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Kenyan banks go 'digital' with loans to
small businesses after credit squeeze

by Bedah Mengo NAIROBI (Xinhua) -- Kenyan small businesses are spoilt for choice as the number of digital lenders and the amount of money one can borrow rises after months of credit squeeze.

The lenders, some of them standalone businesses while others run by commercial banks and telecommunication firms, are in fierce competition to catch the attention of small enterprises.

The government, through the central bank, has also teamed up with five commercial banks to start a digital product dubbed Stawi that targets the small and micro-enterprises sector by offering them loans of at least 30,000 shillings (300 U.S. dollars) at 9 percent per annum, the lowest in market.

The small businesses, which account for more than 90 per cent of the jobs created annually, according to the Kenya National Bureau of Statistics, are currently catching the attention of the lenders after two years of credit squeeze following the introduction of interest caps on lending rates.

The rates were capped at 4 percent above Central Bank benchmark rate, which currently stands at 9 percent.

Central Bank data shows since the caps were introduced, banks have lending less to small businesses and channeling their funds to the debt market which they consider less risky.

The recently released Economic Survey 2019 shows commercial bank’s credit to the private sector recorded a marginal 2.4 percent growth to 2.42 trillion shillings (24 billion dollars) in 2018 as compared to a surge of 3.9 percent in 2017 to 23 billion dollars.

Gilbert Wandera, who runs a computer shop in Nairobi, said that he can now borrow from at least four loan apps over 1,000 dollars, what initially was not possible.

"These apps have limits and offer loans after accessing your credit worthiness.

"But this means I can borrow up to 4,000 dollars at ago if I so wish," he said on Saturday.

The multiple borrowing options, according to him, helps spread the risks.

"Unlike borrowing from a single bank and risking sanctions from the institution in case of late payment, taking loans from multiple apps minimizes severe backlash," he said.

Mechanics, second-hand clothes sellers, carpenters, vegetable traders, book sellers and shopkeepers are among those reaping from the loan apps.

"It is now easier for me to complete customer work even when they have not paid because I can borrow up to 500 dollars from two loan apps," said Kiiru Ndungu, a mechanic in Kitengela on the outskirts of Nairobi.

For most small businesses, especially those run by vegetable sellers christened mama mboga, they borrow early morning from 3 a.m. to buy supplies and repay the money in the evening after selling produce, according to Kenya’s leading telecom Safaricom, which runs lending app dubbed Fuliza.

John Gachora, Kenya Bankers Association vice-chairman, said banks are at the forefront of using innovation to fund small businesses.

"The biggest Fintechs in Kenya today are actually by banks.

"Over 95 percent of mobile loans are actually by banks," he said.

Ernest Manuyo, a business management lecturer in Nairobi, noted that with the government joining the digital lending fray, loans in Kenya would soon be exclusively offered through mobile phones.

"The loan apps have made things easier for businesspersons because of instead of one spending time walking to a bank to negotiate for a loan, they get it on mobile phone and use the time to sell their wares," he said.

Central Bank governor Patrick Njoroge acknowledged that small businesses are the lifeblood of any economy, but in Kenya many have struggled to secure the necessary financing to continue operations, the reason why the bank with its partners came up with the digital loan facility.


Kenyan economic growth slowed in the first quarter of 2019

by Bedah Mengo NAIROBI (Xinhua) -- Kenya’s economy was subdued in the first quarter of 2019, growing by 5.6 percent as compared to 6.5 percent in the first three months of 2018, the government statistics agency said Friday.

The growth, which was significantly slower, was mostly supported by growth in the service-sector industries such as wholesale and retail trade, transportation, accommodation and food services, financial and insurance activities, the Kenya National Bureau of Statistics (KNBS) said.

"The quarter was characterized by slowdown in agricultural activities following delay in the onset of long rains.

"The agriculture, forestry and fishing sector grew by 5.3 percent, compared to a growth of 7.5 percent in the first quarter of 2018," the KNBS said.

The slowdown in agricultural growth affected agro-processing and led to slower manufacturing activities.

The KNBS noted that the agricultural sector expanded by 5.3 percent during the period, compared to 7.5 percent in the same quarter of 2018.

"Nevertheless, the sector’s performance was supported by a 6.6 percent growth in volume of tea produced, from 99,800 metric tons in the first quarter of 2018 to 106,300 metric tons during the period under review," it said.

In the horticulture sub-sector, the volume of cut flowers, fruits and vegetables grew by 3.7 percent, 22.2 percednt and 0.9 percent respectively.

