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.

NIC Bank Move to Now

Ten years after NIC pioneered a revolutionary flat fee banking model, they have now launched Move To Now a banking model that makes time consuming banking experiences more convenient for any customer who can use a computer or smart device. This is represented in faster decision making, likes asset finance loan approval decisions which NIC delivers within 12 hours of application that can also be placed at various local vehicle dealers.

At an event this week, the Group Managing Director and his team highlighted four of the features of MovetoNow  including online account opening, online banking, a mobile app and online cheque deposits  - all of which can be done without having to visit a bank branch, whether for existing or new customers. 

Notably the accounts are in two types;  one being a transactional (pay as you go) model that charges Kshs 30/= per activity done by a customer, or a flat fee of Kshs 800 ($9.41) per month for a bouquet of products. The NIC app has all the features of the online platform as well as others like traffic cameras, movie listings, and the ability to make KRA enquiries and payments.

At the launch of M-Shwari in 2012, the then Immigration Minister spoke of an online platform that banks could access to immediately confirm identities of citizen identity/registration documents and this seems to be what has enabled banks to offer account opening verification by phone.

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.

Why Telco Mobile Money wins over M-Banking

Safaricom's mobile money transfer service M-Pesa is only five years old yet it has about twice as many subscribers as all the bank accounts in Kenya. The numbers are not growing as fast any more and many commercial banks now offer services that link to telco mobile money, or promote their own m-banking platforms, or extend services to customers through agents

But the attraction of mobile phone companies as preferred mobile money wallets is that they have gained customer trust with simple tariff structures. Millions of Kenyans are comfortable sending and receiving money by mobile phone. They know what it costs e.g. Kshs. 30 shillings ($0.40) to send money, and Kshs. 30 to withdraw money on the other end.

But for banks, they enter the mobile phone relationship with a stain in the minds of many of their customers as they have a legacy and history of imposing dozens of fees on their account holders & customers. While there are banks that have no ledger fees (just transaction charges similar to mobile phones Kshs 20 or 30 per transaction) and others that have free 'mobile' banking, the legacy of banks is also one of changing customer terms, raising tariffs and interest rates, phasing out services, migrating customers to new costlier services, phasing out services that were promoted as 'free', migrating their customers to more expensive options at will.

For comparison, if you leave Kshs 1,000 (~$12) in your M-Pesa account it will be there until you use it, with no phantom charges eating it away (it won't stay in your phone for 6 months). But if you leave the same Kshs 1,000 in your bank account for a few months, the money will be exhausted by various tariffs like ledger fees, dormant account fees, minimum balance fees and the account will be drained out and shut down. Unfortunately, a similar distrust extends to companies offering third party payment services m-commerce, payments, settlements etc. as they are new or unknown entities to customers until they establish a behaviour pattern with customer tariffs.

This should also be a caution to mobile operators not to shake up their cost structures too often. Safaricom recently changed their M-Pesa tariffs, but by having simple & clear disclosures and not levying hidden or unexplained charges, they will keep the trust that their customers have.

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.

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.

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

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?

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?

M-Pesa IPO?

Mobile transfer solution M-Pesa from Safaricom was on Monday inaugurated as loan repayment tool for microfinance.

SMEP using M-Pesa for loan repayment is now the latest M-Pesa partner joining satellite TV, medical cover, investment funds, spare part utility provides and insurance companies that now enable their customers to remit monthly or periodic solutions via M-Pesa.

This phenomenon is not unseen, it addresses gaps in the banking sector; and now M-Pesa solutions are coming from the customers, not Safaricom - which is the way it should be.

M-Pesa Flaws: M-Pesa with it's 5 million customers is not perfect and it may have reached the zenith for now; it is pricey, it requires business owners to put up substantial credit (float) to access the system, it's statements are crude etc. Electricity bills can now be paid by M-Pesa, but accounts take 48 hours to be credited, while with rival transfer product Zap (from Zain) they take 24 hours. The fault probably lies with Kenya power, which has forged closer links with the less established Zap and Standard Chartered Bank.

