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Wealthy Kenyans snub small banks’ safes

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Wealthy Kenyans snub small banks’ safes


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Central Bank of Kenya. FILE PHOTO | NMG

Small lenders accounted for 4.6 per cent of the new bank accounts with more than Sh100,000 as wealthy savers preferred well-known brands in the wake of three mid-sized financiers being placed under receivership after failing to meet their obligations.

The 21 small banks — classified by the Central Bank of Kenya (CBK) as low-tier — had 6,155 new accounts with more than Sh100,000 of the 134,425 high-quality deposits that lenders gained last year.

The CBK data shows that small banks controlled six per cent of the high-quality accounts, down from 13.2 per cent in 2017 as depositors sought safety in larger institutions.

Depositors and investors in Kenya were rattled four years ago when the CBK took control of three mid-sized lenders — Chase Bank, Imperial Bank and Dubai Bank– after the banks ran into financial trouble.

This triggered panic withdrawals from smaller banks and a shift of cash to the larger lenders that were considered stable in what was dubbed “flight to quality”.

The Kenya Deposit Insurance Corporation (KDIC) — an independent State agency that manages deposit refunds in collapsed banks — last July raised compensation for depositors in collapsed banks to Sh500,000 from Sh100,000 to help ease the discomfort with the small banks.

But this has done little to boost the share of accounts with more than Sh100,000.

“We are coming up with risk-based premium model to enhance market discipline and create a level playing ground so that depositors can bank their money anywhere,” said Mohamud Mohamud, KDIC chief executive.

The low compensation had exposed wealthy savers to higher losses in the event of bank closures because the refund was not adjusted to take into account changing economic realities over the three decades.

The increase in compensation of up to Sh500, 000 was the first rise in 30 years.

Out of the three lenders placed under receivership, Dubai is facing liquidation but Chase Bank and Imperial Bank had their good loans and deposits transferred to State Bank of Mauritius (SBM) and KCB respectively.

The CBK data shows that the total number of high quality banks accounts in small banks stood at 100,805 last year from 208,704 at the end of 2017, representing a 52 percent drop.

This emerges despite the large lenders offering lower returns on deposits compared to the small banks.

The top nine banks including KCB, Equity, Co-operative Bank and NCBA Group accounted for 78.78 per cent of the total accounts holding in excess of Sh100, 000 last year, up from 71.1 per cent in 2017

Equity Bank leads with 377,148 accounts followed by KCB (280,186), Co-operative Bank (262,614) and NCBA with 122,535.

Standard Chartered had the largest proportion of high quality savings, with 31.45 percent of its 236,616 accounts having in excess of Sh100,000.

Medium sized ones’ share of quality accounts has reduced from 15.7 percent in 2017 to 15.24 percent. First Community Bank led the pack in losing quality savers over the past three years. Others are Paramount, Spire, Guardian, Kingdom and Consolidated Bank.

The number of bank accounts holding more than Sh100,000 rose by 134,000 last year in the face of uncertainty about jobs and incomes following the Covid-19 pandemic.

The CBK data show that the number of the high-quality accounts increased to 1.69 million in the year to December, reflecting a growth of 8.7 percent.

It was expected that layoffs, job cuts and closure of small businesses due to coronavirus-induced slump would cut the number of bank accounts with more Sh100,000, especially those held by salaried workers.

But the increase in the high quality accounts was the highest in three years and happened in the year consumers and rich firms stockpiled an extra Sh341 billion since the onset of the pandemic in Kenya.



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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.



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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.



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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


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Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.



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