Calabar — Four staff of a first generation bank have been taken to court for illegal withdrawal from a customer's account.
They are accused of stealing and illegally transacting business on an account belonging to one Chibuike Nwogu.
The bankers, who were arraigned at the Magistrate's Court in Calabar on a three count charge of conspiracy and stealing, include Ikpeme Emmanuel Moses,29, Aniekan Etim 31, Jonny Ekaete Udofia ,28, and Lydia Attah, 38.
The police prosecutor, Edum Daniel, who brought the charges before Magistrate Emmanuel Ekokim of Magistrate Court Two, Moore Road under charge number MC/465/2011, said the accused are alleged to have on April 14, 2011, unlawfully conspired to commit felony by stealing thereby committing an offence punishable under Section 516 of the Criminal Code Cap C16 vol 111.
Ikpeme Emmanuel Moses on the second count charge was singled out for allegedly stealing N50,000 from Chibuike Nwogu's current account, thereby committing an offence punishable under Section 390 (9) as enshrined in the Laws of Cross River State.
Aniekan Edet was also said to have stolen N20,000 from the said bank account.
The four are being accused of lodging a cheque belonging to Chibuike Nwogu and stealing his money, an offence punishable under Section 467 of the Criminal Code.
The accused pleaded not guilty to the charges. Magistrate Ekokim granted them bail and adjourned the case to July 6, 2011.
Risk Manager (Operations) at CRDB Bank Plc in Tanzania. In this blog I intend to share (back-up) public information (news) relating to banking industry and other general issues. I believe knowledge sharing will shape our thinking to be(come) critical decision makers.
Thursday, June 30, 2011
Nigeria: Banks Begin Selective Implementation of Cash Withdrawal Limits
Six months to the commencement of the cash withdrawal/deposit limit imposed by the CBN, some banks have commenced selective implementation of the policy barring cash transactions by some organisations.
Meanwhile, the organised labour in the banking industry has condemned the recent statement of the Central Bank of Nigeria (CBN) on the financial health of the rescued banks, saying the apex bank is "playing to the gallery." Labour said that it has taken a holistic examination of recent policy pronouncements by the Mallam Sanusi Lamido Sanusi-led management of Central Bank of Nigeria and declared that the policies are anti-Nigerian economy that must be halted before they cripple the economy.
Labour under the umbrella of the Association of Senior Staff of Banks, Insurance and Financial Institutions, ASSBIFI, described Sanusi's statement on CBN's planned liquidation of the rescued banks and its wider implications for the economy as dangerous and self-seeking and will seriously harm the economy and the larger Nigerian population than the few that designed and are pushing the policy through.
Last month, the CBN introduced limits of N150, 000 and N1 million on free cash withdrawal and deposit for individual account holders and corporate bodies respectively.
Consequently, it imposed charges of N100 per N1000 for individuals and N200 per N1000 for corporate bodies for cash transactions above the limits. The limit, according to the CBN, is to reduce the cost of cash processing in the industry.
Although the apex bank said that the policy would commence December with a pilot scheme in Lagos, which would be extended to Port Harcourt, Abuja and Kano by June next year, some banks have started selective implementation of the policy, which also banned banks from offering free cash pick services for customers. Sources said the CBN in a hurry to implement the policy, has encouraged banks to start the implementation as no bank can do such a thing without clearance from the CBN.
M. D Bank of Industry Ms. Evelyn Oputu (r); the Chairman Bank of Industry ,Alhaji AbdulSamad Rabiu and the United Nations Resident Representative in Nigeria Mr. Daouda Toure discussing at the formal Launching/ signing ceremony of Access to Renewable Energy (AtRE) Project between the Bank and the UNDP at the U N Building, Abuja.
Indications to this emerged last week when a bank (name withheld) issued a memo to its BDC customers telling them it would no longer allow cash transactions on their account but bank draft.
The memo titled: No more cash lodgement for BDC transaction, stated: "Please note the following important information on your account with us which we have introduced in order to serve you better. Effective 15th of June, 2011, ONLY Certified Bank Drafts will be acceptable means of payment for BDC purchases. Cash lodgment for BDC transaction will no longer be accepted.
Transfers of cash lodgments from other account types into BDC accounts for the purposes of transacting purchases is also NOT acceptable. This new policy will enable us serve you better and faster.
We assure you of our commitment to ensure a smooth processing of your transactions without disruption or delay to your operations. Thank you for your understanding and co-operation."
A top official of the bank, who pleaded anonymity, told Vanguard that the directive was an internal memo to staff to encourage customers to use alternative means of payment instead of cash and the aim is to reduce cost of cash processing for the bank."
Meanwhile, the Association of Senior Staff of Banks Insurance and Financial Institutions has condemned the policy that limits free cash transactions saying: "It is another policy fraught with danger".
In a statement by Comrades Emeka Ogene and O. P Orere, President and Secretary- General of ASSBIFI affiliated to Nigeria Labour Congress, NLC, lamented that the controversy trailing the recent pronouncement by CBN to limit cash withdrawal in the country, had died down when it threatened to liquidate any of the eight rescued banks it intervened into their management last year unless certain options are urgently taken before 30th September, 2011.
According to the association, "We are not averse to the recapitalisation of any technically insolvent bank, because the nation needs healthy banks for sustainable economic growth. But, the first question that comes to mind is, were the banks given these options in the first place to recapitalise after the reported forensic examination of their books in 2009? It is also important to know if the apex bank followed due process before sacking the then directors of these banks. We are aware the results of the examinations were not laid before the then boards of these banks, in line with BOFIA, before they were sacked.
The essence of this would have been to give them the opportunity to defend their actions and take steps to correct all observed errors within a statutory period, failing which the apex bank would have requested a competent court to order an extra-ordinary general meeting where the Central Bank would have advised the shareholders to replace them (the erring directors). You will recall that the reports with which CBN took the decisions on these banks were leaked to the Press before they were made public in August, 2009, that led to a serious runs on the banks which they are yet to recover from.
"The recent pronouncement has further created fear in the minds of the banking public, especially the undiscerning, thereby putting the banks in more precarious financial positions.
The many utterances of the leadership of the Central Bank on the state of these banks has become embarrassing and made us wonder if there was no preconceived intention to actually liquidate these banks irrespective of their financial health. Such sensitive statements were not made against some favoured banks which were given more than three years to recapitalise. What was the reason for the change in tactics? Could it be because these banks were principally owned by regional Governments and peoples while the so-called rescued banks are owned by some powerless individuals? If these rescued banks must remain in business, the Central Bank must desist from openly calling the banks' customers to withdraw their patronage.
This calls to question the professionalism of the CBN management. No business is too big to fail, but some of these banks really had no problems in the first place to warrant any CBN intervention.
The records available to us clearly show that one of these banks was declared illiquid because of facilities to three customers, two of which were sovereign debts.
We wonder why a bank should be declared illiquid for financing government-guaranteed projects. Before the intervention of the lender of last resort, this bank had been meeting its obligations and about 58% (N70bn) of the intervention fund given to it by the apex bank was invested in Government bonds while it used the balance to offset its inter-bank debts."
The body said it was very surprised that the CBN was bragging about the fund it sunk into these banks in the name of bailout.
Nigerian Banks Implement Withdrawal Limits
It said; "As a lender of last resort, the CBN owes it as a duty to any bank to assist it financially when in need. We therefore do not see the reason for all the noise about the apex bank doing its job. This happens all over the world. But the question still remains: Did all the banks need the bailout fund? In our opinion, and in view of the recent revelations, some of these banks did not need any intervention, financially or otherwise. This is just giving a dog a bad name in order to hang it. The ousted management teams of the eight banks were accused of lacking in corporate governance, among other charges.
There may, undoubtedly, be some truth in the allegations because of our human nature. But, is the situation better now? In an advertorial in a national newspaper of Friday, June 10th, 2011, the Central Bank boasted that it replaced the then Chief Executive and Executive Directors of the eight banks with 'competent managers with experience and integrity.' Nigerians, especially members of the Press, are in a very good position to confirm or challenge this claim. Nigerians must have all read the expositions in some Newspapers in the last three weeks of the shady transactions being carried out in some of the rescued banks by the 'competent managers with experience and integrity' appointed by the Central Bank.
Meanwhile, the organised labour in the banking industry has condemned the recent statement of the Central Bank of Nigeria (CBN) on the financial health of the rescued banks, saying the apex bank is "playing to the gallery." Labour said that it has taken a holistic examination of recent policy pronouncements by the Mallam Sanusi Lamido Sanusi-led management of Central Bank of Nigeria and declared that the policies are anti-Nigerian economy that must be halted before they cripple the economy.
Labour under the umbrella of the Association of Senior Staff of Banks, Insurance and Financial Institutions, ASSBIFI, described Sanusi's statement on CBN's planned liquidation of the rescued banks and its wider implications for the economy as dangerous and self-seeking and will seriously harm the economy and the larger Nigerian population than the few that designed and are pushing the policy through.
Last month, the CBN introduced limits of N150, 000 and N1 million on free cash withdrawal and deposit for individual account holders and corporate bodies respectively.
Consequently, it imposed charges of N100 per N1000 for individuals and N200 per N1000 for corporate bodies for cash transactions above the limits. The limit, according to the CBN, is to reduce the cost of cash processing in the industry.
