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More Than 60,000 Bank Agents On Watch-list

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Bank agents exceeding 60, 000 in number have been added to a watch-list as possible channels for cleaning illegal money.

The agents, who transacted a total of Sh1.07 trillion in 2017, could easily be of help to dealers handling illegal cash outside the formal banking system and in the ongoing process of the withdrawal of old notes.

When speaking on Wednesday, KBA chairman Habil Olaka said that bankers have put in place a system that will flag unusual transactions at the agencies such as frequent small deposits from the same person and large daily trades.

“Agents, for example, have limits and range of transactions and any strange upsurges will definitely be flagged and monitored. We just want to be extra vigilant to ensure that the system is not used to clean dirty money,” said Mr. Olaka.

“We already have the necessary framework to check the inflow of such money but we are now being extra careful to ensure they are enforced without any slip-ups and without inconveniencing those making genuine transactions.”

Agency banking is becoming an increasingly popular trend among the country’s commercial banks with the aim of providing their services to formerly under-served areas and lowering costs by minimizing the number of customers who visit their branches.

Data from the Central Bank of Kenya (CBK) accentuates its popularity as transactions conducted hit record high values at Sh1.07 trillion in 2017, rising from Sh734 billion in 2016 and Sh152 billion in 2012.

Similarly, the number of agents rose from 23,477 in 2013 to 61,290 in 2017.

Bankers warn that the ongoing withdrawal of the old 1,000 note may be an uphill task, considering the fact that it accounts for 83 percent of the total currency in circulation and 40 percent of the cash being used.

Some of the hitches the banking lobby has identified to be expected are software upgrades to accommodate the new notes, the acquisition of new cash counting machines and the reconfiguration of automated teller machines (ATMs).

CBK approvals will be needed before authorization is given to individuals seeking to exchange more than Sh5 million shillings. According to rules provided by the bank, a basic assessment will be carried out on the source and ownership of the money.

The CBK, however, says that the people who fall under this category are few.

Those who don’t possess bank accounts and are also seeking to exchange at least Sh1 million will also need the central bank to approve the transaction.

In the case of those with less than Sh1 million to exchange, official identification will be required in order to deal at their bank’s branches if they have accounts or at the CBK if they do not.

The governor said that while the volume of illegal flows has yet to be quantified, the authorities have obtained enough evidence to force them into action.

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Banks

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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