholder chooses to do business with CRS. People buy shares from stockbroker or banks and provide their documents at that point where they are comfortable providing any information that the bank or broker requests, but not to CRS with whom they have no affiliation with
• They are lazy – and ask for every document to be notarized (i.e. rubber stamped) by a lawyer on their panel. In other words, they assume you’re guilty first and need to be proven innocent. Truth is any bank or government office will do business with you if you show a national ID and give them a photocopy – not CRS, they send you to the lawyers.
• They are inconsistent, and any attempt to deal with them will usually require several visits back and forth in search of the extra documentation they can arbitrarily request .
• They are so risk averse in modern times. E.g. Safaricom with their registrars were able to register over 180,000 Safaricom shareholders to receive their dividends by mobile phone or m-pesa dividends – they did the registration at supermarkets and bus stations. I’m sure KQ would like to be able to do the same for their 72,000 shareholders, but if they used to CRS, shareholders would probably be asked for a blood test or fingerprints first!

The conventional wisdom for dealing with them is that you have to go and argue your case because its like being at the US Embassy and asking for a Visa - Simple for some, but not easy of you’re a student or resident living overseas (Diaspora) or a grandmother living far from Nairobi (a typical rural based, retail shareholder)

So what sill it take for CRS to shape up?
- More complaints to the over-burdened CMA or NSE held-desks?
- Appeals to the respective company secretary’s
- A shareholders petition to EABL, KQ, NMG, or BBK and others about the need for a more responsive and customer friendly registrar?

Mostly Mobile

The mobile phone story is everywhere now, and it seems it has taken on a life of its own, bringing real life transformations as more applications and uses develop around it.

What’s happening in mobile now here?

Conferences: Conferences have always been there, but tech conferences, especially mobile related ones, are really sexy these days thanks to Ushahidi – (currently working at Haiti earthquake emergency operations and M-Pesa from Vodafone/Safaricom.

February will see Mobile Web East Africa which will have a round-table format and will feature, among others @whiteafrican (Ushaidi), @ VincentMaher (Vodacom) @MosesKemibaro, and @kahenya.

Later in the month will be another Mobile Banking Conference (AITEC’s COMESA Banking & Mobile Money Conference)

Mobile Wallet: With over 8 million users signed up in two years, M-Pesa is all the rage in the media owing to the staggering M-pesa growth rate that continues. @whiteafrican in a recent post showed that mobile transfer volume numbers are actually quite low compared to formal banking systems; however the increasing number of subscribers and organizational partners that M-pesa is drawing indicates a growing disenchantment with traditional banking/payment channels. Partners now include airlines, schools, insurers, media houses (KBC, Nation media group), micro-financiers, banks (CFCStanbic, Family) as well as others such as Chloride Exide (solar equipment), Davis & Shirtlift (water pumps) , spare parts (Ecta-Subaru), Oriflame (beauty products), Gor Mahia etc.

Mobile Investment: Over at the Nairobi Stock Exchange, M-Pesa is represented in the form of Safaricom whose share price has been leading a resurgence of NSE shares by re-attracting foreign and institutional investors

chart from rich.co.ke
Faux Mobile However as simple mobile banking strikes a connection with consumers tired of hidden bank charges, banks are rolling out their own mobile platforms. Kenyans largest bank Barclays has embarked mobile banking and recently announces that mobile banking is free - except at Barclays ‘free’ costs 100 shillings, as this was the tariff increment passed on to its customers at the same time

Know Your Mobile Users: There is a mandatory registration of mobile subscribers is ongoing, a mild shock to the laizze faire pre-paid when anyone with less than $1 could acquire a new phone line . However the exercise in not unique, and SIM registration is also ongoing in Tanzania, Nigeria and other countries. In Kenya the exercise will help reduced instances of crimes related to mobile phones such as extortion.

Mobile Domains: In March, there will another conference in Nairobi - ICANN which concerned with domain names - and in Kenya, embattled domain registrar Kenic has just announced raft of new low priced domains including mobile domains - .mobi.ke for mobile sites, and .me.ke for personal sites.

Mobile Data Costs: Why the high costs of mobile communications? Some argue that Kenya has a skewed regulatory environment that that favours Safaricom and protects it as a government revenue generating machine (Safaricom is Kenya’s largest corporate taxpayer) but hurts the consumer through high communications costs.