Although the apex bank said that the policy would commence December with a pilot scheme in Lagos, which would be extended to Port Harcourt, Abuja and Kano by June next year, some banks have started selective implementation of the policy, which also banned banks from offering free cash pick services for customers. Sources said the CBN in a hurry to implement the policy, has encouraged banks to start the implementation as no bank can do such a thing without clearance from the CBN.
M. D Bank of Industry Ms. Evelyn Oputu (r); the Chairman Bank of Industry ,Alhaji AbdulSamad Rabiu and the United Nations Resident Representative in Nigeria Mr. Daouda Toure discussing at the formal Launching/ signing ceremony of Access to Renewable Energy (AtRE) Project between the Bank and the UNDP at the U N Building, Abuja.
Indications to this emerged last week when a bank (name withheld) issued a memo to its BDC customers telling them it would no longer allow cash transactions on their account but bank draft.
The memo titled: No more cash lodgement for BDC transaction, stated: "Please note the following important information on your account with us which we have introduced in order to serve you better. Effective 15th of June, 2011, ONLY Certified Bank Drafts will be acceptable means of payment for BDC purchases. Cash lodgment for BDC transaction will no longer be accepted.
Transfers of cash lodgments from other account types into BDC accounts for the purposes of transacting purchases is also NOT acceptable. This new policy will enable us serve you better and faster.
We assure you of our commitment to ensure a smooth processing of your transactions without disruption or delay to your operations. Thank you for your understanding and co-operation."
A top official of the bank, who pleaded anonymity, told Vanguard that the directive was an internal memo to staff to encourage customers to use alternative means of payment instead of cash and the aim is to reduce cost of cash processing for the bank."
Meanwhile, the Association of Senior Staff of Banks Insurance and Financial Institutions has condemned the policy that limits free cash transactions saying: "It is another policy fraught with danger".
In a statement by Comrades Emeka Ogene and O. P Orere, President and Secretary- General of ASSBIFI affiliated to Nigeria Labour Congress, NLC, lamented that the controversy trailing the recent pronouncement by CBN to limit cash withdrawal in the country, had died down when it threatened to liquidate any of the eight rescued banks it intervened into their management last year unless certain options are urgently taken before 30th September, 2011.
According to the association, "We are not averse to the recapitalisation of any technically insolvent bank, because the nation needs healthy banks for sustainable economic growth. But, the first question that comes to mind is, were the banks given these options in the first place to recapitalise after the reported forensic examination of their books in 2009? It is also important to know if the apex bank followed due process before sacking the then directors of these banks. We are aware the results of the examinations were not laid before the then boards of these banks, in line with BOFIA, before they were sacked.
The essence of this would have been to give them the opportunity to defend their actions and take steps to correct all observed errors within a statutory period, failing which the apex bank would have requested a competent court to order an extra-ordinary general meeting where the Central Bank would have advised the shareholders to replace them (the erring directors). You will recall that the reports with which CBN took the decisions on these banks were leaked to the Press before they were made public in August, 2009, that led to a serious runs on the banks which they are yet to recover from.
"The recent pronouncement has further created fear in the minds of the banking public, especially the undiscerning, thereby putting the banks in more precarious financial positions.
The many utterances of the leadership of the Central Bank on the state of these banks has become embarrassing and made us wonder if there was no preconceived intention to actually liquidate these banks irrespective of their financial health. Such sensitive statements were not made against some favoured banks which were given more than three years to recapitalise. What was the reason for the change in tactics? Could it be because these banks were principally owned by regional Governments and peoples while the so-called rescued banks are owned by some powerless individuals? If these rescued banks must remain in business, the Central Bank must desist from openly calling the banks' customers to withdraw their patronage.
This calls to question the professionalism of the CBN management. No business is too big to fail, but some of these banks really had no problems in the first place to warrant any CBN intervention.
The records available to us clearly show that one of these banks was declared illiquid because of facilities to three customers, two of which were sovereign debts.
We wonder why a bank should be declared illiquid for financing government-guaranteed projects. Before the intervention of the lender of last resort, this bank had been meeting its obligations and about 58% (N70bn) of the intervention fund given to it by the apex bank was invested in Government bonds while it used the balance to offset its inter-bank debts."
The body said it was very surprised that the CBN was bragging about the fund it sunk into these banks in the name of bailout.
Nigerian Banks Implement Withdrawal Limits
It said; "As a lender of last resort, the CBN owes it as a duty to any bank to assist it financially when in need. We therefore do not see the reason for all the noise about the apex bank doing its job. This happens all over the world. But the question still remains: Did all the banks need the bailout fund? In our opinion, and in view of the recent revelations, some of these banks did not need any intervention, financially or otherwise. This is just giving a dog a bad name in order to hang it. The ousted management teams of the eight banks were accused of lacking in corporate governance, among other charges.
There may, undoubtedly, be some truth in the allegations because of our human nature. But, is the situation better now? In an advertorial in a national newspaper of Friday, June 10th, 2011, the Central Bank boasted that it replaced the then Chief Executive and Executive Directors of the eight banks with 'competent managers with experience and integrity.' Nigerians, especially members of the Press, are in a very good position to confirm or challenge this claim. Nigerians must have all read the expositions in some Newspapers in the last three weeks of the shady transactions being carried out in some of the rescued banks by the 'competent managers with experience and integrity' appointed by the Central Bank.
Global: IMF Appoints Christine Lagarde, 'First Woman' MD
The Executive Board of the International Monetary Fund (IMF) Tuesday appointed Ms Christine Lagarde as its Managing Director and Chairperson for a five-year term, effective from July 5, 2011.
Lagarde, who succeeds Mr Dominique Strauss-Kahn, is the first woman appointed to head the Bretton Woods institution since its establishment in 1944.
Strauss-Kahn resigned after he was accused of sexual assault against one Ms. Nafissatou Diallo, a Guinean and maid of a New York hotel. He is being prosecuted.
According to a statement by IMF, the selection of Lagarde by the 24-member executive board representing the Fund's 187-member countries has brought to a conclusion the selection process initiated by the board on May 20, 2011.
The IMF in the statement noted that, "according to the agreed procedures, the Board had agreed to meet with Mr AgustÃn Carstens and Ms. Lagarde for the post. The candidates met bilaterally with Executive Directors as well as the Executive Board, during June 20-23, 2011. In these meetings, Mr Carstens and Ms Lagarde had the opportunity to present all relevant information concerning their specific candidacies."
It added that, "the Executive Board agreed that both were well qualified candidates and the objective was to select one by consensus. Based on the candidate's profile that had been established, the Executive Board, after considering all relevant information on the candidates, proceeded to select Ms Lagarde by consensus. The Executive Board looks forward to Ms Lagarde effectively leading the International Monetary Fund as its next Managing Director."
The managing director is the chief of the IMF's operating staff and Chairman of the Executive Board. The chief executive is assisted by three deputy managing directors in the operation of the Fund, which serves the 187-member countries through its 2,700 staff from more than 140 countries.
Lagarde, 55, a national of France, had been the France's Minister of Finance since June 2007. Prior to that appointment, she served as France's Minister for Foreign Trade for two years.
She also has had an extensive and noteworthy career as an anti-trust and labour lawyer, serving as a partner with the international law firm of Baker & McKenzie, where the partnership elected her as chairman in October 1999.
She held the top post at the firm until June 2005 when she was named to her initial ministerial post in France. Lagarde has degrees from Institute of Political Studies (IEP) and from the Law School of Paris X University, where she also lectured prior to joining Baker & McKenzie in 1981.
While reacting to the appointment of Lagarde, World Bank President Robert B. Zoellick said: "I would like to congratulate Christine Lagarde on her appointment as Managing Director of the International Monetary Fund. The IMF plays a critical role in the global financial system. The World Bank Group and the IMF have worked ever more closely in the last few years to support countries as they recover from the global economic crisis, and to avert crises going forward.
"I have had the great pleasure of working with Minister Lagarde in her capacity as France's Minister for Economic Affairs, Finances and Industry and as Chair of the G-20 Finance Ministers. Wherever she has worked, she has had a strong voice and impact. I look forward to working closely with her and with the IMF under her leadership."
Lagarde, who succeeds Mr Dominique Strauss-Kahn, is the first woman appointed to head the Bretton Woods institution since its establishment in 1944.
Strauss-Kahn resigned after he was accused of sexual assault against one Ms. Nafissatou Diallo, a Guinean and maid of a New York hotel. He is being prosecuted.
According to a statement by IMF, the selection of Lagarde by the 24-member executive board representing the Fund's 187-member countries has brought to a conclusion the selection process initiated by the board on May 20, 2011.
The IMF in the statement noted that, "according to the agreed procedures, the Board had agreed to meet with Mr AgustÃn Carstens and Ms. Lagarde for the post. The candidates met bilaterally with Executive Directors as well as the Executive Board, during June 20-23, 2011. In these meetings, Mr Carstens and Ms Lagarde had the opportunity to present all relevant information concerning their specific candidacies."
It added that, "the Executive Board agreed that both were well qualified candidates and the objective was to select one by consensus. Based on the candidate's profile that had been established, the Executive Board, after considering all relevant information on the candidates, proceeded to select Ms Lagarde by consensus. The Executive Board looks forward to Ms Lagarde effectively leading the International Monetary Fund as its next Managing Director."
