There has been a marked contrast this year between the performance of the economy, going by headline growth numbers, and that of local companies, which have continued to report lower profits across the board.
At least 23 listed firms, which are by law obliged to publish their financials periodically, have reported a fall in profits or a loss in provisional results this year.
Most have cited a challenging business environment, blaming the lack of bank credit which has hurt their capacity to grow and sometimes sustain operations.
The firms have cut thousands of jobs as a result, further hitting the economy by reducing consumer spending.
In contrast, the headline growth of the economy has gone up compared to last year.
Latest economic data released by the Kenya National Bureau of Statistics and central bank shows that in the first half of the year, the economy grew by six percent, up from 4.7 percent in the same period of 2017.
Experts say while the growth is driven by some sectors such as agriculture and services, which were last year adversely hit by poor weather and political uncertainty, government spending is still a key driver, largely in the big-ticket projects such as the standard gauge railway.
“Robust agricultural production coupled with improved public spending should power the economy to a stronger close in 2018,” said Commercial Bank of Africa in their December 2018 economic report.
“While forecasts remain generally bullish, the outcome is still dependent on vagaries of weather, developments in credit markets.”
For private sector firms, however, the risk is that they will be left behind in this growth, largely because of a lack of capital.
Private sector credit growth has remained below five percent throughout the year, and while banks have continued to make profits –their net earnings for the nine months to September grew by 13.5 percent to Sh87.8 billion—it has only been due to lending to government.
Of concern is the rise in bad loans, an indicator of an economy struggling to generate income. In the one year to September, non-performing loans rose by Sh66 billion to Sh326 billion.
Government revenue has also continued to underperform in spite of the official numbers showing that the economy is growing.
In the first three months of the fiscal year, (July to September), the Kenya Revenue Authority missed collection target by Sh60.46 billion, largely blamed on a slowdown in economic activity and delayed implementation of some new tax measures.
Tax revenue stood at Sh320.311 billion against the target of Sh380.76 billion set by the Treasury.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.