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In this episode recorded on 21.11.2024 and hosted by Tim Kipchumba - Co-founder at Questworks, we are joined by Spin Mobile Limited’s CEO, Dr. Victor Kiplagat, and CTO, Eng. Sammy Kariuki, to discuss how alternative data is revolutionizing credit scoring.
We cover the use of alternative data in credit scoring, security and privacy of user data, the application of AI in credit scoring, and adapting alternative data for SMEs.
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Key Quotes
“ One of the biggest benefits of this alternative data is triangulation. Data should be able to verify itself. I'll give you an example. If this customer at the point of loan application or providing their KYC indicated that they operate in Thika Road, maybe Kahawa Sukari or Kahawa Wendani. Maybe wrote they run a small shop around that. Now, when you get data, let's say from mobile money statements, which actually provided by the customer, and you notice that this customer is literally doing their shopping every day in the evening in Langata, they take their lunch along Langata Road, probably shop at Naivas Supermarket next to Langata Road, literally itself correct. So it's actually able to tell you there is something here that is not adding up. So that's really the beauty of having many sources of data. Remember, in conventional lending what we call traditional data, it was mainly referencing. It is historical and submitted by financial institutions. But now if you have this many sources of data and confirmations coming in from these verification APIs, you can be able to verify most of these aspects.”
Dr. Victor Kiplagat
“Another challenge is ensuring that the lender has the credit scores within three minutes or five minutes, and whether it's a tiny statement, 20 pages, or something with 2000 pages, they're able to make a decision within five minutes. This overall ensures that at some point, we will not even need to have human beings looking at this data. We can be able to automate this data because you can guarantee that the system would have already generated the expected output within one minute and can move on to the next decision.”
Eng. Sammy Kariuki
“ Anybody who is venturing into technology space, be ready to change. Remember our story of how we started by being a lending company, and it's a customer who requested us to do this credit scoring. We were not to get into it. So it was client-led. So I think be more agile. Be willing to try new technologies.”
Dr. Victor Kiplagat
“Listen to who you're targeting, your customers, what they need. And I think that's one of the things that have helped us to innovate and to keep improving on the product. It's not an easy thing to do perfectly, but it really ensures that you are solving real problems and that people find your product to be very useful and adaptable. That's something I would tell any startup or any company that's trying to find its footing and make a difference.”
Eng. Sammy Kariuki
Show Notes
00:00:00 Introduction
00:06:44 Alternative Data in Credit Scoring
00:15:20 Misconceptions About Alternative Data
00:22:24 Financial Inclusion and Success in Credit Decisions
00:25:51 Challenges in Collecting, Processing, and Analyzing Alternative Data
00:28:10 Classification, Security, and Privacy of User Data
00:33:20 AI in Credit Scoring
00:37:00 Open Banking and Data Integration
00:39:36 Adapting Alternative Data for SMEs
00:45:53 The Future of Credit Scoring in Emerging Markets
00:49:11 Expanding Reach and Advice for Fintech Startups
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In this episode recorded on 02.12.2024 and hosted by Ramah Nyang, we are joined by Robert Kibaara - CEO of HF Group as we dive into HF Group's Q3 2024 results and their rights issue.
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Key Quotes
“We have heavily digitized our business… We have 54 journeys and we embarked on enabling customers to be able to consume services of the bank through the digital channels, pretty much as if they would come to the bank. And now I can say 80% of our transactions, as I said earlier, are through digital channels and our banking app has been voted the best banking app in Kenya. Now I can tell you this digitization work has really pulled down our costs by removing manual processes, both in the back office and in the customer-impacting channels. So this will remain a key pillar to our transformation.”
“Branches have an optical value. And I think people feel the confidence of knowing that if I have an issue, my branch is not far away. So that's the first reason. The second reason is branches have become conversation centers. So people use branches less for transactions and more for conversations, especially business customers who like to come, and have a conversation with the relationship managers or relationship managers go to them. And thirdly, branches are also advisory centers where you can be able to advise clients. And then also finally scale. Sometimes people want to see that the company they are banking with also has many branches.”
“Keeping an eye on the cost, focusing on the target sectors that are fast-growing, less risky, and less susceptible to macroeconomic forces, we believe that we can be able to sustain this growth.”
“You should be asking me because I'm one of the smaller investors of the group as a person. Why have I taken up my rights and why have I invested in the company? In fact, I've applied for more shares than my rights. And why is that? I'll say a few things. Number one, HF group the group itself and all its subsidiaries are profitable. And if you just think about the new capital, the new incremental money that is coming, it is coming to power the growth of the business. Now, today, the costs of the business, the establishment costs of the business, what we call overheads are all taken care of. So we are not going to double the technology of the company. We are not going to double the number of staff. So that entire cost is already taken care of. So the marginal or incremental capital that is coming in will power the growth of the business, and it's going to accelerate the growth of the business and the rewards to shareholders are going to be sooner.”
“The reason why I would encourage somebody to invest in this business is just the fact that they can be able to grow with the business as it grows, and in my view, it's a very good opportunity.”