Loan potential: M-Pesa, a Vodafone solution is now goes into the area, that no one can contain credit growth. The SMEP (micro-finance loan) repayments are just a start. Banks and savings & credit societies (SACCO’s) can easily utilize M-Pesa for loan repayments under the current 35,000 shilling ($440) daily transfer limit. e.g. a 400,000 shilling ($5,000) SACCO loan at 12%, repaid over one year will have installments of 35,932 per month, or a car loan of 800,000 shillings ($10,000) repaid over 3 years at 21% interest would have repayment of 30,140 per month.

New markets: M-Pesa has been built on the back of Safaricom, operating informal relationships with subscribers who submit a bare minimum of information. That relationship requirement with customers requires a lot less than with a bank and international know your customer guidelines (KYC). Already, all the mobile companies have aspirations of moving on to international transfers and merchant banking which will also bring them more into collision with banks, western union and debit/credit card giants.

New regulations: M-Pesa's already fractious relationships with banks is likely to get worse; and with (soon) three mobile companies offering money transfers, and all eating into bank ledger and interest income, there will be calls to rein them in. Soon it is likely that the government of Kenya will create an e-commerce regulatory body (another parastatal) since neither the communications commission or the central bank has absolute authority.

Second Safaricom IPO: Vodafone should spin off M-Pesa into a separate company. M-Pesa is now able to stand on its own, and handle its own competition, regulatory, and licensing issues. Safaricom should let it go, focus on other voice and data services, while continuing to enjoy the revenue M-Pesa spins, by subscribing for shares in it. By freeing it from Safaricom, M-Pesa will move from being an 'unregulated’ but licensed solution owned and managed by Vodafone (UK) to a local-listed company, owned and operated in Kenya.

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.

Kenya Bank Charges

Late in February 2009, the Central Bank of Kenya released their bank charges survey (PDF). The earlier comments after the last survey still apply mainly:

1 It’s a good read
2 Customer satisfaction/service should be measured (it’s not just about costs)
3 Savings accounts do attract charges (any pay very little interest)

Banking will probably get cheaper as banks adapt to competition from mobile companies –i.e. Safaricom M-Pesa and Zap from Zain which are becoming become mini e-wallets.

Also found was a recent article on avoidable bank charges - which were:

1 overdraft fees
2 ATM fees (that means avoid pesa point and Visa charges)
3 Minimum balance fees

Bank’s Need to Embrace MPesa

banks need to adapt to M-pesa, not fight it

A recent Nairobi Star story links banks to m-pesa probe in an underhand move to stifle the growth of mobile company Safaricom’s money transfer service - M-Pesa.

How much growth? As a recent article put it four million Kenyans can’t be wrong in reference to those who have signed up for the M-pesa and which the company recently stated to be clocking up to 10,000 new registrations per day!

Here’s why:

1. It makes sense and that's all the law it needs Is it illegal and does it need more legislation? The answers are probably not and yes. Probably Not - because you can’t legislate everything, more so the simple payment of cash from person A to person B - whether a prostitute or a priest. And Yes, M-pesa agents need to beef up security, systems and training of staff as its popularity grows.

But the argument that M-pesa will be used for money laundering or other crimes is laughable - who launders less than $500? (Kshs. 35,000 is the maximum transaction amount on m-pesa) You are more apt to find a transfer of Kshs. 35 million at a bank - and banks were themselves used to prop up the numerous local pyramid schemes before they all imploded.

2. M-Pesa is affordable banking: Is it unfair? What’s to stop a bank from operating branch-less accounts? Several small banks have 1 – 3 branches and can comfortably and profitably serve their customers. Most Kenyan banks still don’t want to serve the unbanked and M-pesa has evolved because banking is still too expensive for the masses. There’s Mzansi in South Africa and in the absence of a similar program, Kenyan masses have created their own Mzansi in M-pesa. It is not Safaricom’s fault that they are so popular – take away m-pesa and people will go back to stuffing cash in tins, rolling them in blankets and mailing them in cartons on buses. They will not go back to open new banks accounts or queue at western union.

3. M-pesa is better than banks in some functions: Two scenarios
- Having a bank account is of no use sometimes, as one executive told me. She may be in Malindi looking to hook up Flavio Briatore or find Obama’s village (Nyangoma – not Kogelo) - her bank account is in Westlands (Nairobi) she has no way of reaching that money (avoid credit cards) - but her bank has no presence in many parts of the country, but from where she can access M-Pesa
- I received a small cheque payment of Kshs. 10,000 shillings ($130) that I deposited in my bank account on 19th December – today it’s 10 days later and the cheque has not cleared – reason is that four working days have not elapsed - (banks don’t count weekend or holidays – thought they work six days a week). What the banks does - transferring money from a creditor to a debtor (me) is no different than what M-pesa is doing. But with access to the same technology and similar resources, M-pesa takes 3 minutes, while the bank system takes 10 days.

