New Law to Protect Sacco Members, 1 Million More Kenyans Join Fuliza - Money Weekly

With the decline in global stock markets, the crash of crypto markets, a slowing real estate market, and reports about new Monkeypox infections in multiple continents, industry experts are expressing fears that the world could be heading into a recession in 2022. 

Locally, things are not looking very good either. Foreign investors are fleeing the NSE, public debt is close to the debt ceiling, and life is getting more expensive for the average Kenyan.

However, it is not all gloom. Increased borrowing in the private sector points to signs of economic recovery, and the Cabinet has approved a new law that will protect Sacco savers.

Today’s edition of Money Weekly looks at these stories and other top financial news affecting your money.  

New Law to Protect Sacco Depositor’s Funds

The Cabinet on Thursday approved a new law that will protect Sacco members’ deposits in case a Sacco collapses.

Amendments to the Sacco Societies Act of 2008, which the Cabinet approved on Thursday, make a provision for establishing a Deposit Guarantee Fund. The fund will protect deposits not exceeding Ksh100,000 if a Sacco collapses due to liquidity and governance challenges. However, the protection doesn’t extend to members’ shares.

The Deposit Guarantee is similar to the banking sector's Kenya Deposit Insurance Corporation (KIDC) and will be managed by a board of trustees. The board will comprise four members nominated by Saccos, the SASRA CEO and chairman, the Central Bank governor, the Principal Secretary to the National Treasury, and the Commissioner of Co-operatives.

The fund will be financed by Sacco contributions, investment income, donations, borrowings, and grants.

Banks Pump Ksh317 Billion into Private Sector as Lending Hits 6-Year High

Commercial banks loaned Ksh317 billion to the private sector in the 12 months to March, translating to a 10.8% growth compared to a similar period in 2021. This is the first time private sector lending has experienced double-digit growth since 2016.

According to data from the Central Bank of Kenya (CBK), total private sector credit in March stood at Ksh3.26 trillion, compared to Ksh2.94 trillion in March last year. The growth of private-sector lending indicates a healthy business environment and an economy recovering from the slowdown brought about by the Covid-19 pandemic.

The largest share of the new loans went to the transport and communications sector, which grew its credit uptake by 20.7% in January and 24.1% in February. Other sectors that saw increased credit uptake include trade at 8.9%, business services at 11.6%, and consumer durables at 14%.

NSE Investors Protest Monthly Fee, CDSC Caves

Earlier this week, the Central Depository and Settlement Corporation (CDSC) announced plans to introduce a Ksh100 monthly maintenance fee on all CDS accounts, which was to be paid annually. However, the CDSC has shelved the plans following protests from traders and investors.

CDSC, which facilitates the clearing, delivery, and settlement of shares traded at the Nairobi Securities Exchange (NSE), would have earned over Ksh1.8 billion annually from the maintenance fees, which had been set to roll out in July.

Investors argued against the move, saying that implementing the fee would make trading more expensive and lead to account closures when the bourse is already experiencing low trade volumes. Currently, traders pay up to 2% of the total transaction value per trade.

Following the protests, CDSC has recalled the notice to investors as it holds consultations with market stakeholders and the Capital Markets Authority (CMA) before deciding on the way forward.

Kenya’s Public Debt Hits Ksh8.4 Trillion

New data from the National Treasury shows that Kenya’s public debt has grown from Ksh8.2 trillion in December 2021 to Ksh8.4 trillion in March 2022. In September 2021, the stock of public debt stood at Ksh7.9 trillion. The public debt stock is split 50-50 between domestic and external debt.

As the country continues relying on debt to fund spending, the public debt stock is expected to hit the Ksh9 trillion debt ceiling before the end of the year. Estimates by the Treasury show that public debt will grow to Ksh8.6 trillion by June this year, before hitting Ksh9.5 trillion in June 2023. By June 2026, the Treasury estimates that public debt will have grown to Ksh11.6 trillion.

With the debt stock fast approaching the debt ceiling, Treasury has mooted a proposal to abolish the debt ceiling and opt for a new approach that caps public debt at 55% of GDP at net present value.

Safaricom Sheds Ksh222 Billion in One Month

Safaricom shareholders lost Ksh222.36 billion over the last month, the biggest loss recorded at the NSE. The price of the telco’s share fell from Ksh35 on April 19 to Ksh29.45 yesterday. At the close of the trading day on Wednesday, the telco shed over Ksh40 billion in 24 hours as its share price dropped by a shilling.

The telco’s large losses at the bourse have been attributed mostly to a drop in full-year profits for the year ended March 2022 and a sustained sell-off by foreign investors.

Safaricom’s paper loss pulled the NSE’s market capitalisation to Ksh2.14 trillion. Such a low market cap was last seen in the NSE in September 2020 at the height of the Covid-19 pandemic.

Safaricom is not the only firm that shed its value. Over the same period, Equity Group shed its value by Ksh16 billion (8.5%), while KCB Group lost Ksh23.9 billion (17.3%). Other losers include Cooperative Bank and East Africa Breweries Limited (EABL). Combined, the five firms account for over 70% of the NSE’s wealth.

Other Money News

• In the 12 months to March this year, the number of Fuliza customers grew by 1 million to 6.9 million borrowers, while the amount disbursed through the overdraft facility increased from Ksh351.2 billion to Ksh502 billion in the same period. The facility earned Safaricom Ksh5.9 billion in revenue, a 31% increase from the Ksh4.5 billion revenues the previous year.
• In the year ended March 31, 2022, Safaricom’s M-Pesa brought in Ksh107.7 billion, a 30.3% increase from the Ksh82.6 billion recorded the previous year. This is the first time M-Pesa’s revenue has crossed the Ksh100 billion mark in a calendar year. The increase in revenue has been largely attributed to the reinstatement of fees for transactions below Ksh1,000.
• The cost of wheat flour is set to go up again, exerting even more pressure on Kenyan households. Since April, the price of wheat flour has increased by 28%, pushing the cost of a 2Kg pack of flour beyond the Ksh200 mark for the first time in 4 years. The prices are expected to go even higher following India’s decision to ban the export of the product to protect local stocks. India is the world’s second-largest exporter of wheat after China.
• Agriculture Cabinet Secretary Peter Munya has announced that the country will not import any milk despite the ongoing milk shortage and a recommendation from the ministry’s technical team to supplement the deficit with imported milk. The CS explained that the ministry expected milk production to improve following the onset of rains in the country. A 500ml packet of fresh milk is currently retailing at Ksh65, up from Ksh50, while a similar packet of long-life milk is going for Ksh70 from Ksh55.
• Data from the Kenya National Bureau of Statistics shows that local food prices have increased by 11.26% in the 12 months to March 2022, making life even harder for Kenyan families. The price increase directly results from global maize and wheat shortages and unreliable rains in the country over the last year. Other commodities that price rises have hit include textiles (15%), pharmaceutical products (23.15%), plastics (7.2%), paper products (19.06%), and transport services.