Show Notes
00:00:00 Introduction
00:01:15 HF’s Journey, Diversification, Culture, and Skillset Transition
00:07:13 Revenue Mix, NPLs, Challenges, and Strategy
00:14:47 Affordable Housing
00:16:18 Rights Issue and Dividend Policy
00:21:39 Impact of Govt’s Affordable Housing on HF’s Mortgage Business
00:27:53 Legal Issues in Asset Recovery
00:29:59 Digitization and Branch Expansion
00:36:04 Liquidity Ratios
00:40:12 Insurance Business, Innovation, and Cost of Funds
00:44:32 Future Outlook
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In this episode recorded on 20.11.2024, we are joined by Brent Malahay - Chief Strategy Officer at Equity Group, Willy Mulamba - Ag. Managing Director at Equity BCDC, and Paty-Paterne Mushagalusa - Commercial Director at Equity BCDC to unpack Equity Group's Q3 2024 results and the DRC strategy.
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Key Quotes
“Let me give you four statistics which may give you a sense of the true problem statement of Africa. The first statistic I'll give you is 3%. 3% is the share of wealth that Africa has if you use GDP. The second statistic is 8%, and this is essentially the supply of food net of exports that Africa has. And then importantly, the third statistic is 17%. And this is the share of Africa's population, and the last or the fourth statistic I'll give is 25% and this is the population of Africa by 2050. So the real problem statement for Africa is how we close the gap of the 3% to the 25% by 2050.”
Brent Malahay
“Our subsidiaries, which include DRC contributed 48% to our asset base. DRC contributed a third to the total Group in terms of total assets or balance sheet. In terms of profit before tax, our subsidiaries contributed 53%. And if we just look at the DRC, it contributed also about a third to the Group's profitability.”
Brent Malahay
“Any investors coming from Kenya or any other country in Eastern Africa where it's a bit developed, we can only believe food and agriculture, I think internal transformation can present a quick conversion in terms of opportunities and then returns on any investment.
The other one will be education and health. Kenya has quite an impressive network in terms of schools, in terms of education we believe that industry itself can also present great opportunities for any investor coming. Health as well I think is a critical and basic need in the DRC, specifically in big hubs of which Kinshasa would be number one, and other areas such as Lubumbashi, even Eastern DRC, and Bukavu. This would be, I think, the three or four where you can see a quick low-hanging fruit for conversion into opportunities and in PNL.”
Willy Mulamba
“As a group, we intend to have 100 Million customers by 2030. So maybe not so much 5 years, but call it in the next 7 years, we expect to have a hundred million customers. For us, the focus is more about the customer target than necessarily the number of flags we plant, our map.”
Brent Malahay
Show Notes
00:00:00 Introduction
00:04:34 Equity Group’s Strategy
00:10:04 DRC's Role and Its Economic Potential
00:19:24 The DRC Strategy
00:21:33 Kenya's Economic Landscape
00:25:03 Economic Challenges, Consumer Trends, and Diversification
00:26:01 Opportunities in the DRC
00:28:51 Regional Strategies
00:32:01 Security Concerns in the DRC
00:36:38 Equity Group's Vision and Future Plans
00:41:38 Closing Remarks
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In celebration of Customer Service Week, we partnered with Kenya Airways on a discussion about growing towards customer excellence. Our guest host, Terryanne Chebet, is joined by Julius Thairu - Chief Commercial & Customer Officer at Kenya Airways of Customer Service Week in this episode recorded on 08.10.2024.
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Show Notes
00:00:00 Introduction
00:05:03 KQ’s Customer Service Week Activities
00:06:56 Customer Service Strategy
00:13:27 Improving On Customer Touchpoints
00:21:46 Self-Rebooking Platform
00:24:43 Addressing Customer Challenges
00:32:01 Future Initiatives At KQ
00:39:47 Closing Remarks
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In this episode recorded on 03.10.2024, we are joined by Dr. Brian Lishenga - Founding Chair of Rupha Kenya and Dr. Trizah Tracey John - Ag. Head of Health Financing at the Ministry of Health to discuss the Social Health Insurance Fund.
We cover the transition from NHIF to SHIF, SHIF benefits, NHIF’s weaknesses that SHIF seeks to address, implementation challenges, funding mechanisms, and the claims process.
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Key Quotes
“We have the four main sources, where we have the government sources, we have the health insurance aspect, and we have external funding commonly what we call the donor funding, as well as what the population pay at the site, at the point of service delivery, that is the out of pocket expenditure. So looking at those four elements, the whole principle of health financing is to try and balance those four by making sure we have more government funding, more health insurance, less out-of-pocket expenditure, and less reliance on donor funding so that we have sustainable financing for the country.”
Dr. Trizah Tracy John
“The other key difference is that SHA actually carries three funds whereas NHIF had just one fund, the insurance fund managing the insurance scheme. Under SHA, the authority, that is the Social Health Authority, seeks to manage three funds. And that is the primary health care fund, the Social Health Insurance Fun (SHIF), and the emergency chronic and critical illness fund.”
Dr. Trizah Tracy John
“The issue of fraud is double-sided in the sense that one, it was conveniently used to push back against a genuine request for payment. Number two, it was an issue that required collaboration by rogue providers and some NHIF staff.”
