In April this year, the government embarked on a 52-day exercise to list Kenyans on the National Integrated Identity Management System (NIIMS) dubbed Huduma Namba.
Five months down the line, the exercise that was meant to improve service delivery seems to have been in futility, with no card (promised by the government) and no improved services.
However, the registration seems to have been on purpose, to draw customer data for few banking-affiliated businesses for who-is-who in the country.
Days before the registration started, information leaked that the data was needed for the benefit of a number of business entities in the banking industry, connected to or controlled by the first family.
First, a document dubbed ‘Restoring Credit Access to Micro and Small Sized Businesses’ leaked on a website known as the Elephant, where David Ndii writes regularly.
Here’s the document: Banking-Cartel
The document revealed a plan to launch an entity dubbed Wezesha that would offer credit services to SMEs, powered by five banks including NIC Bank, Diamond Trust Bank (DTB), the Kenya Commercial Bank, Cooperative Bank and the Commercial Bank of Africa (CBA).
Since, CBA, owned by the Kenyatta family, has acquired NIC Bank and rebranded to NCBA bank.
According to the document, most of the information and services would be offered through Huduma Kiosks, the ‘point-of-sale’ for the Huduma Namba.
In an article published by the Elephant, David Ndii writes: “Huduma Number connection starts with an innocuous statement in a slide titled “How Customers will Qualify” that ends with a bullet point stating that “customers that don’t immediately qualify can opt into a credit access plan (consumer education).” How so, is elaborated in another slide titled “Customer Education At Huduma Universal Service Kiosk” complete with the Huduma Kenya logo. Further along, in another slide titled “Functional Schema” a bullet point: “Distribution: An integrated network of GoK Huduma Centres, Bank Branches and agent locations to ‘onboard’ customers and offer information and advice to capital and business opportunities.””
Typically, SMEs are referred to as the riskiest segment of the market where a lot of non-performing loans (NPLs) are witnessed. In such, the burden of NPLs in any financial institutions are born by performing loans.
Today, President Uhuru Kenyatta launched Wezesha, but now known as Stawi. Loans to SMEs are the most expensive due to NPLs, but this one could be the cheapest at an interest rate of 9 percent.
The big question here is: Who pays for the extra?
David Ndii writes that the nine percent interest is a bait. Its purpose is to make the case for the proposed government credit insurance scheme by purporting to offer SMEs affordable credit.
“Wezesha (Stawi) is a strategy to finance undercutting the competition by pricing below cost at entry, with the intention of charging monopoly prices once the competition is driven out of business. In competition economics, we call this predatory pricing. It is illegal under competition law. In this case, the public insurance serves both as a financial cushion as well as insurance from regulatory scrutiny,” says Ndii.
First, the banks will benefit from the transaction fees, which is set to cover the ‘reduced’ rates.
“In general, the shorter the term, the more expensive. CBA charges a 7.5 percent fee for a one-month Mshwari loan. This is an Annual Percentage Rate (APR) of 90 percent. The recently launched Fuliza overdraft tariff range from 5/- a day for amounts below KSh 500 to KSh 30 per day for amounts above KSh. 2500. A Sh.10,000 Fuliza overdraft at KSh 30 per day translates to an APR of 110 percent.” he writes.
This means that for an SME could pay up to twice the amount it borrowed in just one year, which proves exploitative.
“Assume the scheme achieves its borrowing target of two million customers. Our portfolio of KSh100 billion works out to an average individual loan of KSh. 20,000. Further, assume they churn the funds six times a year, that is, each of the customer borrows and repays a loan every two months on average. A five percent transaction fee translates to an income of KSh12 billion a year, and a total income of KSh19.92 billion — well above the 18 percent required for the scheme to meet its profit target,” he adds.
An APR is the interest rate for a whole year, rather than just a monthly fee/rate, as applied on a loan, mortgage loan or credit card.
Ndii says that NCBA (formerly CBA) already has customer information advantage following its collaboration with Safaricom in M-shwari, a mobile credit service it offers through M-pesa.
“This Scheme is designed to make the CBA the gatekeeper for the entire banking and financial services to micro-and small enterprises, and I quote: “CBA Digital shall play a lead arranger role to develop and operate the credit risk management model for the full credit lifecycle.”,” adds Ndii.
According to Ndii, Huduma Namba initiative is central to the new scheme, and could explain the government’s insistence on rolling out biometric Identity Cards.
Stawi is a mobile loan product that will allow MSME’s to access unsecured credit of between Shs 30,000 and Shs 250,000 at an interest rate of 9 percent per annum