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Kenya:Mobile money loans in offing
Kenya’s Commercial Bank of Africa is back with cutting-edge innovations
Some 45 years after the Commercial Bank of Africa exited the Ugandan market, the bank is back with a bang.
Having been granted commercial banking licence in 2014, the bank broke even last December, so the management decided to launch it officially on Jan.25. The bank is looking at replicating its Kenyan model of riding on information and communication technology for growth through issuing micro savings and loans through mobile money platforms. Already, it has applied for an approval from the BoU to introduce an innovative mobile banking product in partnership with MTN Uganda, enabling people to save, earn interest and borrow money using their mobile phones. Three years ago, they unveiled a similar product in Kenya dubbed M-Shwari in partnership with Safaricom. Consequently, they have seen customer numbers surge past the 10million mark - higher than rivals Equity Bank and KCB. Officials In 2014, the bank launched a similar product (M-Pawa) in partnership with Vodacom in Tanzania.
CBA Uganda Chief Executive Officer Samuel Odeke said the bank’s move to use ICT in its expansion to drive its growth is hinged on the fact that majority of the population in the region do not have bank accounts yet own mobile phones with registered mobile money services, adding that the service would enable the unbanked population with registered mobile money platforms to access financial services from commercial banks without necessarily holding a bank account. According to Bank of Uganda data, the country’s bank account holders stand at merely four million — mainly from the urban areas — out of the 12 million bankable populations.
On the other hand, Uganda has continued to register a surge in mobile money users from 12.12 million in June 2013 to 17.64 million in June 2014, according to the Budget Framework Paper 205/16. Odeke said the re-establishment of CBA Uganda is intended to widen its foot print in the region to tapping into the growing population riding on the integration of the East African Community (EAC). CBA launches in Uganda at a time when the banking industry is expected to post a stable growth as a result of reduced borrowing within the second half of 2015, industry executives and analysts say.
Salima Nakiboneka, a Fixed Income & Equities analyst at Crested Capital, an investment advisory firm, told The Independent that the banking industry is expected to register a stable performance looking at the performance of the listed banks in the first half of 2015. “The picture painted by the three local listed banks -Stanbic, DFCU and Bank of Baroda- in their half year 2015 results pointed to traces of tough times for the banks given the high interest rates arising from the higher Central Bank Rate, which was raised in a bid to mitigate inflationary pressures,” Nakiboneka said. She added that the private sector credit had also started to slow down in the last quarter of the year, as lending interest rates soared to highs of 24.54% last November. For instance, of the listed banks, Stanbic Bank and Bank of Baroda posted a very minimal growth in net profits during the first half of the year.
Stanbic Bank registered a marginal increment of 0.05% to Shs68.38bn net profit compared with a similar period in the previous year, owing to higher information technology costs and a strenuous economic environment in the six months to June 2015 characterized by a depreciating currency and high inflation risk that saw the Central bank tighten monetary policy. Similarly, the Bank of Baroda’s net profit a appreciated by 12.06 per cent year on year to Shs19.43bn in the first half of 2015 compared with the previous year, attributed to a raise in the company’s income.
On the other hand, DFCU Bank registered a dip in net profit to Shs 13.66bn compared with Shs19.1bn registered in the similar period in the previous year, due to a 29.96% surge in operating expenses associated with improvement of core banking systems and opening new branches.
George Mulindwa, the portfolio manager at Stanlib, told The Independent that the tier one banks are expected to hold steady performance from 2014 but with the growth expected to be muted because of reduced borrowing within the second half of the year. He said tier two and three banks may suffer some headwinds from the slowdown in economic activities due to the BOU tightening of the monetary policy within the second half of the year, an action that made credit more expensive and therefore made it harder for commercial banks to generate assets. This implies that the growth in the banking industry will generally be subdued, having emerged from a similar situation in the previous year. According the BOU’’s financial stability report 2015, the banking industry registered an increase in net profit by 55.1 %, which was an improvement on the decline of 27.8 percent in the year ended June 2014.
The rise in profitability over the past year was driven by increased net interest income, falling operating expenses as a share of income, and further declines in the impaired asset expense. BoU Governor Emmanuel Tumusiime –Mutebile told the guests at the CBA Uganda inauguration that it is time for businesses throughout the East Africa to adopt a regional status if they are to remain competitive.
In reference to CBA Uganda’s plan to roll out a micro savings and loan products to the mass market through mobile telecom platform in partnership with mobile network operators, Mutebile said the bank’s adoption of technology innovations would make banking more adaptable and affordable, meeting the needs of the customers of the time.
SOURCE:INDEPENDENT
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