Global rating agency Moody’s review of 12 markets shows Kenyan lenders are the second most exposed to the government with almost 300 per cent of their equity lent out to the State. However, Egyptian banks are even more exposed on lending Cairo 603 per cent of their equity.
The fortunes of the banks are consequently tied to governments, with Moody’s adjusting views on banks depending on the sovereigns.
“Banks will maintain high government exposure because they are the main financiers of wide fiscal deficits,” Moody’s said in the year 2020 outlook.
“The bulk of our recent African bank rating actions has followed sovereign rating actions despite banks’ financial performance remaining generally resilient. This reflects the aforementioned large sovereign exposure,” the agency said.
In Kenya, banks have been preferring the lending government to risky borrowers, flooding Treasury bill and bond auctions.
The rate cap ushered in three years of cheap credit for the government in the domestic market that saw the Treasury ramp up domestic borrowing from Sh1.8 trillion in June 2016 to Sh2.9 trillion in this year.
Banks are now reducing exposure to the government following the repeal of the cap in November, where the government has offered to procure Sh96 billion debt but has only got banks to bid half, Sh48.7 billion, over the last four weeks.
A recent Sh50 billion ten-year bond received Sh38 billion, prompting the central bank to reduce the current five-year bond to only Sh25 billion.
Analysts say there is pressure for banks not to cut out the government, which will have the effect of driving rates up if the Treasury becomes desperate.
Moody’s said besides banks being exposed to country ratings, their customers are also exposed to late payments by State a double edge sword that may make more loans toxic.
“Problem loans will remain high given an accumulation of payment arrears, and problems at select large corporates,” the agency said.
Moody’s expects loan growth to accelerate, following the repeal of interest-rate caps on bank lending which will support banks’ earnings-generating capacity.
The ratings agency also sees banks will maintain strong capital buffers, high liquidity — especially in local currency — and a stable, deposit-based funding structure.
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.