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Low income households to miss out on growth

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Central Bank of Kenya
Central Bank of Kenya. FILE PHOTO | NMG 

Millions of low-income households will not feel the impact of the expected 6.2 per cent economic growth this year, the Central Bank of Kenya said, citing disproportionate growth arising from the capping of interest rates.

Central Bank of Kenya Governor Patrick Njoroge said the rate cap has had a negative impact on millions of low-income earners and small businesses who have effectively been denied credit.

“We expect a 6.2 per cent growth but issue is not just growth. It is important for us to have a much more inclusive growth,” Dr Njoroge said at a Press briefing, adding that pursuit of higher and more inclusive growth is the right quadrant because people “cannot eat GDP”.

“If you have people who are struggling in the SMEs like my butcher, who wants to extend his credit facility but cannot then we have lost our way. It is our job as policymakers to protect such people. Not just the large GDP thing.”

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Dr Njoroge’s comment was seen as signalling that the expected increase in the pace of economic activity from a five-year low of 4.9 per cent last year to 6.2 per cent at the end of 2018 may not impact many Kenyans. He said the rate cap has “strangled the economy” by locking out people with low-income per capita and small enterprises that are looking for money to expand their businesses and this could fuel unequal growth. Parliament voted last month to retain the rate caps despite the National Treasury’s push to repeal the law.

“The proposal was not a philosophical consideration. It is time for action and figuring out what the impact of the caps on the economy is,” said Dr Njoroge, who promised that the CBK will continue to push for removal of the caps through dialogue with other policymakers in order to return the country to risk-based pricing.

The CBK’s renewed push for removal of the rate caps comes at a time when commercial banks have collectively returned Sh58.6 billion net profit in the six months through June, a 12.7 per cent growth from a similar period last year.

Dr Njoroge, however, said that the moderate 4.3 per cent growth in private sector credit points to a decrease in the number of active loan accounts.

In August, the private sector operators in agriculture, transport and communication, mining and quarrying sectors all posted negative credit growth.

The latest banking supervision report shows that banks lost 657,000 loan accounts last year, besides the 695,000 lost in 2016.

The value of gross loans disbursed followed a similar trend, having dipped by Sh114 billion to Sh2.15 trillion last year.

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World Bank pushes G-20 to extend debt relief to 2021

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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.

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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.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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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.

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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.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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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.

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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.

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