Dr. Brian Lishenga
“One of the things that is obviously clear and the reason for the vigorous debate is that the money available to pay for the benefits is not enough. Even if we tax at 2.75%, we don't think we will raise enough money to pay for the healthcare that Kenyans want.”
Dr. Brian Lishenga
“As a country, we need a blueprint for health. We can't have the cyclic political changes that we see in the health sector, because on average, it takes about 15 years for you to realize any return on investment in any change that you bring into the sector, and we must quarantine the sector from the political happenings. And a blueprint is the only way that can change this, and we will use how much of acreage, maybe a president, a governor or your MP is able to cover in that blueprint as the indicators for success.”
Dr. Tim Theuri
Show Notes
00:00:00 Introduction
00:02:07 Transition from NHIF to SHIF
00:09:25 Healthcare Provider’s Perspective
00:16:49 Fraud Within NHIF
00:20:40 NHIF’s Weaknesses that SHIF Seeks to Address
00:30:32 Implementation Challenges and Patient Experiences
00:37:58 SHIF Benefits
00:45:09 Funding, Claims, and Informal Sector Contributions
00:50:05 Proxy Means Testing
00:52:17 Balancing Benefits and Financial Realities
01:03:12 Concluding Remarks
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In this episode recorded on 19.09.2024, we are joined by Geofrey Mwaura - Head of Refinancing at Kenya Mortgage Refinance Company, Lydia Owuor - Partner at Cliffe Dekker Hofmeyr, Stella Situma - Partner at Cliffe Dekker Hofmeyr, and Beatrice Chege - Head of Mortage at Absa Bank Kenya to discuss common misconceptions about mortgages in Kenya.
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Key Quotes
“A mortgage can typically be obtained through three means, a borrower may be buying an existing house, or you may be buying off plan, or you may be in ownership of an undeveloped piece of land, and then you're borrowing to construct.”
Lydia Owuor
“When you look at the statistics, Kenya's mortgage penetration is less than 2%, in fact, 1.9% as per the last CBK report that was published last month. We’re actually talking about a very big gap in terms of mortgage penetration. Homeownership sits at around 21% in the country compared to other markets where they are up over 70-65% in Eastern Europe where home ownership is quite high. So we have a lot to do.”
Geoffrey Mwaura
“When we started, there was a limitation on income, 150, 000 which moved to 200, 000. But recently, we have removed that income limitation so that we allow more Kenyans to enjoy this program. So as of today, you can access up to 10.5 million with no income restrictions. So if you are earning through employment or you are doing business, you can still access this as long as you are buying a property that is within that 10.5 million for your own occupation.”
GeoffreyMwaura
“What I want to emphasize is that due diligence is key. In circumstances where you're buying, due diligence is key. Due diligence on the registered owner of the property, due diligence on the property itself, and lately the scope of due diligence has expanded. We've seen flooding incidents, and that may require structural due diligence before you acquire such properties. We've seen properties that have been adversely mentioned. We have an ongoing land conversion and migration process, which is a process of tidying up our records. And there are some properties within Nairobi because that's where we still are, which have not been gazetted for conversion. So you need to be proactive, check why your property has not been gazetted for conversion and please deal with those issues. So do not skip due diligence.”
Lydia Owuor
One of the things to look at when you're dealing with such developers is do they have the necessary approvals for the development that they're taking out? And this is where you actually demand to see those documents because you're buying into this and you need to know that you're buying into something that has already been legally recognized by the government. And then also do they have enough money to finish the construction? Where is their source of income? You don't want to be the ones pumping everything and you know with pre-sales the deposits don't come all at the same time. So when people are not paying what happens does the developer stall and just wait for you to pump in the money?”
Beatrice Chege
Show Notes
00:00:00 Introduction
00:02:49 Understanding Mortgages in Kenya
00:04:18 KMRC’s Role in Affordable Housing
00:06:29 Eligibility Criteria and Legal Aspects for Mortgages
00:18:54 Debunking Mortgage Myths
00:23:57 KMRC’s Funding and Impact
00:30:57 Down Payment, Monthly Repayments, and Foreclosure
00:45:08 Income Limits and Mortgage Accessibility
00:48:52 Credit Worthiness and Mortgage Approval Process
00:54:28 Due Diligence, Success Stories, and Market Impact
01:02:02 Mortgage Products and Closing Remarks
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In this episode recorded on 24.09.2024, we are joined by Spiro Kenya CEO, Kaushik Burman, and Deputy Country Manager, Raymond Kitunga, to discuss the impact of Electric Vehicles (EVs) on Kenya's transport sector.
We also cover the African EV market landscape, building the EV ecosystem in Kenya, financing solutions to drive EV adoption, and Spiro’s key products and innovations.
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Key Quotes
“For Spiro, our vision is aligned with what we call SDG goals, sustainable development goals, which means by actually developing affordable and clean mobility accessible infrastructure, we will be in a position to provide this to mass customers, mass consumers so that they feel included, they feel and that leads to a massive amount of compounding in terms of GDP growth, in terms of quality of life, in terms of multiple other factors. So for us, that is the higher purpose which drives us and inspires us to come to work.”