2009 Kenya Bank Rankings Part II

10. Diamond Trust (2008 rank 11) : assets of 44.9 billion ($600 million) and nine month profits of 1 billion ($14.2 million). Loans (28.6 b) grew faster than deposits (33.1b), but expenses also grew faster than income. Neck and next with NIC and I&M banks with 44 and 41 billion in assets in position 11 and 12 respectively.
9. Commercial Bank of Africa (7): assets of 52 billion and nine month profits of 1.39 billion. Deposits flat (40 b) but loans (28.2 b) are up 20% this year and with GOK paper up 77%, however income and expenses are lower than 2008.

8. National Bank of Kenya (9): assets of 55.2 billion and nine profits of 1.4 billion. The bank is in great demand with a planned further divestment by GoK which may attract significant interest next year. For 2009, NBK has had a remarkable 40% growth this year, with 27% loans (12 b) and 48% in deposits (41 b)

7. Citibank Kenya (8) assets of 55.6 billion ($742 million) and nine month profit of 2.3 billion ($31 million). while embattled in the US, Citibank had a slow down in growth of loans (22.7 b) and deposits (29.7 b) compared to ‘08 but will still record a healthy +20% growth for year 2009.

6. CFC Stanbic (4) assets of 83.5 billion and nine month profits of 981 million. Bank had no growth in loans (43 b) and assets, but sitting on a load of cash - almost 16b billion (~$214 million)

5. Equity Bank (6) assets of 92.4 billion and nine month profits of 4.2 billion. Equity is still one of Kenya’s fastest growing banks though the 100% growth margins have tapered off to more manageable 30%+ for loans (55 b)and deposits (63 b) as it expands regionally in Uganda and Sudan and continues to roll out unique banking products.

4. Cooperative Bank of Kenya(5) with assets of 98 billion and nine month profits of 2.9 billion. The bank continues its 20%+ annual growth a year after listing and has diversified into investment banking. However their re-jigged executive shareholding following n ESOP is a sore point to be debated further.

3. Standard Chartered 3 with assets of 122 billion ($1.6 billion) and nine month profits of 5.2 billion ($69 million). Despite my earlier negative outlook, stanchart was a late bloomer and has come on strong: significantly, unlike other big banks, stanchart grew faster this year compared to 2008 - with 18% growth in deposit (89 b) and loans (40 b) while profits are up by 40% as income is up 23% compared to just 5% for costs while spearheading technologial products & services to their customers. Also increased investment in government securities by 77% and holds ~ Kshs. 36 billion now.

2. KCB (2) assets of 163 billion ($2.17 billion) and nine month profits of almost 5 billion ($66 million). KCB group is larger than Barclays in assets (185 b to 168 b) but has a smaller asset base than last year. In 2009 deposits (133 b) and loans (93 b) are up over 20% but profit is up just 3% - income is up 11% but expenses are up 15%, as KCB continued its expansion, opening six branches in November and also expanding in Rwanda Uganda, South Sudan and soon to Burundi. The bank also continues to weather occasional storms against it sustainability with triton and now Kenya planters coffee union.

1. Barclays Kenya (1)assets of 168 billion ($2.25 billion) and nine month profits of 6.63 billion ($88 million) . Barclays shrunk by 2% compared to growth of 17% a year ago with lower deposits (123 b) and loans (96 b) compared to a year ago but with profits ahead of last years pace, perhaps boosted by GoK securities investments which are up 23% this year.

M-Pesa as a low cost bank account

Safaricom have extended the registration deadline for m-pesa divided payments via cell phone to today - October 15. Over 465,000 of their shareholders own less than 1,000 shares, and will get a dividend payment of less than 100 shillings ($1.31), with most in this category likely to get about shillings, assuming they have not bought any shares since the IPO allocations.

M-Pesa's latest offering During the dividend registration process, Safaricom has clarified that shareholders receiving dividends of less than 100 shillings will only be able to buy airtime with this, while those with larger dividends will be able to withdraw the cash, pay bills, send it to other people etc.