The managing director is the chief of the IMF's operating staff and Chairman of the Executive Board. The chief executive is assisted by three deputy managing directors in the operation of the Fund, which serves the 187-member countries through its 2,700 staff from more than 140 countries.
Lagarde, 55, a national of France, had been the France's Minister of Finance since June 2007. Prior to that appointment, she served as France's Minister for Foreign Trade for two years.
She also has had an extensive and noteworthy career as an anti-trust and labour lawyer, serving as a partner with the international law firm of Baker & McKenzie, where the partnership elected her as chairman in October 1999.
She held the top post at the firm until June 2005 when she was named to her initial ministerial post in France. Lagarde has degrees from Institute of Political Studies (IEP) and from the Law School of Paris X University, where she also lectured prior to joining Baker & McKenzie in 1981.
While reacting to the appointment of Lagarde, World Bank President Robert B. Zoellick said: "I would like to congratulate Christine Lagarde on her appointment as Managing Director of the International Monetary Fund. The IMF plays a critical role in the global financial system. The World Bank Group and the IMF have worked ever more closely in the last few years to support countries as they recover from the global economic crisis, and to avert crises going forward.
"I have had the great pleasure of working with Minister Lagarde in her capacity as France's Minister for Economic Affairs, Finances and Industry and as Chair of the G-20 Finance Ministers. Wherever she has worked, she has had a strong voice and impact. I look forward to working closely with her and with the IMF under her leadership."
Kenya: CBK Raises Overnight Rates And Bans Arbitrage
Central Bank of Kenya (CBK) has banned commercial banks borrowing cheaply using its emergency overnight window and lending to each other at a higher rate.
CBK said it would take action against any bank profiting from the interbank arbitrage as it raised the central bank rate - the overnight borrowing window - by 1.75 percentage points to 8.00 per cent.
The CBK move is expected to strengthen the exchange rate as more dollars flow to take advantage of higher interest rates and thereby curb the inflation that rose to 14.49 per cent in June.
The mounting differences between the CBR at 6.25 per cent and interbank - through which financial institutions lend to each other overnight - that had risen to as high as 8.00 per cent in some transactions had created arbitrage opportunities for banks to the tune of 1.75 per cent.
A bank could therefore borrow at the CBR and lend to another distressed bank at 8.00 per cent making Sh1.75 for every Sh100 lent. CBR was last at 8.00 per cent in May 2009.
The central bank has also suspended the operations of the CBR and come up with what it called a CBK Discount Window that will move in line with market expectations such that the operative rate will be posted every working day at 9.00 am.
Thus this will become the new emergency window showing that the CBR is only being converted into a daily rate rather than a rate that is reviewed every two months as previously.
"Henceforth, the operational interest rate for CBK Discount Window will be reviewed from time to time and posted on the CBK website on a daily basis by 9.00 am. In this regard, with immediate effect, the initial accommodation through the CBK Discount Window will be 8.00 per cent," Jackson Kitili, director of banking services and national payment system, said in a circular to the CEOs of commercial banks.
CBK said it would take action against any bank profiting from the interbank arbitrage as it raised the central bank rate - the overnight borrowing window - by 1.75 percentage points to 8.00 per cent.
The CBK move is expected to strengthen the exchange rate as more dollars flow to take advantage of higher interest rates and thereby curb the inflation that rose to 14.49 per cent in June.
The mounting differences between the CBR at 6.25 per cent and interbank - through which financial institutions lend to each other overnight - that had risen to as high as 8.00 per cent in some transactions had created arbitrage opportunities for banks to the tune of 1.75 per cent.
A bank could therefore borrow at the CBR and lend to another distressed bank at 8.00 per cent making Sh1.75 for every Sh100 lent. CBR was last at 8.00 per cent in May 2009.
The central bank has also suspended the operations of the CBR and come up with what it called a CBK Discount Window that will move in line with market expectations such that the operative rate will be posted every working day at 9.00 am.
Thus this will become the new emergency window showing that the CBR is only being converted into a daily rate rather than a rate that is reviewed every two months as previously.
"Henceforth, the operational interest rate for CBK Discount Window will be reviewed from time to time and posted on the CBK website on a daily basis by 9.00 am. In this regard, with immediate effect, the initial accommodation through the CBK Discount Window will be 8.00 per cent," Jackson Kitili, director of banking services and national payment system, said in a circular to the CEOs of commercial banks.
Tanzania: CRDB bank sets its sights on EAC untapped market
The CRDB bank is set to expand its banking services in the East African countries, in an effort to exploit the untapped regional market.
CRDB managing director, Dr Charles Kimei revealed this here over the weekend when speaking at the one-day seminar which involved more than 100 shareholders of the bank.
He said that the bank’s idea is meant to empower East Africans economically and use the bank as a ladder to prosperity.
If the mission will be fulfilled, CRDB bank will be the first Tanzanian bank to explore the untapped potentials available in the EAC. In another development, Dr Kimei stated that the Dar es Salaam Stock Exchange has not been well exploited by Tanzanians due to the limited number of brokers in the newly established capital market.
He cited other factors as limited knowledge on the significance of the Dar bourse to boost the country’s economic prosperity.
“After realising that we have already embarked on a programme to educate our shareholders on the significance of the DSE market, of which if well utilised it will help to transform people’s lives,” he told the fully packed gathering.
He added: “The only thing people know, is for them to buy shares…but in reality there are more than that.”
Dr Kimei explained that his bank uses special brokers in selling and buying shares contrary to the previous system whereby a shareholder was forced to buy shares in the bank’s branch or through the DSE of which the bank is a member since 2009.
“Currently, there are limited number of brokers enabling people to participate in the bourse market, because we have learnt there are over 200,000 Tanzanians who have shares at the DSE, which is a very small number. That is why we deployed special brokers who will be providing services in all of our branches across the country,” he said.
The bank’s senior official noted that there are many areas which have no such services, hence the new initiative to enable the bank’s customers easily buy and sell their shares.
He explained that there is a need for Tanzanians to understand issues related to shares and its technicalities.
One of the bank’s shareholders, Esterina Tarimo from Moshi municipality in Kilimanjaro region stressed the need for shareholders to understand the key issues related to shares.
SOURCE: THE GUARDIAN
CRDB managing director, Dr Charles Kimei revealed this here over the weekend when speaking at the one-day seminar which involved more than 100 shareholders of the bank.
He said that the bank’s idea is meant to empower East Africans economically and use the bank as a ladder to prosperity.
If the mission will be fulfilled, CRDB bank will be the first Tanzanian bank to explore the untapped potentials available in the EAC. In another development, Dr Kimei stated that the Dar es Salaam Stock Exchange has not been well exploited by Tanzanians due to the limited number of brokers in the newly established capital market.
He cited other factors as limited knowledge on the significance of the Dar bourse to boost the country’s economic prosperity.
“After realising that we have already embarked on a programme to educate our shareholders on the significance of the DSE market, of which if well utilised it will help to transform people’s lives,” he told the fully packed gathering.
He added: “The only thing people know, is for them to buy shares…but in reality there are more than that.”
Dr Kimei explained that his bank uses special brokers in selling and buying shares contrary to the previous system whereby a shareholder was forced to buy shares in the bank’s branch or through the DSE of which the bank is a member since 2009.
“Currently, there are limited number of brokers enabling people to participate in the bourse market, because we have learnt there are over 200,000 Tanzanians who have shares at the DSE, which is a very small number. That is why we deployed special brokers who will be providing services in all of our branches across the country,” he said.
The bank’s senior official noted that there are many areas which have no such services, hence the new initiative to enable the bank’s customers easily buy and sell their shares.
He explained that there is a need for Tanzanians to understand issues related to shares and its technicalities.
One of the bank’s shareholders, Esterina Tarimo from Moshi municipality in Kilimanjaro region stressed the need for shareholders to understand the key issues related to shares.
SOURCE: THE GUARDIAN
Tanzania: Transform and become market leaders, SMEs told
The government has asked small and medium enterprises (SME) to transform themselves by harnessing power and technology so that they become market leaders.
This was said at weekend in Dar es Salaam by Natural Resources and Tourism minister Ezekiel Maige, at an awards giving ceremony organised by Tanzania Society for Travel Agents (Tasota).
The association named Emirates as airline of the year and best airline in Africa. Other awards went to Swiss Air, KLM, Qatar, Precision Air, Kenya Airways, Oman Air and Zanair.
In the Hotel category, the awards went to Movenpick, Kilimanjaro Kempinski, Serena and Sopa Lodge.
Speaking on behalf of the minister, Tourism director Ibrahim Musa said SMEs play a crucial role in the country’s economic growth.
Most of them have not applied modern technology in their undertakings, hence failing to move forward, he said.
“Time has come for SMEs to change and see how they can use technology more efficiently and become more competent,” he stressed.
Minister Maige also challenged investors in the tourism industry to improve services offered so as to attract more tourists.
For a long time, he said, the government has been encouraging more people to invest in tourism which still has a lot of untapped potentials.
According to him, the ministry has an open door policy which allows stakeholders to visit or air their views for the improvement of the industry.
“We welcome the stakeholders who have ideas to enrich this industry to come forward and assist us so that we make it to grow at good pace,” he said.
For his part, TASOTA chairman Moustafa Khataw said for the past 50 years Tanzania has marked a remarkable growth in various sectors including tourism.