4. M-Pesa is going to get more mainstream: More corporations are embracing the cost cutting and simplicity of M-Pesa. You can now pay for satellite TV (GTV), some insurance plans, and mutual funds (Old Mutual) by M-pesa. Next up will probably be two large companies that are in dire need of a cheaper alternative of money transfers
- Safaricom with its 800,000 new shareholders will probably have to pay a dividend next year. The use of text messages/e-mail and M-pesa will save the company millions of shillings that would be spent on printing, postage and cheque processing charges
- Kenya power & lighting company; as KPLC takes electricity to thousands of new customers in rural Kenya and inner cities, it has a dire need for cash collection points. It has used the banking system and the post office (paying an average Kshs. 30/= for each payment), but M-pesa would be a cheaper (for them) and more convenient option (for distant customers) who can also have been alerted by SMS on how much to pay.
- Also microfinance institutions (and shylocks) – who make small loans, for short periods of time. The sooner they can transfer funds, the clock is ticking, and their customer can access funds immediately and pay them back at the last minute without each having to wait for cheques to clear. M-pesa fits into the last minute thinking of many Kenyans – who tend to wait till the last minute to do many things including payment of electricity bills!

Banks need to change and embrace M-Pesa as it is able to do some things they can't or won't do. e.g. The lady in scenario one has a relationship officer at her bank, who can move her funds from one account to another – why not also enable her to M-pesa the next Ms. Briatorie her money? This can be an extra service from bank from which they can earn some income, instead of opening a branch in Malindi?

They should take a cue from other players such as

- Pesa point (ATM network) who may be losing some business to M-pesa but have now have embraced and partnered with them so that customers can withdraw cash from M-pesa 24 hours a day at any of their Pesa Point ATM
- Western union whose local money transfer system may have been eroded by M-pesa will now be the international arm for remittances through Safaricom's M-Pesa
- Banks like Housing Finance and Family Bank already process M-pesa payments for their customers.

FYI
1. Are you a heavy M-Pesa user? Did you know you can get a statement of your M-Pesa transactions - a statement of the last three months costs Kshs. 500 from Safaricom, which is about what many banks charge for interim/instant statements
2. Want to become an M-Pesa agent?
3. Other interesting recent posts about M-Pesa.

Kenya Bank Charges

The Central Bank released the latest report of a Kenya bank charges survey (PDF)

Notes
- It’s a good read, which may lead account holders to check their statement and shop around for cheaper banks. However many account holders get one or two statements a year at most, so this may not be useful to them
- Also, though some banks score good points for low charges there are other aspects to customer - service to be considered in the choice of where to bank.
- One flaw in the survey is that it assumes that the banking act is applied and that no charges are levied on savings accounts - I’m yet to see a bank that does not
- This years' survey acknowledged bundled or flat fee accounts such as Move (from NIC) X from (Stanchart), Bouquet (Barclays), and Open (D-Trust)
- Customer who take loans calculated using the flat rate method end up paying more than the reducing balance method
- The final table shows a growing list bank automated teller machines (ATM) which are being established for customers to use. But if there are 3 ATM’s next to each other at Nakumatt Junction, 3 next to each other at Kenyatta Hospital and 6 at the international arrivals terminal of JKIA, the spread is not very useful.

Bank charges survey

The Central Bank and FSD Kenya released a report on bank charges – a summarized version of which is now available from the CBK site.

It is an interesting report based on a survey of several hundred bank customers. CBK used to publish bank charges every quarter in the newspapers from about 2003 to 2005, which were not clearly understood by the public then they appear to have decided to used FSD Kenya to do a more comprehensive analysis.

The report highlights a problem, which many bank customers face. They start a relationship with a bank for one reason, but without knowing all the charges for various others banks services. E.g. it shows that you may take a loan at one bank because of the low interest rates, but pay a lot more to service the loan, or you may open an account because of the low opening balance or free salary processing, but find it very expensive to do anything else.