All this brings up the question that has been asked several times, most recently by research group - CGAP in the blog post cell phone bank accounts as an incentive to save money. If you compare holding cash in an m-pesa account, you are able to gain comparable benefits to low cost bank accounts offered at several leading local banks – and can use banks for those services that M-pesa or Zap (from Zain) don’t have e.g. withdraw cash via m-pesa, and go to Equity Bank and buy a banker’s cheque for 50/=

Benefits of m-pesa banking
- 24 hour banking: More reach & access than any bank or ATM network
- Mobile banking with operator tends to be cheaper then mobile banking via bank provided services
- Saving in transport costs and banking transaction costs
- Can pay a variety of bills for utilities at a low cost
Challenges of m-pesa banking
- Lack of float at dealers to transact/occasional mpesa system downtime
- No credit history; and the clumsy expensive statement from Safaricom not useful yet
- Calls for discipline to build savings
- Funds are not insured, and are more prone to crime. And dealing with a stolen phone in Kenya is not a pleasant experience.

Anyone tried to use m-pesa as their main bank a/c?

Week on Twitter: September 22

Another re-cap of a week full of Twitter - @bankelele posts which included issues like Olympia prepares for shareholders then postpone AGM, a skunkworks forum and a fibre summit are coming to Nairobi this week, but how is the fibre being used in government? There’s a new newspaper from the government of Kenya and a new magazine from EAM. Charterhouse bank may re-open while PTA bank has a silent bond, Kenya airways flies to ndola while Emirates air starts selling world cup 2010 packages, and finally twitter matures by enabling medical advice for Kahenya, drawing in the US ambassador to Kenya and also by helping Stanbic Bank improve customer service

- East Africa Fibre Summit - in Kenya next week http://www.aitecafrica.com/...
Emirates Air starts selling 2010 World Cup South Africa Packages http://tinyurl.com/pbj7e3 (where's SAA, @kenyaairways, Ethiopian?)
New GoK newspaper title Kenya Today; first issue has bullet trains, brigadier Ali, SMEs, IdiAmin, MJ, and rants about parliamentary dictatorship & NYTimes writers – all at a cost of Kshs 30/=
- @SupremeGREAM I'd be very surprised if Charterhouse Bank reopens. It will be like re-licensing Triton; @kachwanya is correct, something is smoking at Charterhouse http://bit.ly/3lk8d2
- R/T @kaboro Skunkworks Tech & Entrepreneur Forum, 29Sep Speakers: Liko Agosta, Verviant, Joshua Wanyama, Pamoja, Alex Gakuru.
- Help @kahenya with medical advice http://bit.ly/1YDJ3F #rhabdomyolysis
- @RookieKE CFA one very tough exam, it has driven some very bright professionals up the wall. CFA pass rates Level I: 46% Level II: 41% Level III: 49% @kainvestor http://tinyurl.com/mwegha i salute those who have tried it
- Tiomin say they have made progress with Canadian and Chinese investors on #kwale. Wait till they get to environment minister #michuki
- Kenya government has asked all ministries/agencies to email copies of procurement tenders - to be complied at a portal http://www.tenders.go.ke/ ; also http://www.tandaa.co.ke/ which is "all about Kenyan content" has NO KENYAN CONTENT! Just Anheuser Busch, French news, love in Warsaw...
- @kenyaairways 44th destination launch flight lands in Ndola #Zambia http://bit.ly/hMFk5
- Barclays waives joining fee for gold (6K) & classic (3k) cards http://www.barclays.com/afr... #youllpaysomehow @coldtusker i have no credit card, i can usually tap family or friends #TIA
- R/t @joosi @davos World Economic Forum (WEF) to be in Tanzania May '10. Nairobi star said kofi annan steered it away from Kenya’s bad leadership
-
#Newshot and #bullseye are not too funny: seems marende may have banned use of parliamentary clips for satire. Did njoki spell stakeholder as steakholder in her protest letter? #NTV
- Sunday nation writes about US ambassador on twitter @usamb4reform, but twitter yet to be taken up keenly in Kenya unlike facebook
- Nairobi water company appoints 4 debt collection agencies
- PTA Bank has a $21 million 14% bond in Uganda closing Oct 2. Pity they stopped updating their website http://www.ptabank.org
- New women's magazine called Move out this week from EAM, costs just Kshs. 80 ($1) http://www.drum.co.ke/node/... was true love too pricey for the ladies?
- Twitter improves bank service R/T @coldtusker Thanks to @StandardBankGrp I got a call from CFCStanbic Kenya re: my problems at the bank
- R/t @kainvestor Kenya Ministry of Water office connected to fibre cable! But nobody knows what do with it...just watching movies online.

