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Recent Topicals

Alternative Financing for Real Estate Development

Aug 18, 2019

Kenya’s real estate sector has been one of the fastest-growing sectors of the economy over the last 5 years. Recently, the sector has experienced a lower rate of development, with the shortage of funding in the real estate sector being a contributing factor to the slow growth, with most developers relying on presales and debt. The slow uptake has reduced the presales capital available for developers to plough back into the project, with average uptake in the Nairobi Metropolitan Area declining from 23.3% in 2017 to 20.9% in 2018 as per our 2019 Residential Report. The decision to cap interest rates in the banking sector has led to banks reducing funding to the real estate sector, owing to the tighter credit conditions, given the inherent risks in funding long-term real estate projects, as evidenced by the increase in non-performing loans (NPLs) in the sector. The latest data from the Central Bank of Kenya repo...

Personal Financial Planning

Aug 11, 2019

More often than not, out of the challenges we face in life, we face various financial obligations in different stages of life. They range from medical expenses, education expenses and other miscellaneous expenses. In most cases, a lot of challenges stem from lack of money, often caused by poor financial planning. This week, we follow up our previous focus on Investment Options in the Kenyan Market, where we now look at the importance of financial planning and the various considerations to make, based on one’s own characteristics, needs and preferences. Therefore, we shall be discussing the following: What is Personal Financial Planning? The Financial Planning Process, The Key Considerations to Make, Conclusion. Section I: What is Personal Financial Planning?

Investment Options in the Kenyan Market

Jul 28, 2019

Following the launch of the Derivatives Market in Kenya at the Nairobi Securities Exchange (NSE) on July 11th, 2019 (see our Topical here), investors have a new investment avenue in the Kenyan market, which is expected to diversify the existing product offering. In light of this development, it is important to examine the current investment options in the Kenyan market. This week we focus on the investment options in the Kenyan market, where we shall discuss the following: Overview of Investments, Categories of Investment Products in the Kenyan Market, and, Conclusion: We give considerations an investor should take into account before choosing an investment option, highlighting the returns for the different asset classes as well as the inherent risks. After this discussion, we shall follow up with a note on financi...

Impact of Proposed Budget Changes to Pensions Industry

Jul 21, 2019

A report done by the World Bank in 2018 shows that Kenya’s population is aging and the number of the elderly as a percentage of the population is expected to hit 7% by 2050, from the current 3%. This is as a result of an improvement in life expectancy from an average of 49 years in 2006, to 59 years in 2016, and 64 years in 2018. The reducing birthrate has not helped as we have seen the average number of children per family fall sharply, from 8.1 children in 1978 to 4.6 children in 2008, and it is projected to possibly reach 2.4 children by 2050. These changing demographic trends reinforce the need to ensure that some form of old age protection is provided to the elderly and ensure security against destitution during old age. This note will review the regulatory changes that the Retirement Benefits Authority has enforced over the years to ensure continuous improvement in the Retirement Benefits Industry; as such, we will cover; Role of the Ret...

Cytonn Note on the Monetary Policy Committee (MPC) Meeting for July 2019

Jul 17, 2019

The Monetary Policy Committee (MPC) is set to meet on Wednesday, 24th July 2019, to review the prevailing macro-economic conditions and make a decision on the direction of the Central Bank Rate (CBR). In their previous meeting held on 27th May 2019, the MPC maintained the CBR at 9.0%, citing that the economy was operating close to its potential and inflation expectations remained anchored within the target range, despite the possible spill overs of the food and fuel price increases, thus the prevailing monetary policy stance remained appropriate. This was in line with our expectations as per our MPC Note, informed by the country’s macroeconomic fundamentals, which had remained stable as well as sustained optimism on the economic growth prospects, as evidenced by: Inflation expectations, which had remained within the target range of 2.5%-7.5%, desp...