HK - as Banks refuse to lend - Mobile lending is going to change the change

[RV Pundit]

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https://ubapesa.com/ --- for example is on fire

And then we have many micro-lending banks and non-banks -Mshwari/Talas/Branch/

And even bitcoin lending - likes of Twiga & Uniliver - are now lending goods through the phone.

https://www.bloomberg.com/news/articles/2018-06-14/blockchain-is-opening-up-kenya-s-20-billion-informal-economy

[Globalcitizen12]

At what interests rates?

[hk]

https://ubapesa.com/ --- for example is on fire

And then we have many micro-lending banks and non-banks -Mshwari/Talas/Branch/

And even bitcoin lending - likes of Twiga & Uniliver - are now lending goods through the phone.

https://www.bloomberg.com/news/articles/2018-06-14/blockchain-is-opening-up-kenya-s-20-billion-informal-economy

Actually most banks especially kcb,equity and cooperative have a mobile lending. This banks are increasingly relying on mobile lending as their revenue driver. While all this is good its clear most of the loans are micro loans. And also those loans are all pegged to CBR rate that is determined by CBK. So yes its encouraging that fintech is helping but the interest rates on this are quite high which obviously affect the size and return on debt for the borrowers.

[RV Pundit]

These loans will help fill the gaps in private/household lending - and so what is really lacking is funding for SMEs - and I think treasury is working on establishing banks to deal with that + mortagage bank.

The most encouraging this is the ability to scale these fintech - without any opex from the banks - it will be possible to lend to 30M kenyans with m-pesa account - so you can imagine even if you lend 100 dollars per person per Quarter- you're talking 3B dollars - annually 12B dollars - which is probably more than what Brink-n-Mortar banks are doing.

So yes these are not "micro" lending - just like m-pesa has shown.

Actually most banks especially kcb,equity and cooperative have a mobile lending. This banks are increasingly relying on mobile lending as their revenue driver. While all this is good its clear most of the loans are micro loans. And also those loans are all pegged to CBR rate that is determined by CBK. So yes its encouraging that fintech is helping but the interest rates on this are quite high which obviously affect the size and return on debt for the borrowers.

[hk]

These loans will help fill the gaps in private/household lending - and so what is really lacking is funding for SMEs - and I think treasury is working on establishing banks to deal with that + mortagage bank.

The most encouraging this is the ability to scale these fintech - without any opex from the banks - it will be possible to lend to 30M kenyans with m-pesa account - so you can imagine even if you lend 100 dollars per person per Quarter- you're talking 3B dollars - annually 12B dollars - which is probably more than what Brink-n-Mortar banks are doing.

So yes these are not "micro" lending - just like m-pesa has shown.

Actually most banks especially kcb,equity and cooperative have a mobile lending. This banks are increasingly relying on mobile lending as their revenue driver. While all this is good its clear most of the loans are micro loans. And also those loans are all pegged to CBR rate that is determined by CBK. So yes its encouraging that fintech is helping but the interest rates on this are quite high which obviously affect the size and return on debt for the borrowers.

Fintech if they were sourcing credit cheaply that would be ideal to lower lending rates. There's no need for another government bank. We already have development bank which is suppose to lend SMEs. Not to mention National bank,Consolidated and postal. The key is lowering rates for everyone big and small companies, which inescapably means more fiscal responsibility. 

[RV Pundit]

Our 13.5% interest rate are "to die" for if you factor inflation & deposit rate of 6-8%!. Most African countries would be okay with 20-25% interest rate for their loans. The problem our banks just cannot lend as long as treasury is buying expensively - so treasury should sell their debt cheaply - unless there is some collusion - in which case they should borrow more from China/WB/IMF

Fintech if they were sourcing credit cheaply that would be ideal to lower lending rates. There's no need for another government bank. We already have development bank which is suppose to lend SMEs. Not to mention National bank,Consolidated and postal. The key is lowering rates for everyone big and small companies, which inescapably means more fiscal responsibility. 

[RVtitem]

Banks are serving the government and big business.

Apps are filling gap in servicing the small people and businesses.

[Pragmatic]

Pundit, i know the ubapesa folk very well. They are onto something... just 4months into business and it is mind-blowing.

