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Dr. Njoroge Reappointed as CBK Governor

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Dr. Patrick Njoroge has been reappointed as the Central Bank of Kenya (CBK) governor for a second and final four-year term by President Uhuru Kenyatta.

The President announced the reappointment through a special gazette notice dated May 24, 2019 and issued Thursday morning.

“In exercise of the powers conferred to me by section 13 (2) of the Central Bank of Kenya Act, I Uhuru Kenyatta President and Commander of the Republic of Kenya Defence Forces re-appoint Patrick Ngugi Njoroge to be the governor of the Central Bank of Kenya for a period of four years with effect from the 11th June 2019,” said President Kenyatta.

This new term will see Dr. Njoroge serve until June 2023.

His first appointment as CBK governor was on June 26, 2015 with his four-year renewable term expected to come to a close on June 19 this year.

In the same vein, CBK deputy governor Sheila M’Mbijjewe and CBK board chairman Mohammed Nyaoga also had their terms renewed by the President.

Performance

Formerly an advisor to the International Monetary Fund, Dr. Njoroge assumed office during a time when the country faced inflation risks and a currency slump.

Under his watch, the rate of inflation has remained largely under control at an average of 6.2 percent during the period and within the 2.5 – 7.5 target band set by the government.

On the other hand, the shilling has experienced a fair amount of stability, remaining at an average of Sh101.97 to the US dollar. The governor has also denied claims of over-valuation of the Kenyan shilling, saying it derives its value from the forces of demand and supply.

His entry into the Central Bank has led to the dawning of a new order for Kenyan financial institutions with banks being made accountable for the enforcement of banking regulations.

Several banks have also been placed under receivership including Dubai Bank – which is currently undergoing liquidation, Chase Bank – which as recently reopened and Imperial Bank – which is the subject of a sale transaction with the KCB Group.

During his reign, commercial banks have limited credit extended to small businesses following the enactment of a law that caps lending rates at no more than four percentage points above that of the CBK.

The measure was put in place to counter the high cost of credit to individuals and private businesses at interest rates of more than 20%. The result, however, has been that banks are applying more caution in their lending thus reducing the flow of credit in the market.

According to data by the CBK, private sector credit has experienced a 4.9 percent growth in the 12 months to April from 4.3 percent posted in March.

However, contrary to the Central Bank’s 12 – 15 percent target rate, credit growth has remained well below that.

New Currency

Despite facing criticism from some sections, the CBK recently rolled out the much-awaited and controversial new-generation currency in line with the dictates of the constitution.

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Sh1,000 Notes Abroad to be Exchanged in the Country, CBK Says

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Patrick Njoroge, the Central Bank of Kenya (CBK) Governor, has urged those with the old Sh1,000 notes that are out of the country to exchange them in Kenya before the October 1st deadline elapses.

The Governor dismissed permitting conversion of the old currency outside the country, adding that the CBK had alerted all foreign banks to cease recognition of the old notes.

He further said that banks outside the country will not be receiving any new notes to aid in conversion, contending that this would defeat the process of demonetization.

“If you have the Kenyan currency and you happen to be outside the country, there is only one way to get value for it before October 1. You have to take a trip here and go through the procedures outlined in the Gazette notice and subsequent releases,” said Dr. Njoroge when speaking at a press briefing yesterday.

“You cannot convert it to any other currency out there since this would defeat the process of demonetization.”

Earlier this month, notices were issued from the Bank of Tanzania and the Bank of Uganda discontinuing the conversion of the old currency in their banks. In addition, they have directed their countries’ banks to apply more stringent due diligence processes to all currency flows.

The procedures to be followed for currency conversion by locals will also be followed by those coming into the country.

Dr. Njoroge has warned that measures have been put in place to thwart any efforts to clean illicit money in nations involved in significant financial transactions with Kenya.

After the East African Community allowed free movement of goods and people across member states, the Kenyan shilling is frequently used in business transactions in neighbouring countries.

The result is that this money comes back home through those trade routes and official currency repatriation mechanisms between central banks of countries in the Community.

He also said that the deadline will not be extended, arguing that an extension would create a loophole for those seeking to clean their dirty money to do so.

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Safaricom and Equity in Deal to Offer Loans to Contractors

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Safaricom contractors that may find themselves short on cash will now be able to access as much as Sh200 million in unsecured short-term loans following a deal between the telco and Equity Bank. This will help the contractors to maintain cash flow positions before receiving payment for their services.

The firm wrote a letter addressed to its business partners in which it said that the aim of the deal is the creation of a more procurement-ready business. The main beneficiaries will be Safaricom dealers, suppliers, and agents.

In the fiscal year ended March 2019, Safaricom had 440 dealers, 156,000 M-Pesa agents, and 1,164 suppliers.

“We are pleased to inform you of our partnership with Equity Bank which will offer our partners financing solutions linked to purchase orders and invoices,” said Francis Murabula, Safaricom’s head of supply chain management, in the letter.

He is asking the dealers, suppliers, and agents for consent to share their information including contact details, invoice and purchase order information to enable loan processing for potential firms.

Contractors will be able to borrow from Equity before or after they fulfill their contractual obligations with Safaricom.

The terms and amount of the loan applied for will depend on each company’s credit rating.

Therefore, for a contractor to qualify for an unsecured loan of up to Sh200 million, they have to be using unpaid accounts for goods and services that have already been provided to Safaricom as their collateral.

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Kenya’s Victoria Bank Appointed to Invest Sh1.5bn in Fin-tech Start-ups

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Victoria Commercial Bank (VCB), based in Kenya, has been appointed to oversee the investment of a Dubai-based equity fund’s kitty worth Sh1.5 billion in African and Asian financial technology startups.

This will see 1.7 million customers hailing from several countries including Bangladesh, Kenya, Ghana, Nepal, Tanzania, Sri Lanka, and India benefit from the Nimai Emerging Financial Services Fund (NESF) facility.

“The markets were chosen based on the existing (fintech) presence and experience. It integrates investment expertise with deep operational capability and resources,” said a joint statement.

According to Yogesh Pattni, the VCB chief executive, the deal presents an opportunity for a stronger partnership with Nimai Capital. The latter recently set up a kitty worth Sh1 billion to fund onward lending to enterprises operated by women.

Housing finance, insurance, microfinance, banking, and retail are some of the technology mobility-enabled emerging financial services opportunities that will receive investment from the fund.

Pankaj Mundra, NESF’s co-founder and managing director, expects VCB’s extensive understanding of the Kenyan market and business experience to be of benefit to the fund.

“We look forward to working with Victoria Commercial Bank to source and develop investment opportunities for the Fund across East Africa,” said Mr. Mundra.

The benefits to be enjoyed by investee firms include expert financial advice from line companies, system integration with Indian fintech firms and access to financial services from the diaspora.

“We have a firm belief that the fund will make a significant and positive impact in the lives of millions of families in addition to generating appropriate financial returns for investors,” the statement added.

A proven track record is a condition for start-ups to access funding.

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