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Recent Topicals

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Review of the Interest Rate Cap

Jun 23, 2019

This week, we revisit the interest rate cap topic following the proposal by the National Treasury Cabinet Secretary, Mr. Henry Rotich, in the Budget reading for 2019/20 fiscal year, to repeal Section 33B of the Banking Act, which capped interest chargeable on loans at 4.0% above the CBR rate. As highlighted in the Finance Bill 2019, the proposition to repeal the interest rate cap stems from the adverse effects the law has had on credit access, especially by the Micro, Small and Medium Enterprises (MSMEs), which consequently has detrimental effects on economic growth.  In 2018, the Parliament rejected a similar repeal proposition made by the Cabinet in the Finance Bill 2018, electing to retain the lending rate cap ceiling but scrapping off the deposits rate floor, which was set at 70.0% of the Central Bank Rate. According to the Treasury, in order to spur business activity and improve access to credit to the private sector that is largely made of MSMEs, there is a need t...

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Effects of the Issuance of the New Generation Banknotes

Jun 19, 2019

Introduction Demonetization refers to the process by which a currency is withdrawn from circulation losing its status as legal tender and is replaced with new currency. A number of countries have gone through demonetization of their currencies, either replacing the old currency with a new generation currency that has additional favourable features, or replacing the old currency with an entirely new currency. Some of the reasons for demonetization include: Facilitation of regional trade, where countries adopt a single currency, as was the case with the Euro in 2002. Control of inflation, where a country’s currency with a diminishing value is demonetized and replaced with a more stable currency, as was the case with the Zimbabwean dollar in 2015. Combating illicit financial flows such as counterfeit currency, money laundering and tax evasion. Demonetization makes the currency valueless and forces perpetrators to return...

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Kenya Listed Banks Q1’2019 Report

Jun 16, 2019

Following the release of Q1’2019 results by Kenyan banks, the Cytonn Financial Services Research Team undertook an analysis on the financial performance of the listed banks and identified the key factors that shaped the performance of the sector, and our expectations of the banking sector for the rest of the year. The report is themed "Consolidation and Diversification to Drive Growth”, as we assess the key factors that influenced the performance of the banking sector in the first quarter of 2019, the key trends, the challenges banks faced, and areas that will be crucial for growth and stability of banking sector going forward. As a result, we seek to answer the questions, (i) “what were the trends witnessed in the banking sector in Q1’2019?” (ii) “what influenced the banking sector’s performance?”, and, (iii) “what should be the focus areas for the banking sector players going forward?”. A...

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Focus of the Week: Nanyuki Real Estate Investment Opportunity, 2019

Jun 9, 2019

In line with our regional coverage strategy, we continue to carry out research on various markets in Kenya. So far we have done research in counties such as Mombasa, Nakuru, Kisumu, Laikipia, Meru, Nyeri and Uasin Gishu. The exercise is aimed at identifying the best real estate investment opportunities for our investors outside Nairobi and taking advantage of the benefits of the devolution in these counties. This week, we focus on Nanyuki town in Laikipia County, by highlighting our findings on the Nanyuki real estate market, having collected and analyzed our research data as at January 2019. In summary, in terms of investment returns...

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National Housing Development Fund (NHDF)

May 26, 2019

Kenya has a huge housing deficit of approximately 2.0 mn units, growing by 200,000 units p.a., according to National Housing Corporation. To tackle this, the National Government established the Affordable Housing Initiative, as one of its Big Four pillars to promote long-term economic development, focused on delivering 500,000 housing units for the lower and middle-income population segments by 2022, with a price range of Kshs 0.6 mn – Kshs 3.0 mn per house. (However in our analysis, prices for affordable housing would need to range at Kshs 3.6 mn and below at prevailing market conditions, as per the Cytonn Affordable Housing Note.) The housing initiative composed of the following components: Formation of the Kenya Mortgage Refinancing Company (KMRC) whose main function is enhancing mortgage affordability by enabling long-term loans at attractive ma...

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