Olympia CEO comments South Africa has been a real challenge, but we still believe in the market M Matu http://tinyurl.com/klheg7 ; later Olympiacapital muddle continues, now AGM postponed to 2nd-oct cause delayed fin statement dispatch

Where to Bank an Adsense Cheque in Nairobi

This is a follow up post to the long-running question of what do with an adsense cheque or its’ equivalent. There are dozens of Kenyan bloggers building up small net earnings from adsense and similar web-based advertising companies – but who usually pay in US$ cheques - minimum $100 i.e. now almost Kshs 8,000 which is a tidy sum for a part time activity.

The post is of interest because the costs of clearing such a cherub can run up to 50%at some banks. After the last post on the subject we had these as the cheapest banks:

2. Family Bank - Kshs. 650
3. KCB (said) minimum Ksh.800
4. Co-op Bank - Kshs 1,000
1. I can now add to the top of the pile Barclays Bank of Kenya who charge just Kshs 200 /= (~$2.5) the lowest so far I have verified.

KCB was the only bank (out of 40) to respond to a query via the general e-mail account published by the banks. What does this say about the level of internet interaction? Very bad. There are some non-existent companies with great interactive websites, but with Kenyan banking its the opposite – some great innovative banks who put up massive website, and which, though updated often, rarely respond to to online queries and feedback.

Twitter would be a nice (free) tool for them to use, but no bank has yet embraced corporate blogging, and none are on @Twitter yet. @MosesKeimbaro had a recent post on Kenyan brands on Twitter. – with the most prominent and active being @KenyaAirways. Also here's a great list of other financial sites on twitter.

Reading the Barclays Tea Leaves

Barclays Kenya just published their 2008 annual report; what does some interesting points about the banking sector.


Barclays Peek
- Is the second largest bank in Kenya behind KCB, but still tops in profit – with Kshs 8 billion ($100 million) before tax. Has 126 billion ($1.58 billion) in deposits, loans of 108 billion ($1.35 billion) and total assets of 168.5 billion shillings. It would probably reclaim the number one status from KCB, but KCB shareholders will next month absorb the assets of S&L, their mortgage subsidiary
- Shariah Banking Barclays launched La Riba in 2008 – and in 2008 they managed to mobilize over 2 billion in new la riba deposits to stand at 3.3 billion ($41 million) at end of year, but gave out just 19 million in loans
- Customers They have a popular Business club – with over 10,000 members some of whom were flown to Dubai, China and Holland. Barclays had 930,000 customers in 2008 (2007 was 580,000) – compared to Equity Bank’s 3.3 million customers, and 60,917 shareholder 60, 917 (up from 58,945 in 07)
- Staff cutback? Employees in 2008 reduced by 16% - as group had 5,571 at December 08 compared to 6,900 in December 07. In 06 they had 2,197 (but it appears in 2008, they shed the part time staff whose numbers reduced from 4115 to 1698)
- No thanks Agriculture. Agriculture is referred to as the backbone of Kenya’s economy7, but Barclays estimate their exposure to the sector to be just 1% of loans. Private industries account for 44%, with 10% each to manufacturing and to transport & communications sectors.
- Asset finance reduced?? Assets under financial lease decreased slightly – still at 6.1 billion
- Gloabl crisis / External Impact? a 1% or decrease in interest rates would impact profit about 5%, but there’s no impact from strength/weakness of Kenya shilling (bank only does business in Kenya)
- Directors: the three directors who were appointed at previous times are up for re-election on May 15; Brown Ondengo (2003), Jane karuku (2003), and Paul Phemngorem (1998). Barclays (UK) parent, with 68.5% of the vote, will pretty much determine who will remain or leave the board. No other shareholder has more than 1%, with the next largest being Kenya’s national social security fund (NSSF) with 2%
- Cheaper to borrow overseas than the NSE: The bank received subordinated debt in the form of a tranche of NSE listed bonds of 2 billion shillings (3,078b) repayable over 5 years – at 10.36%. They also borrowed 1.25 billion from their Barclays parent; BBK in the form of a 10 year loan at just 2.39%
- Pension Funds gloomy outlook The Barclays staff pension scheme with 44% equity investments was down 13% in value (to Kshs 7 billion), compared to a gain of 6% in 07

Kenya Bank Rankings 2008 Part II

Follow up to part I and tracks change from December 2007 to 2008 in assets and profits