Kaushik Burman
“Now we are deploying fast chargers in Kenya. So wherever you want to go and do a quick fast charge in 15 to 20 minutes, you can fill up, and charge up 30% of your battery. And then we are also giving home charging kits to customers. So people who have access to home charging can just go and charge their batteries through the night.”
Kaushik Burman
“We have developed our own maps. So we don't use Google Maps. We use Spiro maps. Increasingly, you will see that maps will have the energy network footprint, and the number of swap stations. Any boda rider, or even for that matter, if you're a normal consumer, you'll be able to actually see where the swap stations are, where the fast chargers are, and you will increasingly see more and more action happening on Spiro maps.”
Kaushik Burman
Show Notes
00:00:00 Introduction
00:02:25 Spiro’s Journey and Vision
00:05:33 African EV Market Landscape
00:08:16 The EV Revolution
00:11:17 Key Products and Innovations
00:14:59 Building the EV Ecosystem in Kenya
00:20:19 EV vs Fuel-Powered Bikes
00:26:15 Financing Solutions
00:29:46 Regulatory Insights and Future Outlook
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In this episode recorded on 12.09.2024, we are joined by AAR Insurance’s CEO, Justine Kosgei, and Head of Distribution, James Kamau, as we explore affordable and flexible insurance solutions for families and businesses.
We also cover insurance penetration in the country, their ShwAARi product, implementing cloud Infrastructure and digital transformation to enhance service provision, and their partnerships with various stakeholders to provide effective insurance coverage.
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Key Quotes
“There are quite a number of barriers that make insurance not accessible amongst Kenyans. One of them is affordability. For a fact, insurance is expensive compared to some of the other priorities in the household…The other barrier to insurance would be probably the product designs, maybe they're a bit complicated for the ordinary person to understand. And the other would be probably trust.”
James Kamau
“The ShwAARi proposition was all about bringing that simplicity to medical insurance and the product has very unique features. It is a very innovative product. It has what we call a one-limit. Most, in fact, all health insurance products have an aspect of inpatient-outpatient and then quite a number of sub-limits to address other concerns like dental, optical maternity and what have you, pre-existing conditions. So what ShwAARi does is to create a solution that is one limit. It gives you a lot of empowerment because you are able to decide on the limit that you have bought.”
James Kamau
“As a result of having our systems in the cloud, we're able to have platforms that provide services in a paperless and electronic manner. So we have a core platform that supports us, especially on claims. One area of this is our claims. That means that, for our customers, we have used this to ensure that they can access services digitally. Using mobile, you can view your health insurance benefits. Using the mobile, you can go to the hospital and be identified using biometrics. Your fingerprints can be used to access your insurance card, and then you can be given services. Then using the same platform hospitals can submit their claims digitally because the platform connects the hospital systems to our systems and therefore we do not need human intervention or paperwork to do that.”
Justin Kosgei
“Finally, I'd like to just highlight one more thing, which we tested again in partnership with our M-TIBA providers, where we worked with transport sectors Saccos to have an evacuation product because of the huge number of accidents that we have in the country. I think recently we've had a lot of accidents happening. Things that we noticed is that whenever accidents happen, there's a delay in getting emergency help. Normally there's a lot of lives that can be saved within that time frame.”
Justin Kosgei
Show Notes
00:00:00 Introduction
00:05:16 Insurance Penetration
00:08:20 Technological and Innovative Solutions
00:14:25 Affordability and Transparency
00:16:41 Insurance Products for Women and Youth
00:25:06 Microinsurance
00:32:53 Cloud Infrastructure and Digital Transformation
00:34:20 ShwAARi
00:39:18 Restrictive Limits on Dental and Optical
00:45:53 Flexible Solutions for the Underserved Market
00:50:43 Home and Business Insurance Products
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In this episode recorded on 17.09.2024, we are joined by Stanbic Bank’s Asset Management Portfolio Manager Jimmy Karanu, and Head of Asset Management - Christian Mwirigi as we explore wealth creation with Stanbic Asset Management. We also discuss their product offerings, fees, investment allocation, asset classes, and risk management.
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Key Quotes
“With as little as a thousand Kenya shilling, you can be able to partake in our money market offering, and with as little as 100 USD, you are able to partake in the U. S. dollar offering. That is quite intentional because from where we sit we want to equally provide accessibility to these solutions because we believe that's part and parcel of promoting financial inclusion.”
“A money market fund is the safest form of what we call unit trusts that you can partake in. It is designed to ensure that the investments that are contained within that pool are as liquid as possible, are as stable as possible to be able to not only give you a competitive return, but also ensure that your funds are actually readily accessible should you need to access the money.”
“When you look at money market funds, they are designed to minimize risk through something that is called diversification. At the end of the day, the structure of the fund is that, it being a pooled investment, you basically have what you call indirect exposure to multiple asset classes.”
Show Notes
00:00:00 Introduction and Career Journey
0:03:58 Overview of Stanbic Asset Management
00:05:59 Understanding Unit Trusts and Key Players
00:12:23 Product Offerings and Fees
00:17:01 Investment Allocation, Asset Classes, and Risk Management
00:25:07 The Investment Process, and Value Dates
00:29:38 Investing for the Long Term
00:38:02 Future Plans and Diversification
00:44:32 Advice for Young Investors
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In this episode recorded on 06.09.2024, our guest host, Terryanne Chebet, is joined by Grace Vihenda - Manager, Innovation and Sustainability at KenyaAirways to discuss the airline’s sustainability efforts through The Aviation Challenge.