“We have witnessed an increase in flight frequency, new airlines, more hotels opening up in many parts of the country which is a good indicator for economic growth,” he said.
However Khataw said Tanzania needs to do a lot in promoting tourism and local tourism.
"The government and those in tourism should join hands and move the industry forward, hence increase revenue and people's welfare," he said.
According to him, cultural tourism should be promoted by allowing people to start their own business, as is the case in South Africa.
He said regulation must be simple and easy in order not to discourage investors.
Likewise, he urged Tanzanians to create the culture of visiting tourist attractions scattered all over the country.
He said Tasota, in collaboration with the Tanzania Tourist Board (TTB), is planning to develop untapped tourism potentials in the Southern circuit this year.
Tourism experts are optimistic that cultural tourism resources will serve as a base for Tanzania's tourism industry in future.
Last year Tanzania received 719,030 tourists, fetching just over USD1bn, making the sector the country’s leading foreign exchange earner.
SOURCE: THE GUARDIAN
This was said at weekend in Dar es Salaam by Natural Resources and Tourism minister Ezekiel Maige, at an awards giving ceremony organised by Tanzania Society for Travel Agents (Tasota).
The association named Emirates as airline of the year and best airline in Africa. Other awards went to Swiss Air, KLM, Qatar, Precision Air, Kenya Airways, Oman Air and Zanair.
In the Hotel category, the awards went to Movenpick, Kilimanjaro Kempinski, Serena and Sopa Lodge.
Speaking on behalf of the minister, Tourism director Ibrahim Musa said SMEs play a crucial role in the country’s economic growth.
Most of them have not applied modern technology in their undertakings, hence failing to move forward, he said.
“Time has come for SMEs to change and see how they can use technology more efficiently and become more competent,” he stressed.
Minister Maige also challenged investors in the tourism industry to improve services offered so as to attract more tourists.
For a long time, he said, the government has been encouraging more people to invest in tourism which still has a lot of untapped potentials.
According to him, the ministry has an open door policy which allows stakeholders to visit or air their views for the improvement of the industry.
“We welcome the stakeholders who have ideas to enrich this industry to come forward and assist us so that we make it to grow at good pace,” he said.
For his part, TASOTA chairman Moustafa Khataw said for the past 50 years Tanzania has marked a remarkable growth in various sectors including tourism.
“We have witnessed an increase in flight frequency, new airlines, more hotels opening up in many parts of the country which is a good indicator for economic growth,” he said.
However Khataw said Tanzania needs to do a lot in promoting tourism and local tourism.
"The government and those in tourism should join hands and move the industry forward, hence increase revenue and people's welfare," he said.
According to him, cultural tourism should be promoted by allowing people to start their own business, as is the case in South Africa.
He said regulation must be simple and easy in order not to discourage investors.
Likewise, he urged Tanzanians to create the culture of visiting tourist attractions scattered all over the country.
He said Tasota, in collaboration with the Tanzania Tourist Board (TTB), is planning to develop untapped tourism potentials in the Southern circuit this year.
Tourism experts are optimistic that cultural tourism resources will serve as a base for Tanzania's tourism industry in future.
Last year Tanzania received 719,030 tourists, fetching just over USD1bn, making the sector the country’s leading foreign exchange earner.
SOURCE: THE GUARDIAN
Tanzania: Moshingi Picked New Postal Bank CEO
President Jakaya Kikwete has appointed Mr Sabasaba Moshingi, new Managing Director of Tanzania Postal Bank (TPB).
A statement issued in Dar es Salaam on Tuesday by TPB Board of Directors Chairperson, Prof Lettice Rutashobya, said the new MD is taking over from Mr Alphonse Kihwele, who has been at the helm of the bank's management for the past 13 years.
Mr Kihwele is leaving the bank after 19 years of distinguished service at the institution. Mr Moshingi is joining TPB from Standard Chartered Bank Group where he was the bank's Regional Head of Consumer Banking, Operational Risk and Sales Governance for the Middle East Region of Northern Gulf, Levant and Oman.
The region, which he was overseeing, is made up of five countries namely Bahrain, Lebanon, Jordan, Qatar and Oman. He was based in the Kingdom of Bahrain, where the regional office is located.
Prior to his relocation to the Middle East, Mr Moshingi was the Head of Technology and Operations of Standard Chartered Bank Tanzania.
He is a Chartered Banker from the Tanzania Institute of Bankers and the Institute of Bankers UK. He holds a Masters degree of Business Administration (MBA-Finance) from the University of Dar es Salaam (UDSM). The 40-year old banker is married and has three children.
"Mr Moshingi, a distinguished career banker locally and internationally, is expected to transform TPB to be one of the strong banks in Tanzania and the Board is glad to have him on board and warmly welcome him and his family back to Tanzania," Prof Rutashobya said in the statement.
A statement issued in Dar es Salaam on Tuesday by TPB Board of Directors Chairperson, Prof Lettice Rutashobya, said the new MD is taking over from Mr Alphonse Kihwele, who has been at the helm of the bank's management for the past 13 years.
Mr Kihwele is leaving the bank after 19 years of distinguished service at the institution. Mr Moshingi is joining TPB from Standard Chartered Bank Group where he was the bank's Regional Head of Consumer Banking, Operational Risk and Sales Governance for the Middle East Region of Northern Gulf, Levant and Oman.
The region, which he was overseeing, is made up of five countries namely Bahrain, Lebanon, Jordan, Qatar and Oman. He was based in the Kingdom of Bahrain, where the regional office is located.
Prior to his relocation to the Middle East, Mr Moshingi was the Head of Technology and Operations of Standard Chartered Bank Tanzania.
He is a Chartered Banker from the Tanzania Institute of Bankers and the Institute of Bankers UK. He holds a Masters degree of Business Administration (MBA-Finance) from the University of Dar es Salaam (UDSM). The 40-year old banker is married and has three children.
"Mr Moshingi, a distinguished career banker locally and internationally, is expected to transform TPB to be one of the strong banks in Tanzania and the Board is glad to have him on board and warmly welcome him and his family back to Tanzania," Prof Rutashobya said in the statement.
Thursday, June 23, 2011
Tanzania: Weak currency is biggest enemy
THE story of Tanzania’s shilling, its supply and value, can easily be likened to the short tale: “The Emperor’s New Clothes” by Hans Christian Andersen, a 19th century Danish writer of children’s books and social critic. In short, Tanzania’s money is a runaway currency that needs serious re-anchoring if all the aspirations for the country’s economic development are to be realised.
Andersen’s book is about an Emperor who was too engrossed with his appearance and clothing. The Emperor hired two tailors who promised him the best suit made from a material invisible to anyone who was unfit for his position or “just hopelessly stupid”.
The Emperor could not see the cloth himself, but pretended that he did for fear of appearing unfit for his position or stupid. His ministers also did the same. When the cheats reported that the suit was finished, they pretended to dress him and the Emperor then marched in procession before his people, who played along with the lie.
Suddenly, a child in the crowd shouted that the Emperor was naked as the whole crowd supported him. The Emperor shrunk, suspecting that the child was right, but held himself up proudly and continued the procession. Mwalimu Nyerere also once used this story in one of his many addresses to the nation. Simply defined, money is a commodity used as a medium of exchange that retains its own value.
Short of that, money becomes almost useless as a unit of account, especially so since all money today is fiat or paper money whose value depends on government order as “legal tender,” meaning it is illegal not to accept it for all transactions in a given country. A key feature of any legal tender is that its value must be perceived by its users to have the weight or value of the goods and services exchanged for.
Short of that, the currency is on a high inflationary rate and the economy in a state of recession. It is this kind of scenario that many serious minded economies usually fear. Faced with a high balance of payments deficit in 1971, former US President Richard Nixon formerly ended the direct convertibility of the US dollar to gold.
It was about the same time too that the shilling was plucked from the Sterling standard and pegged to the dollar because Tanzania too was experiencing economic problems of its own. But that never helped the shilling to retain its value. Many of the younger generation can probably never believe that the dollar exchanged for just five Tanzanian shillings.
However, the chaotic daladala commuter buses in Dar es Salaam are living testimony to those nostalgic days. The five shilling coin lost its par value against the dollar in massive devaluation and remained in circulation as bus fare only. The coin is almost no longer in circulation or at best, worthless.
One dollar today is close to Tsh 1,560, a figure that should probably send shockwaves to our macro-economics gurus, but alas, no one seems to care. Seasoned businessman Mustafa Sabodo has repeatedly said that the dollar could exchange for at least half of that amount, but again nobody takes him seriously. One thing is clear though. The shilling cannot be allowed to become a rogue currency.
Luckily, economic theory dictates that countries cannot go bankrupt. However, weak currencies are certainly a major stumbling block in efforts to make every man and woman earn a decent living. The people can be called all sorts of names, lazy, sluggish, complacent and many others but no growth is possible without a strong currency.
Evolving a strong currency is not the job of the common. It is the task of the guys working in very cool offices from the Bank of Tanzania (BoT) twin towers. True, market forces are beyond their control but monitoring the value of our currency is certainly one of their responsibilities.
BoT Governor Professor Beno Ndullu owes the people good explanation when the shilling tumbles to madness levels as it is currently behaving. If anything, we should have long ago become quite apprehensive with budgeting first in billions and now in trillions, which have very little corresponding value.
