There have been a number of significant developments in the financial sector in Kenya in the first two months of 2022, and our Media TEAM took time to assemble some of these key happenings in the industry, for your benefit and enrichment.

The Financial sector shaken as Russia invades Ukraine

March began on a tough note for the entire global financial sector as Russia invaded Ukraine, in a war that has escalated rapidly, leading to tough sanctions on Russia.

The sanctions have had a negative effect not only on Russia, but the global markets at large. The following are some of the stories that have made headlines in the first two weeks of March 2022, for which our Media Team took time to build a collective narrative of the happenings in the financial sector, as is presented herein for your reference and enlightenment.

Sanctions block Sh10bn Kenya exports to Russia

We begin with the Russian invasion of Ukraine, which has had ripple effects across board. The Business Daily reported that Kenya’s exports of tea, flowers, coffee and fruits to Russia have been derailed in the wake of sanctions imposed on Moscow by Western nations after its invasion of Ukraine, hurting local smallholder farmers.

The blockade of the exports, estimated at nearly Sh10 billion annually, came after major container and shipping lines temporarily suspended cargo shipments to and from Russia in response to the sanctions.

Excluding Russian banks from SWIFT, the international payment system, and its central bank from international operations has made it harder for the country to pay for imports and receive cash for exports.

SWIFT [Society for Worldwide Interbank Financial Telecommunication] is a secure messaging system that facilitates rapid cross-border payments and its instructions are typically honored without question, making international trade flow smoothly.

The exclusion of Russian banks from SWIFT will make it riskier and more expensive for Kenyan exporters, halting exports like spices, nuts and vegetables to Russia.

Russia’s assault on its neighbour is the biggest state-to-state invasion in Europe since World War Two, prompting suctions from the US, Britain and EU.

Use of cheques falls as digital payments rise

The Business Daily also reported on March 2, 2022 that growth in usage of cheques has slowed down in the last decade, losing out to digital payments channels which are more efficient for businesses and individuals.

According to the Business Daily, the Central Bank of Kenya (CBK) said in its 2022-2025 national payments strategy that the paper-based payment channel will need reforms as part of the alignment of the automated clearing house (ACH) with emerging global practice that is marking a shift away from cheques.

While the value of cheques went up from Sh2.05 trillion in 2011 to Sh2.54 trillion in 2021, the number issued in the payments fell from 18.2 million to 16.4 million in the period.

Meanwhile, the volume of cash transacted through mobile money agents rose by nearly six times to hit Sh6.87 trillion in 2021, from Sh1.17 trillion in 2011.

Bulk payments made through real-time bank transfers have also gone up by a significant margin, from Sh21.9 trillion in 2011 to Sh34.55 trillion last year.

“At a broader level, cheque volumes and values continue to fall, as individuals and businesses make greater use of electronic payment instruments, particularly during the Covid-19 pandemic,” said the CBK.

Digital shilling risks harming price stability goal, says CBK

Further afield, the Business Daily reported on March that the Central Bank of Kenya (CBK) had raised concerns that running a digital currency will interfere with its core mandates including stabilizing prices, raising the possibility that it might allow banks to execute retail payments on its behalf.

The proposed Central Bank Digital Currency (CBDC) will be a virtual version of the shilling, exchangeable on a one-to-one basis with hard cash.

But unlike the normal currency, retail holders of the coin would directly hold accounts at the apex bank.

This would allow them to bypass banks in making and receiving payments, but in doing so push the CBK into direct competition for deposits with commercial banks, which it also regulates.

The regulator said in a discussion paper on the digital currency that its issuance will therefore require national and international consultations.

“…a CBDC could potentially lead to major disruptions affecting monetary policy transmission, financial stability, financial sector intermediation, the exchange rate channel, and the operation of the payment system,” said the CBK.

Equity announces KSh678b Stimulus for regional economic recovery

The Kenyan Wall Street also reported a significant news item, stating that Equity Group had launched a KSh678 billion private sector-focused stimulus package to accelerate economic recovery and resilience in the Eastern and Central Africa region as it recovers from the economic impacts of the COVID-19 pandemic.

Equity Group’s Eastern and Central Africa Recovery and Resilience Plan is envisaged to provide financing of up to 2% of the combined GDP of the six economies in which the Group operates (Kenya, Uganda, Tanzania, Rwanda, South Sudan, and DRC).

The facility will be available to 5 million MSMEs and 25 million individual borrowers for the next 5 years.

Branch International picks Kenya As its Pan-African Digital Bank Launchpad

The Kenyan Wall Street further reported that Branch International, a global digital financial solutions provider has outlined plans to roll out a true Pan-African digital bank with Kenya as its launch pad.

Branch International, best known for digital lending solutions and services in Kenya, will spearhead the rollout of digital banking services across key markets in Africa once the local operation crystallizes before the end of the year.

Speaking in Nairobi at the formal signing ceremony for the acquisition of Century Microfinance Bank, Silicon Valley-based Branch International Founder Matt Flannery said the firm would be investing heavily in the strategic venture.

The firm, he said, had settled on the acquisition of Century Microfinance Bank to jumpstart the rollout of a digital bank in Kenya.

“Branch International engaged a number of potential investment partners locally but settled on Century Microfinance which ticked many of the boxes and remains a right fit partner for the journey ahead,” said Flannery said.

Branch, he said, currently serves customers in Kenya, Tanzania, Nigeria and India, with offices in Nairobi, Lagos, Bangalore, Mumbai and Silicon Valley.

Stanbic Full Year Pre-Tax profit up 57%, declares juicy dividends

In other news that made headlines in the financial sector, listed banking conglomerate Stanbic Holdings Plc announced its full year financial results for the period ended 31st December 2021 with profit before tax rising by as much as 57% to Ksh9.76 billion on an annual basis. Net profit for the year was up 39% to Ksh7.20 Billion.

The impressive earnings were attributed to a drop in impairment charges and rising interest income which was up marginally from Ksh12.80 billion in 2020 to Ksh14.37 billion. Stanbic Holdings operates in three segments; banking, securities brokerage and insurance.

Total loans and advances rose to Ksh229.32 Billion against versus Ksh196.3 Billion reported in the previous year.

Many other banks are soon going to report their full-year financial results, and KIB will be on hand to offer analysis on the same. Our partner in financial report analysis, Abojani Investment, did a remarkable analysis on Stanbic’s 10-year growth, and that report is available as a resource from Abojani Investment to all financial sector players keen on this important information.

KIB enters into MOU with Abojani Investment

Last but not least, KIB signed an MOU with Abojani Investment, who are one of the leading financial sector analysis experts in Kenya.

Abojani means brightness shown in the desert that turns everything green. The firm has trained 5,000+ people on personal finance and investing through WhatsApp, whilst leveraging on bit-sized contents such as videos, chats, graphics and PDF documents. Abojani believes that financial awareness, micro investing and saving will help millions of Kenyans achieve financial freedom.

The firm aspires to train 1 Million Kenyans on Financial awareness by 2023. It runs online communities with over 100,000 learners on Facebook, Twitter, WhatsApp and Instagram.

Abojani will help you with the following key areas of interest including the need to:

  • Understand, Organize & Prioritize your Goals & Resources
  • Take care of your Personal finance
  • Invest in the shares
  • Save with SACCOs & Micro Finance Institutions
  • Protect your Capital with treasury bills and bonds
  • Take advantage of predictable income from unit trusts

Abojani will remain a crucial partner for KIB in ensuring financial education for stakeholders in the industry.