We also cover the economic and social aspects of sustainability, the cost-benefit analysis of sustainability efforts, and engaging passengers in sustainability.
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Key Quotes
“Sustainability really is a philosophy. I would put it like that. It's a philosophy, a way of working and running a business, it's not necessarily the thing that you do on the side. Now let's do sustainability, no, it's actually part and parcel of what the organization does every day and is ingrained in the actual strategy of the company.”
Grace Vihenda
“There are ways that sustainability can help to reduce costs. So in many words, I'm saying it's not really a conflict. It's about how can we be smart enough and strategic enough to make sure that our sustainability initiatives are contributing to profitability as opposed to taking away from profitability. So that can include just having to think out of the box and be creative. And for me, that's the one thing I totally love about my combined role of innovation and sustainability because, on the one hand, we have this and have to drive this creative thinking, yes, this is what we need to do. How can we do it in a way that is actually bringing profit to the company as opposed to taking our profit from the company?”
Grace Vihenda
“When you change the way you look at things, the things you look at change.”
Wayne Dyer
Show Notes
00:00:00 Introduction
00:04:08 Innovation and Sustainability
00:05:49 Economic and Social Aspects of Sustainability
00:08:23 Environmental Initiatives and Upcycling
00:10:06 Sustainable Aviation Fuel and Local Partnerships
00:12:01 The Aviation Challenge (TAC)
00:20:49 Cost-Benefit Analysis of Sustainability Efforts
00:25:30 Tree Planting, Climate Action, and Sustainable Fuel Initiatives
00:29:18 Engaging Passengers in Sustainability
00:30:38 Sustainability vs Profitability
00:34:37 Closing Remarks
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In this episode recorded 15.08.2024, our guest host, Rhina Namsia, is joined by Wilson Wariari - Chief Investments Officer at ArvoCap Asset Managers and Bill Oloo, CFA - Portfolio Manager at Kuza Asset Management on an insightful discussion on understanding unit trusts and their importance as investment tools.
We also explore the risk and return of different unit trust products, the investment decision process, assessing a fund manager’s performance, management fees, and macroeconomic factors affecting unit trusts.
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Key Quotes
“According to the Capital Markets Authority, a unit trust is simply a pool of assets, which have been gathered together based on the contributions of members. And according to the regulations, we have a variety of unit trusts. We have a money market fund. We have an equity fund. We have a fixed-income fund, and at the same time, we have a balanced fund. And if you have to look at the latest statistics around 86% of the funds are domiciled in money market funds and fixed-income funds. And according to the latest statistics we have, at the end of the first quarter of the year, we had around 225 billion shillings in unit trusts.”
“A client wants the highest possible return while taking the most appropriate level of risk, not necessarily the smallest, but the most appropriate level of risk.”
“One should try as much as possible to expose oneself to asset classes whose returns are not necessarily conjoined. By conjoined, they don't necessarily go up together or they don't exactly go down together. So in other words, you need to expose yourself to a basket of security so that at least from a risk perspective, one is effectively covered.”
“One key aspect that would be able to determine whether or not one can be successful from a long-term perspective, just in terms of gathering wealth would be discipline, and the ability to just be goal oriented.
Show Notes
00:00:00 Introduction
00:05:21 Understanding Unit Trusts
00:09:15 Risk and Return
00:13:03 Momentum Fund
00:16:52 Investment Decision Process
00:20:45 Assessing Fund Managers’ Performance
00:23:28 Diversification and Advantages of Unit Trusts
00:30:09 Active Funds vs Passive funds
00:40:41 Investment Decisions in Active Funds
00:48:33 Minimum Investment Amount
00:53:55 Management Fees and Costs
01:00:00 Macroeconomic Factors Affecting Unit Trusts
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In this episode recorded on 22.08.2024, we host NCBA Bank CEO and Kenya Bankers Association Chairman, John Gachora, to discuss the bank’s H1 2024 performance.
We cover the current state of the economy, the acquisition of AIG Kenya, regional subsidiaries and expansion into West Africa, the risk-based pricing model, and the impact of Kenya’s credit rating downgrade.
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Show Notes
00:00:00 Introduction and H1 2024 Performance Highlights
00:02:33 Managing NPLs and the State of the Economy
00:11:24 Regional Subsidiaries and Expansion to West Africa
00:15:52 FX Performance and the Acquisition of AIG Kenya
00:19:32 M&A and Capital Requirements
00:22:49 Risk-Based Pricing Model
00:24:03 Digital Banking Strategy
00:27:49 Dividend Policy
00:29:23 Rising Staff Costs and Strategic Hiring
00:32:41 Mobile and Digital Loan Offerings
00:38:15 Impact of Kenya’s Credit Rating Downgrade
00:40:41 H2 2024 Outlook
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In this episode recorded on 30.07.2024, we explore the challenges and expectations for John Mbadi as Kenya's now Treasury CS, focusing on fiscal strategies, cost-cutting, tax policy, public debt management, and the impact of debt restructuring on financial institutions. The discussion also covers how citizens can hold the government accountable and the importance of transparent and efficient fiscal management.