We of the present enlightenment, politicians, economists, journalists and others, have to see ourselves as the generation that will solve our poverty problem. We can only succeed if we see ourselves as part of the solution and not the problem. There is nothing beyond our control. All the levers of progress are within reach of our hands and if we don’t believe in that then we probably don’t deserve to occupy the positions we do.
The government has just announced a five year development plan but its goals would remain elusive without a steady currency. All that the people can deduce from the present behaviour of the currency is that the people charged with managing it are simply not serious.
If the kitchen gets too hot, it is better to get out! Unless financial services are unlatched to give access to more formal players in the economy, the shilling shall always remain an undermined currency. Looked at critically, we are probably our own enemies, pretending to be dressed in the finest suit whereas in fact, we walk naked.
Andersen’s book is about an Emperor who was too engrossed with his appearance and clothing. The Emperor hired two tailors who promised him the best suit made from a material invisible to anyone who was unfit for his position or “just hopelessly stupid”.
The Emperor could not see the cloth himself, but pretended that he did for fear of appearing unfit for his position or stupid. His ministers also did the same. When the cheats reported that the suit was finished, they pretended to dress him and the Emperor then marched in procession before his people, who played along with the lie.
Suddenly, a child in the crowd shouted that the Emperor was naked as the whole crowd supported him. The Emperor shrunk, suspecting that the child was right, but held himself up proudly and continued the procession. Mwalimu Nyerere also once used this story in one of his many addresses to the nation. Simply defined, money is a commodity used as a medium of exchange that retains its own value.
Short of that, money becomes almost useless as a unit of account, especially so since all money today is fiat or paper money whose value depends on government order as “legal tender,” meaning it is illegal not to accept it for all transactions in a given country. A key feature of any legal tender is that its value must be perceived by its users to have the weight or value of the goods and services exchanged for.
Short of that, the currency is on a high inflationary rate and the economy in a state of recession. It is this kind of scenario that many serious minded economies usually fear. Faced with a high balance of payments deficit in 1971, former US President Richard Nixon formerly ended the direct convertibility of the US dollar to gold.
It was about the same time too that the shilling was plucked from the Sterling standard and pegged to the dollar because Tanzania too was experiencing economic problems of its own. But that never helped the shilling to retain its value. Many of the younger generation can probably never believe that the dollar exchanged for just five Tanzanian shillings.
However, the chaotic daladala commuter buses in Dar es Salaam are living testimony to those nostalgic days. The five shilling coin lost its par value against the dollar in massive devaluation and remained in circulation as bus fare only. The coin is almost no longer in circulation or at best, worthless.
One dollar today is close to Tsh 1,560, a figure that should probably send shockwaves to our macro-economics gurus, but alas, no one seems to care. Seasoned businessman Mustafa Sabodo has repeatedly said that the dollar could exchange for at least half of that amount, but again nobody takes him seriously. One thing is clear though. The shilling cannot be allowed to become a rogue currency.
Luckily, economic theory dictates that countries cannot go bankrupt. However, weak currencies are certainly a major stumbling block in efforts to make every man and woman earn a decent living. The people can be called all sorts of names, lazy, sluggish, complacent and many others but no growth is possible without a strong currency.
Evolving a strong currency is not the job of the common. It is the task of the guys working in very cool offices from the Bank of Tanzania (BoT) twin towers. True, market forces are beyond their control but monitoring the value of our currency is certainly one of their responsibilities.
BoT Governor Professor Beno Ndullu owes the people good explanation when the shilling tumbles to madness levels as it is currently behaving. If anything, we should have long ago become quite apprehensive with budgeting first in billions and now in trillions, which have very little corresponding value.
We of the present enlightenment, politicians, economists, journalists and others, have to see ourselves as the generation that will solve our poverty problem. We can only succeed if we see ourselves as part of the solution and not the problem. There is nothing beyond our control. All the levers of progress are within reach of our hands and if we don’t believe in that then we probably don’t deserve to occupy the positions we do.
The government has just announced a five year development plan but its goals would remain elusive without a steady currency. All that the people can deduce from the present behaviour of the currency is that the people charged with managing it are simply not serious.
If the kitchen gets too hot, it is better to get out! Unless financial services are unlatched to give access to more formal players in the economy, the shilling shall always remain an undermined currency. Looked at critically, we are probably our own enemies, pretending to be dressed in the finest suit whereas in fact, we walk naked.
Tanzania: Manyoni farmers earn 15bn/- from tobacco sales
Tobacco farming in central Tanzania. Production of the crop is spreading eastwards as the whole of Manyoni District is now engaged in the activity. (File photo)
Farmers in Manyoni District, Singida Region have raked in 14,540,862,610/- after having sold 6,353,292 kg of the crop between 2007/2008 and 2009/2010.
Tobacco Cooperative Union (CETCU) chairman Jafari Msangi, said the amount collected resulted from increased crop production in the district during the period under review.
According to him, in the 2007/2008 agricultural season, the farmers produced a total of 1,770,779 kgs worth 1,905,061,148/-; while in 2008/2009 the harvested 1,955,873 kgs worth 5,123,595,612/-. This was followed by production of 2,626,640 kgs worth 7,512,205,550/- in the 2009/2010 season.
However, Msangi explained that in the current season they expect to harvest 3,507,912 kgs worth USD5,612,659.2 , equivalent to 8,418,988,800/-.
Furthermore, the chairman said that more people were joining tobacco farming and that the trend is not unique in Tanzania but global.
He said this has caused the price to tobacco to drop from USD2.13 to 1.60 per kg in the world market.
“The fact that our factories lack sufficient processing facililities has contributed to the general drop of price as well as purchasing preferences,” Msangi said.
He further said that the union’s cooperation with the government in searching for buyers has started bearing fruits and that it was possible that by next year there would be more buyers.
Speaking with tobacco farmers from Mwamagembe village, Manyoni District Commissioner Ally Rufunga said tobacco farming was officially introduced in the district in the 1973/1974 agricultural season at Itigi division, but has now spread all over the district.
He mentioned other areas that engage in tobacco production as Semembo, Mkwese, Masigati, Itagata, Mwamagembe and Rungwa.
SOURCE: THE GUARDIAN
Farmers in Manyoni District, Singida Region have raked in 14,540,862,610/- after having sold 6,353,292 kg of the crop between 2007/2008 and 2009/2010.
Tobacco Cooperative Union (CETCU) chairman Jafari Msangi, said the amount collected resulted from increased crop production in the district during the period under review.
According to him, in the 2007/2008 agricultural season, the farmers produced a total of 1,770,779 kgs worth 1,905,061,148/-; while in 2008/2009 the harvested 1,955,873 kgs worth 5,123,595,612/-. This was followed by production of 2,626,640 kgs worth 7,512,205,550/- in the 2009/2010 season.
However, Msangi explained that in the current season they expect to harvest 3,507,912 kgs worth USD5,612,659.2 , equivalent to 8,418,988,800/-.
Furthermore, the chairman said that more people were joining tobacco farming and that the trend is not unique in Tanzania but global.
He said this has caused the price to tobacco to drop from USD2.13 to 1.60 per kg in the world market.
“The fact that our factories lack sufficient processing facililities has contributed to the general drop of price as well as purchasing preferences,” Msangi said.
He further said that the union’s cooperation with the government in searching for buyers has started bearing fruits and that it was possible that by next year there would be more buyers.
Speaking with tobacco farmers from Mwamagembe village, Manyoni District Commissioner Ally Rufunga said tobacco farming was officially introduced in the district in the 1973/1974 agricultural season at Itigi division, but has now spread all over the district.
He mentioned other areas that engage in tobacco production as Semembo, Mkwese, Masigati, Itagata, Mwamagembe and Rungwa.
SOURCE: THE GUARDIAN
Tanzania: At long last, some good news for motorists
LAST week’s headline stating that Tanzanian motorists will be filling up their car tanks with an ethanol-petrol blend within four months sounds like good news at the outset.
Any news that promises to reduce fuel prices, by any margin, is good news for anyone who is affected by the price of petrol, which is practically everyone.
The Minister of Energy and Minerals has been quoted saying that the government will announce the use of ethanol as a fuel substitute soon. An official of the Tanzanian Petroleum Development Corporation (TPDC) says that it involves a mixture of petrol through ethanol from Brazil. Tanzania is expected to begin production of ethanol within five years.
The promised ten per cent reductions in the price of fuel can be significant over the long term. Curious to find out how much a ten per cent saving means to my budget, I estimated that I buy just over 1,000 litres of fuel every year and at current prices, the total bill reaches Shs.2,323,200/-.
Saving of Sh.232, 320/- may seem insignificant to an individual, but taken on a national scale the savings should be substantial. Brazil is the world’s second largest producer of ethanol and a world leader in the biofuels industry, thus production of ethanol comes with the potential of raising the supply of electricity to the national grid.
The Brazilian model utilizes sugarcane waste to produce electricity for the ethanol plants and supplies up to 3 per cent of the total electricity to the national grid. Because of the current power shedding arrangement that affects Butiama regularly, I have the unenviable experience of having to drive to Musoma regularly and sit in a noisy bar to enjoy the benefits of modern life: a laptop and electricity that drives the laptop.
Having to drive the 80-kilometre round trip means my annual fuel expense is considerably higher than the estimates, and so a project that even remotely promises a more reliable supply of electricity is irresistible.