Some of the info i have been privileged to know indicate that as long as banks keep pretending that they are "very smart"; they will find their cheese gone! The paradigm shift in the market is very much a' la Mpesa..... money to mama mbogas or marikiti/gikomba market traders who otherwise cannot access the glorified brick and mortar banks. You have heard about these traders being very active around 3 - 5am; very true, a lot of these loans are sourced at these "ungodly" hours. And most of these guys don't even wait for the 10/20/30days loan period to repay....they repay right by end of day and take out another one the next morning!

Very much bottom of the pyramid stuff or banking the unbanked played out again right before your eyes. The issue that these loans are expensive is neither here nor there....afterall both MShwari (CBA) and EazzyPay (Equity) are charging these rates and escaped the so called interest rate capping and basically call the fee loan processing fee....one time off fee which they charge at say 7.5% for a 30day or 1/4year loan.

What this is showing is the real dearth of players in the market addressing this area. The big issue here is how do you regulate this? As usual the regulator is lagging behind technology and they cannot impose caveats on these players when both Equity and CBA (and now Barclays) are also in the game.

With good use of BI and Analytics as well as blockchain and AI, they will be well on their way. They probably also need a good/current credit referencing or rating platform after which they can expand even wider than they are playing currently. I take that back, with BI/Analytics, Blockchain and AI they probably can create their own credit rating tools.

We have seen these apps sprout out of Nairobi, mostly touted by some condescending expats (overpaid youngsters straight out of uni) well funded with a PE fund behind them...we don't need them; local players can pretty much do these things. They just need an enabling and supportive environment/government.

Final word, serving the government (treasury bills) and big business cannot be the comfort that the Banks will sustain on. As long as the same government has choked out the mwananchi from accessing money, the one that gets to these mwananchi is the next Equity and CBA. No need for building any infrastructure... the last mile (the branch/ATM) is the handset right in your hands. Don't wake them up....they will find their cheese well and truly moved.

[RV Pundit]

thanks pragmatic.Ubapesa guys are onto something.they may need strategic partners like safaricom to survive the wars from banks.

[hk]

Our 13.5% interest rate are "to die" for if you factor inflation & deposit rate of 6-8%!. Most African countries would be okay with 20-25% interest rate for their loans. The problem our banks just cannot lend as long as treasury is buying expensively - so treasury should sell their debt cheaply - unless there is some collusion - in which case they should borrow more from China/WB/IMF

Fintech if they were sourcing credit cheaply that would be ideal to lower lending rates. There's no need for another government bank. We already have development bank which is suppose to lend SMEs. Not to mention National bank,Consolidated and postal. The key is lowering rates for everyone big and small companies, which inescapably means more fiscal responsibility. 

No the 13.5% rate isn't to die for given that you have indicated that our core inflation rate is 3%. This means our interest rates should be about 6-7% if the liquidity side of macro indicators were aligned. Treasury is buying at that rate cause its the rate the bank are willing to pay based on the treasury auction . If treasury stayed out of the market and issued few bonds the rate would immediately drop. This is what Mwiraria did.
The fintech companies are charging well over 30% annual rate, ridiculous rates. Basically they are in the same league with shylocks. The only innovation is in how they assess  creditworthiness.  Or for ubapesa also how they raise funds.

[RV Pundit]

You lost me there - 6-7% - what about the cost of funds - the banks need to pay interest (6%). I agree on treasury not borrowing domestically - but then forex risks for borrowing outside -- are rather too high for comfort. This year treasury are set to borrow around 3B dollars domestically - is that good enough for all banks, insurances, pension funds & private individual to make money out of? The fintech lending are basically over-draft facility - and I think once they are able to price risks - the rate will come down. I won't regulate them yet. But our mature banks should be regulated.

No the 13.5% rate isn't to die for given that you have indicated that our core inflation rate is 3%. This means our interest rates should be about 6-7% if the liquidity side of macro indicators were aligned. Treasury is buying at that rate cause its the rate the bank are willing to pay based on the treasury auction . If treasury stayed out of the market and issued few bonds the rate would immediately drop. This is what Mwiraria did.
The fintech companies are charging well over 30% annual rate, ridiculous rates. Basically they are in the same league with shylocks. The only innovation is in how they assess  creditworthiness.  Or for ubapesa also how they raise funds.