Charges form an important part of bank income (the top 5 banks earnings based on commissions were Oriental, EABS, Baroda, Family Finance and Equity who all earned over 50% of their 2007 income from non-interest earnings). In terms of bank charges, Equity Bank has been very popular for two reasons

(i) They came on to the banking scenes four years ago without any legacy charges; while other banks used to adjust their charges, based on what other banks were charging, Equity were able to set their own charges
(ii) Many of their services (with low charges) are offered to customers and non-customers alike – like 50-shilling banker’s cheques.

I hope the report, and others from FSD Kenya will be republished in a daily newspaper for the millions of bank customers who don’t have Internet access to review (this is the case in Uganda)

2007 Kenya Bank Ranking Part III

winners

Asset growth 2006 – 2007
Equity 165%
Family 57%
DBK, City Finance 42%
Diamond Trust 40%
Fidelity 38%
Then K-rep, Barclays, Stanbic, Prime, I&M

Loan growth
Equity 100%
Stanbic 73%
Chase 61%
Family 59%
DBK, Baroda 57%
Then Diamond trust, Barclays, Fidelity, KCB, NIC

Deposit growth
City finance 131% yes but to 231m
Equity 93%
Diamond trust 45%
Transnational 42%
Fidelity 39%
Then Credit, k-rep, Chase, I&M, ABC, Baroda

Profit growth
Habib 1,600 %yes but to 107m
Bank of Africa 159%
EABS 149%
Equity 114%
Fidelity 88%
Then Co-op, Transnational, Bank of India, NBK, Prime, Consolidated, Chase

Losers

No profit City finance (-29m)
Declining profit: Guardian -47%, Giro & Dubai -30%, Fina & Equatorial -22%
Declining deposits: Middle East -19%, Victoria -6%
Declining loans: NBK -70%
Declining assets: Middle East -9%, Victoria -4%
Insider borrowing up 218% at Family, 189% at K-rep, 116% at Consolidated, Stanbic 74%, KCB 55%, while down by 90% at NBK
NPA’s : Up 233% at k-rep, 97% at chase, 59% Dubai, 51% at Equity and 48% at bank of Africa. And NPA’s were down 84% at NBK, 50% at Co-op, 40% at Barclays, 35% Southern credit and 34% at Housing Finance.

IPO Tales: 13 days to go

- Oversubscription: If 9 million Kenyans voted last year it's possible a ¼ of them will buy shares. Or that ½ the people with bank accounts will apply for shares. On that, with two weeks to go, new banks with IPO loans include KCB (Uganda), CFC and even high street CBA.

Happy banks: Two banks may have crossed the 1 billion shilling mark for new IPO loans after just a week. They are also earning other fees such as placement/facilitation/arrangement of 1 – 2% of each loan, fees for bankers cheques, returned cheques, money transfer and other myriad charges from the IPO process.

And the fine print of many bank loans lack clauses that deal with some critical questions which borrowers should be asking before they take out 3 year loans, such as;

- If I don’t get a full allocation, can I pay back say 80% or entire loan of loan immediately?
- If shares rise to 10 shillings can I sell my shares in June and pay the bank?
- If price drops to 4 shillings and I want to cut my losses, can I sell the shares?

Multiple share accounts: CDS gets 30 shillings per application, and the transaction managers have warned retail investors not to open many accounts and apply for IPO shares in many names. I saw one I-bank report, which mentions that investors who do this will be charged a 1.5% consolidation fee, but that is not contained in the prospectus.

Bank Wars

Equity vs. Barclays
Equity Bank is often cited as being what caused banks, especially Barclays Bank to change their focus. But is it true, or is Barclays expanding all over Africa not just Kenya, in terms of opening new branches and expanding into the retail sector.

political muscle: A recent editorial strongly defended Equity and it has also received strong defense from Government ministers whenever allegations have been thrown against the bank.

Equity has also not been shy in employing political muscle themselves. The delayed conversion of rival building society into Family Bank has been linked to Equity's influence and the bank was also instrumental suffocating pyramid schemes who grew to rival banks for deposits while ironically relying on banks for their massive fund transfers to/from investors.