We know of promises of reductions in fuel prices that have remained promises because enforcing agencies have been too slow to take action against malpractice by petrol stations that have continued to maintain high retail prices long after the drastic fall of World crude oil prices.
Again, Brazil has mandated up to 25 per cent of ethanol in a petrol-ethanol mix to guarantee a price advantage over petrol and it may be necessary to require a minimum percentage makes up the Tanzanian blend, with stronger safeguards to ensure compliance. Some caution has been raised against the use of land for the production of energy products. It is feared that food security could be compromised.
Research indicates that it should not necessarily be the case, particularly because of the natural limits that impede conversion of land use to ethanol production. In the case of sugarcane-based ethanol production, not all land is suitable for the production of sugarcane, which is only 7.5 per cent of arable land in Brazil’s case.
Only 1.5 per cent of that arable land is used for sugarcane-based ethanol production. The topography, soil composition, and availability of water are some of the critical factors. It is true that even the small proportion of arable land that is suitable for sugarcane production could also be suitable for agricultural crops and entice farmers away from food production into the more lucrative gains offered by supplying the ethanol industry. But it appears that the government is taking steps to mitigate the increased demand for suitable land for ethanol production.
One of the companies that is reportedly investing in ethanol production has been allowed only 20,000 hectares of the original 200,000 hectares it had requested. Consistency makes all the difference in whether good intentions remain good intentions, intended to protect the interests of both current and future generations.
Watchdogs should keep vigil to ensure that a cap is maintained to limit the total land that is provided for ethanol production, and to ensure that the investor who is permitted use of only 20,000 hectares today does not mysteriously end up publishing a report to shareholders confirming a total land under cultivation of 300,000 hectares ten years down the road.
In the short run, humanity can survive longer on an empty fuel tank than on an empty stomach. But a long term perspective demands a solution against a rise in both rising food and fuel costs.
madaraka.nyerere@gmail.com
http://madarakanyerere.blogspot.com http://muhunda.blogspot.com/
Any news that promises to reduce fuel prices, by any margin, is good news for anyone who is affected by the price of petrol, which is practically everyone.
The Minister of Energy and Minerals has been quoted saying that the government will announce the use of ethanol as a fuel substitute soon. An official of the Tanzanian Petroleum Development Corporation (TPDC) says that it involves a mixture of petrol through ethanol from Brazil. Tanzania is expected to begin production of ethanol within five years.
The promised ten per cent reductions in the price of fuel can be significant over the long term. Curious to find out how much a ten per cent saving means to my budget, I estimated that I buy just over 1,000 litres of fuel every year and at current prices, the total bill reaches Shs.2,323,200/-.
Saving of Sh.232, 320/- may seem insignificant to an individual, but taken on a national scale the savings should be substantial. Brazil is the world’s second largest producer of ethanol and a world leader in the biofuels industry, thus production of ethanol comes with the potential of raising the supply of electricity to the national grid.
The Brazilian model utilizes sugarcane waste to produce electricity for the ethanol plants and supplies up to 3 per cent of the total electricity to the national grid. Because of the current power shedding arrangement that affects Butiama regularly, I have the unenviable experience of having to drive to Musoma regularly and sit in a noisy bar to enjoy the benefits of modern life: a laptop and electricity that drives the laptop.
Having to drive the 80-kilometre round trip means my annual fuel expense is considerably higher than the estimates, and so a project that even remotely promises a more reliable supply of electricity is irresistible.
We know of promises of reductions in fuel prices that have remained promises because enforcing agencies have been too slow to take action against malpractice by petrol stations that have continued to maintain high retail prices long after the drastic fall of World crude oil prices.
Again, Brazil has mandated up to 25 per cent of ethanol in a petrol-ethanol mix to guarantee a price advantage over petrol and it may be necessary to require a minimum percentage makes up the Tanzanian blend, with stronger safeguards to ensure compliance. Some caution has been raised against the use of land for the production of energy products. It is feared that food security could be compromised.
Research indicates that it should not necessarily be the case, particularly because of the natural limits that impede conversion of land use to ethanol production. In the case of sugarcane-based ethanol production, not all land is suitable for the production of sugarcane, which is only 7.5 per cent of arable land in Brazil’s case.
Only 1.5 per cent of that arable land is used for sugarcane-based ethanol production. The topography, soil composition, and availability of water are some of the critical factors. It is true that even the small proportion of arable land that is suitable for sugarcane production could also be suitable for agricultural crops and entice farmers away from food production into the more lucrative gains offered by supplying the ethanol industry. But it appears that the government is taking steps to mitigate the increased demand for suitable land for ethanol production.
One of the companies that is reportedly investing in ethanol production has been allowed only 20,000 hectares of the original 200,000 hectares it had requested. Consistency makes all the difference in whether good intentions remain good intentions, intended to protect the interests of both current and future generations.
Watchdogs should keep vigil to ensure that a cap is maintained to limit the total land that is provided for ethanol production, and to ensure that the investor who is permitted use of only 20,000 hectares today does not mysteriously end up publishing a report to shareholders confirming a total land under cultivation of 300,000 hectares ten years down the road.
In the short run, humanity can survive longer on an empty fuel tank than on an empty stomach. But a long term perspective demands a solution against a rise in both rising food and fuel costs.
madaraka.nyerere@gmail.com
http://madarakanyerere.blogspot.com http://muhunda.blogspot.com/
Tanzania: Know your banker [KYB]
ONE would often observe that whenever we want to open a new bank account with any bank, one of the forms which we are asked to fill is called "KYC" form. The KYC, which is popular in the banking and financial industry across the world, stands for-Know Your Customer.
KYC is the due diligence that banks/ financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. KYC policies are becoming increasingly important globally to prevent or identify transactions relating to theft, fraud, money laundering and terrorist financing.
Howsoever influential one might be, no bank of professional standing will open an account until that customer passes the mandatory KYC procedures. Such being the practice in financial sector, don't you feel that it is equally obligatory on the part of any depositor/ investor to also know the corresponding bank/ investment company where one is intending to put his/ her hard earned money.
This is where I introduce you to an altogether new terminology - Know Your Banker (KYB). While KYC is for the bank or investment company, KYB is for a customer.
So, if it is mandatory for a customer to undergo KYC compliance procedures to open a bank account, are we not supposed to apply the same yardstick when we decide to transact with any bank or investment company.
This is where a common investor normally makes a miss. One would go to any extent to comply the mandatory KYC guidelines when required, while on other hand the same person would pay very little attention to know about the bank or investment company where he/ she intends to put one's hard earned money for investment purpose.
Please note, your first and foremost concern as an investor should be the safety of money you intend to deposit/ invest. In order to address this concern one has to take some pain by following the dictum of our today's message - Know Your Banker/ Investment Company. Though the moot question remains, as to how one can know about its Banker or Investment Company?
There are many ways through which one can collect some basic information/ data to know one's banker/ Investment Company well. While doing KYB, the first things you must ensure is that the financial entity--whether a bank, finance company, chit fund or any other concern of similar nature - is duly registered and has a clear cut mandate/ licence to undertake the type of business currently being operated.
Once that financial entity has passed the first litmus test of being found duly registered, the very next thing one must find out is about its track record. One of the best ways through which one can easily find out the track record of any entity is by seeking/ analyzing audited financial accounts of that entity for a period of about 3-5 years. While doing so, you may even take the help of some financial analysts or accountants.
Another important thing one must ensure is to clearly understand the terms and conditions that govern the investment plan you intend to join. The normal practice is to just sign on the dotted lines, without being clear on many important key parameters. You may decide to put money under fixed deposit with the bank for five years without even knowing whether there is any window available to you in case the money is needed before maturity.
If yes, then what conditions would apply in case you decide to break the fixed deposit after completion of three years. There could be many permutation and combinations of similar nature relating to one's investment placed with various financial entities.
There are numerous instances where an investor had joined a savings/ investment plan based on misguided advice received from some greedy financial advisor or agent, which later on turned out to be against one's investment profile. But by the time one discovers such unwanted clause, it is too late for correction. So the best time to do the necessary due diligence is when you are investing at the first instance.
For security and peace of mind, you should be interested only in dealing with the safest bank or investment company, which enjoys highest quality of financials, coupled with the lowest risk and has a steady track record. Thus from hereon please make "KYB-Know Your Banker" as one of your integral investment mantra and I am sure by doing so you would avoid unnecessary miseries that may befall on your hard earned money in the times to come!!!
Jagjit Singh
Technical Adviser
Unit Trust of Tanzania
Email: jsingh@utt-tz.org
KYC is the due diligence that banks/ financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. KYC policies are becoming increasingly important globally to prevent or identify transactions relating to theft, fraud, money laundering and terrorist financing.
Howsoever influential one might be, no bank of professional standing will open an account until that customer passes the mandatory KYC procedures. Such being the practice in financial sector, don't you feel that it is equally obligatory on the part of any depositor/ investor to also know the corresponding bank/ investment company where one is intending to put his/ her hard earned money.
This is where I introduce you to an altogether new terminology - Know Your Banker (KYB). While KYC is for the bank or investment company, KYB is for a customer.
So, if it is mandatory for a customer to undergo KYC compliance procedures to open a bank account, are we not supposed to apply the same yardstick when we decide to transact with any bank or investment company.