Our host is Ramah Nyang who is joined by Churchill Ogutu - Economist at IC Group, Stephanie Kimani - Economist, and Ruth Kendagor - Head of Research at The Institute of Public Finance.
This episode is brought to you in partnership with The Institute of Public Finance.
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Key Quotes
“Instead of looking at introducing new taxes and increasing tax rates, I would suggest he focuses on just enhancing the tax collection mechanism, as well as broadening the tax base to increase government revenues. Broadening the government tax base, in this case, is based on the use of digital tax systems just to minimize tax evasion as well as optimize the compliance in overall tax collection and remittance.” - Stephanie Kimani, Economist
“Our tax system has inclined quite significantly on consumption taxes, VAT, and excise tax. Excise tax is meant to be a sin tax. Let it be a sin tax and let's stop the creativity of saying maybe if we include financial services here, we'll get some extra coin. It's a sin tax, let it be a sin tax. Do not impose a fine on other components that are not sins, on issues that affect the day-to-day lives of citizens, issues that make people's lives easier, and issues that make business life easier.” - Ruth Kendagor, Head of Research at the Institute of Public Finance
“When there's a need for budget cuts, it's always the development spend that is cut fast or cut more drastically. This provides the government an opportunity to increase the use of PPPs to fund those large infrastructure projects, which would at the very least help the government in its development agenda.” - Stephanie Kimani, Economist
“What has been happening in the space over the last three, four years, actually even longer than that is, we find that measures that are introduced in the 2023 finance bill have now been reverted in the 2024 finance bill. Measures that were introduced in the 2022 finance bill were reverted in the 2023 finance bill. So predictability really affects business planners. Say, for instance, you are investing in a particular industry in the hotel industry or the hospitality industry and the finance bill 2023 had given you a particular benefit in terms of tax exemptions or subsidized rates for you to put in your investment. Now you look for this good money, billions or millions to invest, and just before you finish constructing your hotel, you haven't even finished it for you to recover anything, the law is changed, and the taxes back up. So really it discourages investors and businesses, and one of the responses we've seen is that a number of businesses have cut back because of the unpredictability of the system.” - Ruth Kendagor, Head of Research at the Institute of Public Finance
“Rescheduling has to happen around reforms. As long as we continue having problems with wastage, for as long as we continue having problems with corruption, and leakage, our rescheduling process will happen, but it will happen in a problematic manner. It will affect citizens because of the extra burden, and any additional cost that comes with it, all the additional pressure will be transferred to citizens. It really will not address the root cause that was meant to be addressed because the whole reason why we want to talk about rescheduling is because we had bad decision-making when we were borrowing debt. And so if these reforms are not put in place, the rescheduling will not really translate much. Finally, rescheduling needs to happen within an environment where there are prospects for economic growth, where you know that we're rescheduling this debt at this particular time, using these resources to invest in this particular area so that we spark growth and the revenues that will be generated from the growth sectors, then you'll be able to pay off that debt.” - Ruth Kendagor, Head of Research at the Institute of Public Finance
Show Notes
00:00:00 Introduction
00:01:37 Top things expected of John Mbadi
00:09:24 What alternatives do Kenyan policymakers have?
00:13:17 Opportunities to cut cost
00:23:55 Unpredictability of tax strategy/laws
00:30:49 Tax cuts
00:40:38 Public debt management
00:44:24 Potential impact of debt restructuring
00:52:06 How can citizens hold the government accountable?
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In this episode recorded on 10.07.2024, our host, Ramah Nyang, is joined by David Rogovic - VP and Senior Credit Officer at Moody’s, Jared Osoro - Economist and Director of Credit Markets at FSD Africa, and Tom Ogada - Programme Assistant at Okoa Uchumi to breakdown Kenya’s debt situation.
We also cover the current fiscal challenges, the diminished capacity for fiscal consolidation, the implication of domestic debt restructuring, Moody's assessment of debt exchange, public debt audit, and the credibility of public data.
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Key Quotes
“We've been talking for a very long time about expanding the tax net. That simply means bringing more people or more economic agents to that tax bracket. The unfortunate reality is that we've been doing so using convenient but not necessarily effective ways and that is leaning more towards indirect taxes consumption-based taxes. We have seen a proliferation of excise duty, and VAT which touches on almost every economic agent. The problem with that is that it may not necessarily lead to the expansion of the tax revenue. In any event, it may actually lead to what you can call a discouraging consumption.”
Jared Osoro, Director of the Credit Markets Program at FSD Africa
“When we think about the key credit challenge for Kenya from Moody's perspective, yes, the debt burden is high, but debt affordability, which we measure as interest to revenue or interest to GDP is really weak, really high interest to revenue ratio. One of the highest among all the sovereigns that we rate. Of the 143 sovereigns rated, it's in the lowest 10, or the bottom 10 sovereigns. And again, without the revenue measures given the current interest rate environment, given the larger fiscal deficits that we're expecting this year, relative to what was expected prior to the cancellation of these tax measures which should imply higher domestic borrowing, debt affordability will worsen even further.”