"The sector’s performance was hampered by contractions in production of coffee and sugarcane during the same period," the KNBS said.

The manufacturing sector is estimated to have grown by 3.2 percent in the first quarter of 2019, compared to a growth of 3.8 percent in the first three months of last year.

"The growth was curtailed in both manufacture of food and non-food activities.

"In the manufacture of foods products, growth was curtailed by manufacture of sugar, prepared preserved fish and processing of coffee, which recorded contractions in the review period," the bureau said.

In the manufacture of non-food products, growth was held back by manufacture of cement and of leather products that fell during the period.

"However, growth in the manufacture of food products sub-sector was supported by manufacture of bakery products, processing of tea, manufacture of vegetable oils, fats and beer," the KNBS noted.

"In the non-food sub-sector, growth was mainly supported by assembly of motor vehicles."

The construction sector grew by 5.6 percent, compared to 6.6 percent in the corresponding quarter of 2018.

"The growth was supported by the continued construction of the second phase of the Standard Gauge Railway and other public infrastructural developments especially road construction," it said.

"Consumption of cement, which is an indicator of construction activities, declined by 3.1 percent."

"The performance of transportation and storage sector recorded a slower growth of 6.7 percent in the first quarter of 2019, compared to 8.5 percent registered in the same period of 2018," the KNBS said.

The financial and insurance sector recorded a slower growth of 5 percent in the quarter under review, down from 5.2 percent in the corresponding quarter of 2018.

However, the KNBS said the macroeconomic factors were favorable to growth during the quarter under review.

"The average inflation in the period under review eased to 4.40 percent, from 4.49 percent in the first quarter of 2018.

"The Kenya shilling strengthened against all its major trading currencies during the quarter under review, compared to the same quarter of 2018," it said.

KNBS director-general Zachary Mwangi said during the period, Kenya’s current account deficit narrowed to 78.8 billion shillings (772 million U.S. dollars), down from 1.15 billion dollars.

Cybercafés, tech-savvy Kenyans cash in on government online services

by Bedah Mengo NAIROBI (Xinhua) -- Over the last one month, John Mutua’s cybercafé in Nairobi, Kenya’s capital, has been a beehive of activity.

The internet facility has been mainly serving citizens who are filing their tax returns ahead of the June 30 deadline.

It is compulsory for all Kenyans who are over 18 and have personal identification numbers to file their tax returns by end of June of every year.

Initially, the tax returns used to be done manually but the government automated the services, with citizens, therefore, required to open Itax accounts and file returns.

The change of operation by the government has given cybercafés in the east African nation a new a lease of life, with the peak season for the businesses being every June when millions file returns.

"I am overwhelmed by the number of people seeking to file returns ahead of the deadline, but I cannot complain because this is good business," said Mutua on Friday.

The businessman is charging 500 shillings (5 U.S. dollars) to help those who have no idea of how to file their returns and open email accounts, one of the mandatory requirements needed.

For those who know how to file returns, they only pay for the time they spend on the internet and the computer.

"We are getting business because you cannot file the tax returns using the smartphone.

"If this was possible, we would have closed down months ago," said Mutua.

However, it is not only cybercafés that are reaping big, entrepreneurial Kenyans have launched websites that are helping citizens at a fee calculate the amount of tax they are to pay and file returns.

One such a site is named Ushuru, which is dedicated to assisting employed and self-employed file their returns at 20 dollars and 35 dollars respectively.

The fee is paid upfront via mobile money.

The later are being charged more because the site helps one compute the tax that is due while for the employed, the tax is already computed by the employer.

"I am mainly dealing with teachers and civil servants.

"They are the ones who are filing tax returns here," Hezborn Ajwang, a cybercafe operator in Busia, western Kenya, said on phone.

There are four million Kenyans who are registered on Itax, according to the Kenya Revenue Authority (KRA).

The authority said on June 26 that 2.7 million citizens had filed their tax returns by June 23. KRA expects the rest to do the tax by Sunday to avoid up to 200 dollars’ penalty.

Bernard Mwaso of Edell IT Solution in Nairobi noted that decentralization of government services to online has not only improved efficiency but also created job opportunities.

"In rural areas where people have no personal computers or electricity, cybercafés are doing really well. Teachers, car owners, drivers and students are among those frequenting the businesses to access various services online," he said.

These services include loan application for students, registration of cars and driving licenses.

Ordinary citizens applying for birth certificates also have to do it online, offering cybercafés huge business.



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