This is where a common investor normally makes a miss. One would go to any extent to comply the mandatory KYC guidelines when required, while on other hand the same person would pay very little attention to know about the bank or investment company where he/ she intends to put one's hard earned money for investment purpose.
Please note, your first and foremost concern as an investor should be the safety of money you intend to deposit/ invest. In order to address this concern one has to take some pain by following the dictum of our today's message - Know Your Banker/ Investment Company. Though the moot question remains, as to how one can know about its Banker or Investment Company?
There are many ways through which one can collect some basic information/ data to know one's banker/ Investment Company well. While doing KYB, the first things you must ensure is that the financial entity--whether a bank, finance company, chit fund or any other concern of similar nature - is duly registered and has a clear cut mandate/ licence to undertake the type of business currently being operated.
Once that financial entity has passed the first litmus test of being found duly registered, the very next thing one must find out is about its track record. One of the best ways through which one can easily find out the track record of any entity is by seeking/ analyzing audited financial accounts of that entity for a period of about 3-5 years. While doing so, you may even take the help of some financial analysts or accountants.
Another important thing one must ensure is to clearly understand the terms and conditions that govern the investment plan you intend to join. The normal practice is to just sign on the dotted lines, without being clear on many important key parameters. You may decide to put money under fixed deposit with the bank for five years without even knowing whether there is any window available to you in case the money is needed before maturity.
If yes, then what conditions would apply in case you decide to break the fixed deposit after completion of three years. There could be many permutation and combinations of similar nature relating to one's investment placed with various financial entities.
There are numerous instances where an investor had joined a savings/ investment plan based on misguided advice received from some greedy financial advisor or agent, which later on turned out to be against one's investment profile. But by the time one discovers such unwanted clause, it is too late for correction. So the best time to do the necessary due diligence is when you are investing at the first instance.
For security and peace of mind, you should be interested only in dealing with the safest bank or investment company, which enjoys highest quality of financials, coupled with the lowest risk and has a steady track record. Thus from hereon please make "KYB-Know Your Banker" as one of your integral investment mantra and I am sure by doing so you would avoid unnecessary miseries that may befall on your hard earned money in the times to come!!!
Jagjit Singh
Technical Adviser
Unit Trust of Tanzania
Email: jsingh@utt-tz.org
Tanzania: E-Banking Comes of Age
Automated Teller machines (ATMs) were the first well-known gadgets to offer electronic banking services to retail customers. Next came phone banking that allowed subscribers to call their banks' computer systems using ordinary phones and performing bank transactions through the phone keypad.
Personal computer banking superseded phone banking and allowed users to interact with their banks through computers with a dial-up modem connection to the phone network.
The mother of all Information Communications Technology (ICT) on banking however is e-banking, which refers to the deployment of IT services by banks using the infrastructure of the digital age. The technology lowers transaction costs and creates new types of banking opportunities, which also overcome barriers of time and distance.
For users, e-banking provides current information and 24-hour access to banking services in addition to the familiar browser interface. The primary services offered through e-banking are money transfer, bills and tax payments as well as account balance checking.
E-banking in Tanzania has made a number of in roads, although the transactions are still cash-intensive. Citibank, Bank M and Standard Chartered are among the pioneers of e-banking, especially in paying taxes. The three banks use AsyBank system, which is a customs payment scheme that reads Tanzania Revenue Authority (TRA) commissioner's general taxpaying account.
According to Bank M Chairman Nimrod Mkono, Bank M perceives the AsyBank technology as the backbone of financial service industry in the country.
"we have been in the forefront of bringing to this market products and services geared to meet the aspirations of our clients, with levels of commitment unique to us and accompanied by delivery standards unheard of in the local markets," Mr Mkono said when launching Money.Mapato service.
Money.Mapato guarantees speedy payment of taxes, according to Mr Mkono, "With most banks having long queues, some taxpayers opt to pay taxes a day or two before the due date to avoid penalties but with Money Mapato, tax payment becomes smooth and stress-free."
Acting Director of Accounting Operations with TRA Happiness Nkya says the revenue collection agency is delighted by Bank M initiative to simplify procedures for tax payment and enable collection of more revenues, "Bank M has reduced the cost of doing business, especially cutting down the number of days for clearing of goods by customs."
The bank has integrated its systems to TRA's ASYCUDA tax management software to payment of taxes electronically and notifying the authority within short time. Other banks--Citibank and Standard chartered-have the similar technology.
In banking, ICT is basically used under two different venues-communication and connectivity as well as business process reengineering. IT enables development of sophisticated products, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.
The Citibank's online banking, CitiDirect, speaks volume of IT in banking. It is a powerful new way that the bank has devised, bringing all banking functions within reach by the entire organisation.
"CitiDirect lets you access your accounts-real-time -and an ever-expanding portfolio of industry-leading products and services through the web you can be more efficient, more flexible and more in control of your banking," Citibank says in a statement.
Almost all leading commercial banks in the country now have internet banking services. There are 42 banks in the country, led by the National Microfinance Bank (NMB) in term of profit, but with Bank M in terms of IT advancement. But, despite the IT advancement and almost 1,000 ATMs countrywide, long queues in banking halls remain common.
NMB has introduced PesaFaster product in attempt to reduce the queues. The new product allows NMB customers to send money to any person even if the receiver does not have an account or ATM card with NMB.
According to US based Information for Development Programme (InfoDev), online banking allows customers to get current account balances at any time and if the banking transaction does not require physical interaction.
In Latin America and Africa, e-banking has however been less successful, according InfoDev. Developing a successful e-banking for poor people entails managing a host of inter-related issues-technology, pricing, financial literacy, functionality, partnerships, delivery channels, POS distribution and regulation.
Personal computer banking superseded phone banking and allowed users to interact with their banks through computers with a dial-up modem connection to the phone network.
The mother of all Information Communications Technology (ICT) on banking however is e-banking, which refers to the deployment of IT services by banks using the infrastructure of the digital age. The technology lowers transaction costs and creates new types of banking opportunities, which also overcome barriers of time and distance.
For users, e-banking provides current information and 24-hour access to banking services in addition to the familiar browser interface. The primary services offered through e-banking are money transfer, bills and tax payments as well as account balance checking.
E-banking in Tanzania has made a number of in roads, although the transactions are still cash-intensive. Citibank, Bank M and Standard Chartered are among the pioneers of e-banking, especially in paying taxes. The three banks use AsyBank system, which is a customs payment scheme that reads Tanzania Revenue Authority (TRA) commissioner's general taxpaying account.
According to Bank M Chairman Nimrod Mkono, Bank M perceives the AsyBank technology as the backbone of financial service industry in the country.
"we have been in the forefront of bringing to this market products and services geared to meet the aspirations of our clients, with levels of commitment unique to us and accompanied by delivery standards unheard of in the local markets," Mr Mkono said when launching Money.Mapato service.
Money.Mapato guarantees speedy payment of taxes, according to Mr Mkono, "With most banks having long queues, some taxpayers opt to pay taxes a day or two before the due date to avoid penalties but with Money Mapato, tax payment becomes smooth and stress-free."
Acting Director of Accounting Operations with TRA Happiness Nkya says the revenue collection agency is delighted by Bank M initiative to simplify procedures for tax payment and enable collection of more revenues, "Bank M has reduced the cost of doing business, especially cutting down the number of days for clearing of goods by customs."
The bank has integrated its systems to TRA's ASYCUDA tax management software to payment of taxes electronically and notifying the authority within short time. Other banks--Citibank and Standard chartered-have the similar technology.
In banking, ICT is basically used under two different venues-communication and connectivity as well as business process reengineering. IT enables development of sophisticated products, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.
The Citibank's online banking, CitiDirect, speaks volume of IT in banking. It is a powerful new way that the bank has devised, bringing all banking functions within reach by the entire organisation.
"CitiDirect lets you access your accounts-real-time -and an ever-expanding portfolio of industry-leading products and services through the web you can be more efficient, more flexible and more in control of your banking," Citibank says in a statement.
Almost all leading commercial banks in the country now have internet banking services. There are 42 banks in the country, led by the National Microfinance Bank (NMB) in term of profit, but with Bank M in terms of IT advancement. But, despite the IT advancement and almost 1,000 ATMs countrywide, long queues in banking halls remain common.
NMB has introduced PesaFaster product in attempt to reduce the queues. The new product allows NMB customers to send money to any person even if the receiver does not have an account or ATM card with NMB.
According to US based Information for Development Programme (InfoDev), online banking allows customers to get current account balances at any time and if the banking transaction does not require physical interaction.
In Latin America and Africa, e-banking has however been less successful, according InfoDev. Developing a successful e-banking for poor people entails managing a host of inter-related issues-technology, pricing, financial literacy, functionality, partnerships, delivery channels, POS distribution and regulation.
Thursday, June 16, 2011
U.S. Regulators: Progress Being Made On Global Financial Rules
WASHINGTON -- Federal regulators told members of Congress they are collaborating with other nations on rules intended to prevent another financial crisis.
The topic was raised at a hearing Thursday looking into whether last year's financial overhaul could drive business overseas and hurt the U.S. economy.
House Republicans are trying to weaken or kill the law before regulators finish writing rules opposed by the banking and financial community. Regulators, meanwhile, have said they will miss deadlines to complete some of the rules by next month, a year since President Barack Obama signed the law.