David, Vice President and Senior Analyst at Moody's Sovereign Risk Group
“If you think about this, the balance between a revenue-based fiscal consolidation versus an expenditure-based fiscal consolidation. The revenue-based one gives us more confidence that the narrowing in the fiscal deficit that we would project for this year would continue for the year after and the year after versus the spending cuts this year. If you agree that they are more temporary in nature, then you would expect at some point spending to rise, and without an equal rise in revenue that means larger fiscal deficits in the future.”
David, Vice President and Senior Analyst at Moody's Sovereign Risk Group
“What we're really looking for is confidence over the fiscal consolidation that limits the deterioration in the debt burden, debt affordability. So whether it's through revenue measures, spending measures, something that gives us confidence that we can comfortably expect to see a narrower fiscal deficit year after year, that's consistent with debt declining or stabilizing at some point in the future that will be really what we're looking for.”
David, Vice President and Senior Analyst at Moody's Sovereign Risk Group
“Let us fix our expenditure and the leakages that we have so that we can see how we can reduce the fiscal deficit that we have because it is what is informing the kind of borrowing and the debt stock that we are seeing.”
Tom Ogada, Programs Assistant at the Civil Society Group, Okoa Uchumi
Show Notes
00:00:00 Introduction
00:02:10 Fiscal Challenges and Debt Restructuring
00:15:06 Public Policy Litigation
00:20:08 Diminished Capacity for Fiscal Consolidation
00:25:40 Market Access
00:27:25 Implication of Domestic Debt Restructuring
00:29:59 Public Debt Audit and Credibility of Public Data
00:40:17 Moody's Assessment of Debt Exchange
00:43:19 Debt Service Costs and Improving Ratings
00:51:44 Final Thoughts
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In this episode recorded on 09.07.2024, we host the Nairobi Securities Exchange (NSE) CEO, Frank Mwiti, for an in-depth conversation on the state of the exchange.
We cover the current state of the securities exchange, market performance in 2024, access to data, listings from the government, the corporate debt market, and his vision for NSE’s future.
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Key Quotes
“Currently, the participation, for example, by retail investors in Kenya is less than 10%. So, you can see that a huge chunk of our market is reliant on institutional capital. And by the way, more than 60 percent of that institutional capital is foreign.”
“Given that we are in a high-interest environment, and my view, I think that is going to persist for quite a while, especially given the activities of the last few weeks in our country. The government is going to, in my view, continue borrowing at fairly elevated levels, the upper teens, which means that banks in all likelihood will continue to lend to the private sector in the mid-twenties. And that's a secure debt now, which means there is opportunity potentially to come to the public market and raise funds at potentially more competitive terms including potentially even raising a hard currency denominated funding through our market.”
“The green bonds, let me call it the larger sustainability ESG agenda, there's more capital looking for opportunities than there are opportunities but the single biggest issue is origination and structuring.”
Show Notes
00:00:00 Introduction
00:05:05 Overview of the NSE
00:09:12 Kenyan Capital Markets
00:12:15 2024 Market Performance
00:20:52 Strategies to Attract Investors
00:35:54 Access to NSE Data and the Earnings Calendar
00:45:43 Listing from the Govt, Tech Companies, and the Impact of AI
00:52:58 The Corporate Bond Market
00:59:56 Cost Of Investing in the NSE
01:05:56 Future Outlook
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In this episode recorded on 11.07.2024, we host the AAR Insurance CEO, Justine Kosgei, for an in-depth conversation on the firm.
We cover the firm’s product offering, insurance penetration in Kenya, affordable health insurance, Social Health Insurance Fund (SHIF), and IFRS 17’s implementation and impact.
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Key Quotes
On insurance penetration:
“Many people don't know how the penetration is calculated. Usually, it's a percentage of total insurance premiums that we have in the industry compared to the GDP. So right now it's below 3%. That is very low compared to other countries such as South Africa. For example, whereas our penetration is 3% as a contribution to the GDP for developed countries and in Africa, places like South Africa, they're talking about 17%. So it means we are very far off. It means that the number of people also that have insurance if you take the number of people who have health insurance in Kenya, or private insurance, is about 2 million. Yet we have 55 million Kenyans in total. Meaning we have over 50 million Kenyans who have no insurance.”
On cultural aspects:
“We have very strong bonds and very strong support systems that sometimes do not encourage people to take insurance.”
On Insurance cost:
“When you have a smaller pool, you, as actuaries or as statisticians, realize that for you to have adequate premiums together for expenses, you have to charge more. But if we have more penetration, then it will be easier to price and create solutions that are more affordable.”
Show Notes
00:00:33 CEO’s Career Journey
00:09:48 Company History
00:15:47 Insurance Penetration
00:26:20 Product Offering
00:31:37 Affordable Health Insurance
00:35:23 Social Health Insurance Fund (SHIF)
00:38:04 Dos and Donts of Insurance Policies
00:40:27 Responsibilities as a CEO
00:43:57 IFRS17
00:48:49 Closing Thoughts
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In this episode recorded on 27.06.2024, our host, Ramah Nyang, is joined by Churchill Ogutu - Economist at IC Group, Stellar Swakei - Senior Research Associate at SIB, Oyoo Wycklife - Council Member at Law Society of Kenya, Nikhil Hira - Partner at Koddy Africa LLP to discuss the legal and economic implications of the Finance Bill 2024's rejection.