Equity in 2008: Even if 2008 brings in a new government, Equity Bank should be ok. While the current government has been kind to Equity, giving it the space and access to market, environment to expand, Equity has been smart to use their access to Government to grow, without necessarily going to bed with the government. I.e. targeting government and parastatal deposits and banking business. Equity has expanded nationwide and has customers throughout the country and a positive image as a mwananchi bank. Think Kenol, not Mugoya for Equity next year, if the election follows the current polls

other banking briefs

Barclays bond: Barclays Kenya will issue a $75 million bond over 7 years.
Seem receptive, though their last bond to finance a mortgage business was scuttled by former finance minister who asked that the bank invest new money into Kenya, not borrow from the local market. That should whet the appetite for corporate investors who may be put off by the anticipated over-subscription (wasted funds, lost opportunity, delayed refunds) of a Safaricom IPO

But is Barclays parent in trouble? The global financial crisis has also taken done in the Citi (bank) CEO

Merger slows It's a shame that the CFC-Stanbic merger can be jeopardized by a frivolous lawsuit frivolous lawsuit. How does a 50 million shilling dispute balloon into a 25 billion shilling lawsuit for damages?

City Finance is expected to be taken over by new owners. Kenya's smallest bank should get a boost from new owners - as it is the only loss making bank so far this year. As at June this year, it had assets of just 510 million shillings ($7.7 million) in assets, deposits of of 131m, and loans 218m.

Collapsed banks update: Capital Finance and Pioneer Building Society are to be wound up while customers of Daima Bank will be paid another dividend

Bad loan relief?: The interest rates advisory centre offers loan and mortgage interest recalculation, financial cost assurance (overdraft, loan interest), in-duplum interest recalculation for the period (1/1/2001 to 31/7/2005) and informs its clients that that all bank charges from 1/11/89 may be illegal!

Though IRAC won against Housing Finance, bad debt relief may be a pipe dream for most, except for a few instances

Other corporate news

Keroche going into beer production after huge bill handed to them of unpaid taxes. This is the last thing that Kenya Breweries wanted to hear

The Minister for Finance has approve the takeover of Kobil Petroleum by sister company Kenya Oil Company Limited (Kenol). But Kobil is/was a Delaware corporation?

Fake sugar: Strange saga of a ship which arrived at Mombasa with contraband sugar already packaged in Mumias sugar bags – ready to go to store shelves. Packing sugar in their 'produced in Kenya' branded bags has been a key branding initiative by Mumias to differentiate it from imported sugar and seems to have worked, but counterfeiters can only be kept at bay for so long

Wananchi TV: convergence as Kenya's largest ISP wananchi is going into partnership with GTV to begin high speed cable and satellite TV all in one package.

Also mobile TV on phones : a few months ago, the bosses of Kenya Broadcasting Corporation were on TV from a golf tournaments talking about their plans for the rest of the year which included launching a new radio station and also coming up with the first news broadcast via mobile phones by September. (Read on - KBC is a shareholder in the local multichoice Kenya)

Opportunities

- A new Equity Fund in Kenya urgently looking for a financial systems engineer with banking experience. Apply to ndeman2@yahoo.com

- Apprentice to Africa. The Apprentice Challenge comes to Africa – with $200,000 in prize money

Bank Sold

Name this bank?
The deal of the year brings together Stanbic and CFC Banks merge together and is expected to be finalized next month with only Central bank and CMA approval left.

The combined, but yet to be named, bank will have assets of over 55 billion shillings ($800 million), deposits of 43 billion, loans of 30 billion and a pre tax profit as June 2007 of 934 million ($14 million)

Mzalendo bank account
Commenting on the report on bank charges released this week, The Governor of the Central Bank called for a Mzalendo bank account which would probably be akin to mzansi from South Africa which is a low cost account at several banks (with wide branch networks – e.g. KCB, Equity, Postbank) that has similar features and charges at all the banks

banking is not cheap

A recent report released on the banking sector shoed that banking not cheap is not cheap for most account holders .

This should not be a surprise to the public who read about the bank profits or the authorities who are sent all charges and tariffs by the banks each month

There’s already been grumbling from research firms ho say a local firm could have carried out the survey and some banks who say the report is inaccurate.

Earlier, some advertised banking is unexpectedly not as cheap

You are not me

You know it’s time to change your bank when you have to line up before the bank doors open and are stuck in a barely moving line for the next 30 minutes after it opens - as the tellers are too few and the processing system is slow.

But that’s what you get for cheap banking especially with their foreign exchange dealing and processing charges so low & attractive.