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Recent Topicals

Focus of the Week: Home Ownership Savings Plan, “HOSP”, Schemes in Kenya

Sep 15, 2019

Housing is an important aspect of the economy. However, this has been a challenge in Kenya with a housing deficit of 2.0 mn units, with demand growing at 200,000 units per annum, but supply only providing 50,000 units per annum as per the National Housing Corporation (NHC). The Ministry of Housing indicates that 83.0% of the existing housing supply is for the high income and upper-middle-income segments, with only 15.0% for the lower-middle and 2.0% for the low-income population. The Kenyan Government, through their Big 4 Agenda, which covers affordable housing as one of the pillars have, therefore, been seeking to deliver 500,000 units by 2022, costing between Kshs 0.6 mn and Kshs 3.0 mn aimed at 74.5% of Kenyans earning below Kshs 50,000 per month. However, financing for end-buyers towards the purchase of affordable housing remains a challenge in Kenya, both on the absolute value of the unit, and the financing structures available for a first-time buyer to access capital towards t...

Capital Markets as a Catalyst for Economic Growth

Sep 8, 2019

Economic growth is largely influenced by factors such as capital, labour and technology. A well-functioning financial system permits an economy to fully exploit its growth potential, as it ensures that the best investment opportunities receive the necessary funding, while inferior opportunities are denied capital. We have previously covered this topic in our focus on The Role of Capital Markets in Economic Development, where we investigated the role capital markets play in economic and social development, and concluded on the need to develop our capital market so as to realize both economic and social-development goals. This week, we extend that Focus, as we investigate the current state and depth of the Kenyan Capital markets. In addition, we highlight some of the key challenges affecting the development of the capital markets, and the proposed solutions, as we continue to analyze how...

Investment Options for Your Pension Upon Retirement

Aug 25, 2019

For many, the idea of retirement means transitioning into a more relaxed lifestyle, and having time to enjoy all the things we did not have time for before retirement, such as our hobbies, family and friends, travel, and recreational activities. It is therefore important to protect what you have saved or invested to ensure that you will have enough income throughout your retirement; after all, you worked hard to get to retirement. To guarantee income upon retirement, it is important to join a Retirement Benefits Scheme while still in your working years and contribute towards your retirement. On retirement, one should aim to have an income replacement ratio of about 75%. Currently, the average income replacement ratio in Kenya is below 40% and there is need for people to enhance their retirement savings. Depending on the type of Retirement Benefits Scheme you belong to, you may access your retirement benefits as either a lump sum, or a combination of a lump sum and periodic p...

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?