Tier 1 (Assets over 25 billion shillings)
1 KCB (2) 174,712-assests (Kshs. 175 billion, $2.18 billion) 5,394 million ($67million)-profits 109,845-deposits 79,343-Loans (assets up 55%, profits up40 %, overtake Barclays to be No. 1)
2 Barclays (1) 168,786-a 8,016-p 126,408-d 108,086-L (assets up 7%, profits up 13 %)
3 Standard Chartered (3) 99,140-a 4,709-p 76,898-d 43,299-L 8% (assets up 8%, profits down 4 %)
4 Cooperative (4) 83,918-a 3,337-p 65,934-d 53,293-L (assets up 28%, profits up 46 %)
5 (--) CFC Stanbic 83,166-a 1,313-p 61,529-d 44,205-L (new bank created by merger combined assets up 34%)
6 Equity (6) 77,135-a 4,757-p 48,977-d 40,858-L (assets up 45%, profits up 101%)
7 Commercial Bank of Africa (8) 50110-a 1694-p 41715-d 26309-L (assets up 27%, profits up 21%)
8 Citibank Kenya (6) 47534-a 3353-p 31192-d 18154-L (assets unchanged, profits up 89%)
9 NIC (10) 42,704-a 1,474-p 35,238-d 29,955-L (assets up 36%, profits up 41%)
10National Bank of Kenya (7) 42,696-a 1,797-p 34,278-d 8,950-L L (assets up 3%, profits up 11%)
11 Diamond Trust (11) 41,592-a 1,336-p 32,689-d 25,460-L (assets up 37%, profits up 44%)
12 Investment & Mortgages (12) 36,656-a 1,620-p 28,355-d 25,887-L (assets up 25%, profits up 25%)

Tier 2 (Assets of 6 – 24.9 billion)
13Prime (15) 19,945 million-assets (~$249 million or Kshs 19.95 billion) 460 million-profits (~$5.75 million) 15,662 million-deposits 9,426 million-Loans (assets up 44%, profits up 45%)
14Housing Finance (17) 14,330-a 196-p 10,089-d 10,419-L (assets up 38%, profits up 50%)
15 Imperial (16) 13,432-a 673-p 10,414-d 8,276-L (assets up 15%, profit up 19%)
16 Bank of Africa (23) 12304-a 93-p 8708-d 6856-L (assets up 61%, profit down 41%)
17 Bank of India (18) 12049-a 609-p 10211-d 4448-L (assets up 16%, profit up28 %)
18 Ecobank (19) 10499-a 67-p 8341-d 5126-l (assets up 11%, profit down 43%)
19 Family Bank (20) 10,410-a 531-p 7,404-d 5,890-L (assets up 21%, profit up 99%)
20 Baroda (14) 10361 633 15165 8938 (assets down 30% %, profit up 27%)
21 Chase (27) 10,300-a 247-p 7147-d 5139-L (assets up 80%, profit up 37%)
22 Fina (21) 9,865-a 82-p 8,113-d 6,190-L (assets up 22%, profit down 29 %)
23 K-Rep (24) 8,184-a -472(p) 4,502-d 5,935-L (assets up16 %, slipped to loss maker)
24 ABC (26) 6584-a 224-p 5365-d 3550-L (assets up 7%, profit up 21%)
25 Habib AG Zurich (25) 6,557-a 242-p 5,373-d 2,182-L (assets up 6%, profit up 19%)
26 Development Bank of Kenya (32) 6,520-a 171-p 2231-d 3439-L (assets up 39%, profit up 9%)

Tier 3 (assets below 6 billion shillings)
27 Giro (28) 5,938 million-assets (~$74 million, Kshs 5.93 billion) 126 million-profits (~$1.6million) 5,127 million deposits 3,411 million-Loans (assets up 6%, improved profit up 207%)
28 Guardian (29) 5,558-a 44-p 4,586-d 3,553-L (assets up 3%, improved profit up 84%)
29 Southern Credit (30) 5,171-a 6-p 4,106-d 2,655-L (assets down 6%, profit down 85%)
30 (--) Gulf African 5,000-a -382(p)3,249-d 1,932-L (new Shariah bank)
31 Consolidated (34) 4,657-a 85-p 3,279-d 2,751-L (asset up 13%, improved profits up 226%)
32 Habib Bank (35) 4,491-a 146-p 3024-d 988-L (assets up 17%, profit up 37%)
33 Victoria (33) 4,460-a 170-p 3,582-d 2,778-L (assets up %, profit up %)
34 Equatorial (31) 4410-a -8(p) 3668-d 2307-l (assets down 9%, slipped to loss maker)
35 Fidelity (38) 4,329-a 73-p 3,778-d 2,787-L (assets up 39%, profit up 62%)
36 Credit (36) 3,637-a 79-p 2774-d 1810-L (assets up 8%, profit down 40%)
37 Transnational (37) 3,414-a 121-p 1,891-d 1,441-L (assets up 6%, profit up 43%)
38 Middle East (39) 3,297-a 30-p 2,021-d 1,651-L (assets up 6%, profit down 68%)
39 (--) First Community 3,180-a -307(p) 2091-d 868-l (new Shariah bank)
40 Paramount Universal (40) 2,646-a 51-p 2,109-d 1,268-l (assets up 12%, profit up 19%)
41 Oriental (41) 2,289-a 68-p 1,314-d 958-L (assets up 35%)
42 Dubai (42) 1,639-a 7-p 1,032-d 957-L (assets up 6%, profit down 50%)
43 (43) City Finance 538 -a -3(p) 164 -d 193-L (assets down 28%, 90% financial improvement to report loss of 3m)