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Show Notes
00:00:00 Introduction
00:03:55 Impact on Ability to Raise Cash
00:05:47 Legal Perspective on the Withdrawn Finance Bill
00:15:43 The Appropriation Bill and the President’s Proposal to Cut Spending
00:23:17 LSK’s Update on Persons Arrested During Protests
00:27:46 How Can Kenya Fix the Debt Problem?
00:43:41 Possible Implications of the President’s Recommendations
00:49:32 Spending Cuts
00:56:48 Laying the Foundations for Future Growth
01:03:47 Fiscal Targets in Relation to the IMF Program
01:13:46 Closing Thoughts
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In this episode recorded on 12.06.2024, our guest host and communications expert, Terryanne Chebet, is joined by the Competition Authority of Kenya’s Senior Investigations Officer, Prisca Mwanyale, in a conversation on the various strategies and sanctions CAK employs to unmask cartels.
We also cover CAK’s role, what cartels are, how CAK chooses the industries to investigate, the cost of collusion, penalties, challenges in ensuring compliance in the digital space, and checks that keep CAK from abusing its power.
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Show Notes
00:00:00 Introduction
00:02:03 CAK’s Role
00:07:52 Cartel and Uncovering Them
00:13:52 Choose Industries to Investigate
00:19:01 The Investigation to Enforcement Process
00:22:41 Collusion and Penalties
00:32:11 Compliance in the Digital Space
00:34:20 Anti-Competitive Behavior
00:36:18 Cartel Enforcement in Other Countries
00:40:54 Lessons from Forensic Activities
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In this episode recorded on 10.06.2024, our guest host, Julians Amboko from Nation Media Group, is joined by Stephanie Kimani - Economist, Nicholas Kahiro - Tax Manager, Ruth Mwiti - Tax Consultant, and Stellar Swakei - Economic Analyst for a 2024 pre-budget analysis and a discussion about the Finance Bill.
We cover the performance of the Finance Act 2023, the government's ambitious revenue targets in a depressed economy, the voluntary tax disclosure program, the national tax policy, and expenditure estimates for FY 2024/2025.
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Key Quotes
“From the analysis and observation of where we are currently, I don't believe that the Finance Bill 2024 will be able to raise more than KES 600B and still I do not believe that we will be able to achieve the current fiscal year's revenue target and also the next fiscal year's revenue target.” - Stellar Swakei
“Let's have consistency. Let's have predictability. And with the National Tax Policy out, I will urge the government to make sure going forward, let us anchor our changes or amendments in the tax legislation with the national tax policy.” - Nicholas Kahiro
“The budget reading, in my opinion, will be a non-event. There is not much that will change in terms of the numbers that we've already seen. However, what I would love to come out of the budget reading is the government's commitment. That political goodwill and the political commitment that they will be walking the talk and just assuring Kenyans that we are with you because what I have been feeling in the past couple of months, even through this whole public participation for the finance bill, is that there's a bit of a disconnect from what the government expects or thinks is happening on the ground vis-a-vis the reality.” - Stephanie Kimani
“There are laws currently that have been made or developed to collect taxes, the income tax, the excise duty act, the VAT act, and in terms of administration, the Tax Procedures Act. My view is that we don't need to keep on changing the law to increase revenue. I am of the view that if these laws, the way they are, are implemented, the government can achieve the tax that it is looking for.” - Ruth Mwiti
Show Notes
00:00:00 Introduction
00:02:58 State Of The Economy and Finance Act 2023 Performance
00:07:01 Supplementary Budget II
00:19:58 Direct vs Indirect Taxes
00:28:00 Govt’s Ambitious Revenue Targets
00:34:58 FY 24/25 Expenditure Estimates and Fiscal Consolidation
00:42:27 The National Tax Policy
00:55:01 Deficits in the FY 24/25 Budget
01:00:40 The Voluntary Tax Disclosure Program and Tax Amnesty
01:05:46 Closing Remarks
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In this episode recorded on 23.05.2024, our guest host, Ramah Nyang from Bloomberg Africa is joined by Stellar Swakei - Senior Research Associate at SIB, Kigen Kiplimo - Head of Policy Research at KNCCI, Zach Munyi - Head of Public Policy at EABL, and Job Wanjohi - Head of Policy Research at KAM to unpack the Finance Bill 2024.
We cover policy changes that stand out, the impact of the tax proposals on financial services, motor vehicle circulation tax, infrastructure bonds, and engagement by National Treasury with industry players.
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Show Notes
00:00:00 Introduction
00:01:45 Standout Policy Changes
00:05:47 Impact on Financial Services
00:21:00 Concerns from KNCCI
00:25:19 Motor vehicle circulation tax
00:38:28 Tax on Infrastructure Bonds
00:43:30 Policy Proposals by KNCCI
00:45:49 Proposals by KAM
00:51:36 EABL Proposals
01:01:59 Engagement with National Treasury
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