Kenya Bank Rankings 2008

Top 10 banks at December 2008

Assets
1. KCB (rank last year - 2) Kshs. 174.7 billion (~$2.19) billion
2 Barclays (1) 168.8b
3 Standard Chartered (3) 99.14b
4 Cooperative (5) 83.9b
5 CFC Stanbic (4) 83.2b
6 Equity (6) 77.2b
7 Commercial Bank of Africa (7) 50.1b
8 Citibank Kenya (8) 47.5b
9 NIC (10) 42.7b
10 National Bank of Kenya (9) 42.7b
Then Diamond Trust, Investment & Mortgages, Prime, Housing Finance, Imperial

Profits
1. Barclays Kshs 8.0 billion (~$100 million)
2. KCB 5.39b
3. Equity 4.76b
4 Standard Chartered 4.7b
5. Citibank Kenya 3.35b
Then Cooperative 3.33b, National Bank of Kenya 1.8b, Commercial Bank of Africa 1.7b, Investment & Mortgages 1.62b, NIC 1.47b

Deposits
1. Barclays Kshs. 126.4 billion (~$1.58 billion)
2. KCB 109.8b
3. Standard Chartered 76.9b
4. Cooperative 65.9b
5. CFC Stanbic 61.5b
Then Equity 50b, Commercial Bank of Africa 41.8b, NIC 35.2b, National Bank of Kenya 34.3b, Diamond Trust 32.7b

Loans
1. Barclays Kshs 108 billion (~$1.35 billion)
2. KCB 79.3b
3. Cooperative 53.3b
4. CFC Stanbic 44.2b
5. Standard Chartered 43.3b
Then Equity 40.9b, NIC 30b, Commercial Bank of Africa 26.3b, Investment & Mortgages 25.9b, Diamond Trust 25.4b
Source: from published audited accounts for 2008

KCB Dodges Triton Bullet?

Kenya Commercial Bank released their 2008 financial results over the weekend.

No. 1 but… KCB is now Kenya’s largest bank by bank assets and group assets, though Barclays still has a much larger book of loans and deposits, as well as higher profits.

Also with less than half the assets, Equity may be more profitable than KCB by 2010 if its exponential growth continues.

KCB assets were up 56% and profits 40%, with deposits up 28% and loans up 40% compared to 2007. 2008 was a balanced year for the bank actually performed quite well in Q4.

IPO Killer KCB has effectively delivered the final nail in the coffin of the Kenya Pipeline IPO by suing the corporation for almost $14 million of missing oil. The bank is also leading the case against Triton.

KCB beats expectations A January 2009 analysis by African Alliance pegged a Kshs. 2 billion hit to KCB profit and a pre-tax profit for the bank of Kshs. 2.2 billion - yet KCB managed to report a pre-tax profit of Kshs. 5.3 billion. AA also had an overweight recommendation with a price target of Kshs. 28.85 (at the time KCB was 21) and it looks very attractive at Kshs. 15.5 today.

Q4 watch In the September to December 2008 period deposits were up by 9% and loans by 4% - compared to Q1 loans which were up 4% and deposits 17%. KCB also built up quite a huge cash position with 39 billion (~$500 million) in bank placements at the end of the year.

2009 watch This year the bank has announced, a surprising decision to extend real estate finance to estate developers t the tune of Kshs 250 million (~$3.1 million each) and is also one of the few banks to continue offering personal loans in a very public way with media advertisements

More Nairobist analysis on KCB and KCB and Triton