Federal Reserve Gov. Daniel Tarullo, Treasury Department official Lael Brainard and other regulators told a House panel they have made progress in coming up with new capital requirements for banks together with officials overseas.
On the House floor, lawmakers voted to adopt legislation that would delay by more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. The amendment to the bill funding the Agriculture Department's operations would require the Commodity Futures Trading Commission to first have other rules in place to help it collect derivatives market data.
The value of derivatives depends on the future price of some other investment. They have ballooned into a $600 trillion market. Regulators say they pose a threat to the stability of the financial system.
Wall Street executives, appearing later before the House Financial Services Committee, maintained that the stricter financial rules could crimp U.S. firms, hurt the economy and cost jobs.
"The regulatory pendulum clearly has now begun to swing to a point that risks hobbling our financial system and our economic growth," Barry Zubrow, the chief risk officer of JPMorgan Chase & Co., told the panel.
The combined impact of U.S. and international financial restrictions "imposes significant costs not just on the industry, (companies) and investors, but on consumers and the U.S. economy," said Timothy Ryan, president and CEO of Wall Street's biggest lobbying group, the Securities Industry and Financial Markets Association.
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Brainard, the Treasury undersecretary for international affairs, said "We have been working tirelessly" to create a level playing field of financial regulation across the U.S., Europe, Asia and other business centers.
"There are some who would argue that the United States is moving too fast, that we should wait to see what other countries implement," Brainard testified. "I do not agree. I would argue that by moving first and leading from a position of strength, we are elevating the world's standards to ours."
Rep. Spencer Bachus, R-Ala., the committee's chairman, warned that a coming "tsunami" of regulations could "push capital, industry and jobs right out of the country."
Democratic lawmakers defended the overhaul but some voiced concern about specific rules being considered, such as the stricter capital requirements for financial institutions deemed by regulators to pose a potential threat to the system.
John Walsh, the acting comptroller of the currency whose Treasury Department agency oversees national banks, said he was concerned that if the capital requirements were "taken too far, we may limit the availability of credit that is needed for economic growth."
Walsh has disagreed with other federal regulators on how stringent the new capital requirements should be.
The topic was raised at a hearing Thursday looking into whether last year's financial overhaul could drive business overseas and hurt the U.S. economy.
House Republicans are trying to weaken or kill the law before regulators finish writing rules opposed by the banking and financial community. Regulators, meanwhile, have said they will miss deadlines to complete some of the rules by next month, a year since President Barack Obama signed the law.
Federal Reserve Gov. Daniel Tarullo, Treasury Department official Lael Brainard and other regulators told a House panel they have made progress in coming up with new capital requirements for banks together with officials overseas.
On the House floor, lawmakers voted to adopt legislation that would delay by more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. The amendment to the bill funding the Agriculture Department's operations would require the Commodity Futures Trading Commission to first have other rules in place to help it collect derivatives market data.
The value of derivatives depends on the future price of some other investment. They have ballooned into a $600 trillion market. Regulators say they pose a threat to the stability of the financial system.
Wall Street executives, appearing later before the House Financial Services Committee, maintained that the stricter financial rules could crimp U.S. firms, hurt the economy and cost jobs.
"The regulatory pendulum clearly has now begun to swing to a point that risks hobbling our financial system and our economic growth," Barry Zubrow, the chief risk officer of JPMorgan Chase & Co., told the panel.
The combined impact of U.S. and international financial restrictions "imposes significant costs not just on the industry, (companies) and investors, but on consumers and the U.S. economy," said Timothy Ryan, president and CEO of Wall Street's biggest lobbying group, the Securities Industry and Financial Markets Association.
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Brainard, the Treasury undersecretary for international affairs, said "We have been working tirelessly" to create a level playing field of financial regulation across the U.S., Europe, Asia and other business centers.
"There are some who would argue that the United States is moving too fast, that we should wait to see what other countries implement," Brainard testified. "I do not agree. I would argue that by moving first and leading from a position of strength, we are elevating the world's standards to ours."
Rep. Spencer Bachus, R-Ala., the committee's chairman, warned that a coming "tsunami" of regulations could "push capital, industry and jobs right out of the country."
Democratic lawmakers defended the overhaul but some voiced concern about specific rules being considered, such as the stricter capital requirements for financial institutions deemed by regulators to pose a potential threat to the system.
John Walsh, the acting comptroller of the currency whose Treasury Department agency oversees national banks, said he was concerned that if the capital requirements were "taken too far, we may limit the availability of credit that is needed for economic growth."
Walsh has disagreed with other federal regulators on how stringent the new capital requirements should be.
US bank must pay back customers for money stolen by hackers
A US court has ruled that Comerica Bank is liable for a $560,000 (£350,000) cyberheist, saying the bank should have done a better job to spot millions of dollars in fraudulent transactions after one of the bank's customers was tricked in a phishing attack two years ago.
In a June 13 decision, the court ruled in favour of Experi-Metal, a custom car parts maker that had sued Comerica after the January 2009 incident. In just a few hours, criminals tried to move millions of dollars to Eastern Europe, before Comerica's fraud department shut down the scam.
Most of the money was recovered, but in his ruling Judge Patrick Duggan of the US District Court for the Eastern District of Michigan said that the bank should have done a better job of stopping the fraud. A "bank dealing fairly with its customers, under these circumstances, would have detected and/or stopped the fraudulent wire activity earlier," Judge Duggan wrote in his ruling.
Experi-Metal's troubles started in the early morning hours of January 22, 2009. That's when the company's vice president of manufacturing, Gerry King, received a phishing email telling him to fill out what appeared to be a mundane piece of online paperwork: a "Comerica Business Connect Customer Form." He forwarded the email to Controller Keith Maslowski, who then logged into a website belonging to the criminals. With Maslowski's login credentials, the criminals were off and running. Over the next six-and-a-half hours they raced to steal as much of Experi-Metal's money as they could before their window of opportunity closed.
Comerica learned about the problem about four hours into the fraud, when JP Morgan Chase called to report some suspicious transactions coming into its accounts from Experi-Metal's account. A much larger bank, Chase could move money overseas, so the criminals were funnelling money into Chase accounts in order to then transfer it to Russia and Estonia.
Comerica's fraud department immediately took away Experi-Metal's account, but they made a mistake. They didn't knock the fraudsters off the Comerica server. Still logged in, the criminals managed to initiate another 15 wire transfers before a Comerica quality risk manager finally killed their session. That final push netted the criminals nearly $50,000.
After Comerica refused to cover the $560,000 loss, Experi-Metal filed suit, arguing that the bank should not have allowed the transfers. Comerica countered that since Experi-Metal was the company that was phished, it should have to pay.
Judge Duggan has ruled in Experi-Metal's favour in a bench opinion, but he has not yet said how much Comerica must pay.
In a June 13 decision, the court ruled in favour of Experi-Metal, a custom car parts maker that had sued Comerica after the January 2009 incident. In just a few hours, criminals tried to move millions of dollars to Eastern Europe, before Comerica's fraud department shut down the scam.
Most of the money was recovered, but in his ruling Judge Patrick Duggan of the US District Court for the Eastern District of Michigan said that the bank should have done a better job of stopping the fraud. A "bank dealing fairly with its customers, under these circumstances, would have detected and/or stopped the fraudulent wire activity earlier," Judge Duggan wrote in his ruling.
Experi-Metal's troubles started in the early morning hours of January 22, 2009. That's when the company's vice president of manufacturing, Gerry King, received a phishing email telling him to fill out what appeared to be a mundane piece of online paperwork: a "Comerica Business Connect Customer Form." He forwarded the email to Controller Keith Maslowski, who then logged into a website belonging to the criminals. With Maslowski's login credentials, the criminals were off and running. Over the next six-and-a-half hours they raced to steal as much of Experi-Metal's money as they could before their window of opportunity closed.
Comerica learned about the problem about four hours into the fraud, when JP Morgan Chase called to report some suspicious transactions coming into its accounts from Experi-Metal's account. A much larger bank, Chase could move money overseas, so the criminals were funnelling money into Chase accounts in order to then transfer it to Russia and Estonia.
Comerica's fraud department immediately took away Experi-Metal's account, but they made a mistake. They didn't knock the fraudsters off the Comerica server. Still logged in, the criminals managed to initiate another 15 wire transfers before a Comerica quality risk manager finally killed their session. That final push netted the criminals nearly $50,000.
After Comerica refused to cover the $560,000 loss, Experi-Metal filed suit, arguing that the bank should not have allowed the transfers. Comerica countered that since Experi-Metal was the company that was phished, it should have to pay.
Judge Duggan has ruled in Experi-Metal's favour in a bench opinion, but he has not yet said how much Comerica must pay.
Kenya: Telecommunications Companies Tasked to Set Up Shared Cash Transfer Platform
Mobile phone companies will be required to develop a common system for facilitating mobile money transfers across rival networks, a move that could cut the cost of sending money and increase the availability of the service countrywide.
A task force set up by the Prime Minister's office has recommended that mobile firms should create a seamless mobile money transfer system regulated by Central Bank of Kenya.
Mr Mwaura Nduati, the head of the national payment system at CBK and also a member of 12-member team that formed the task force, said CBK would not force any of the mobile firm's operators to share its mobile money network agents.
"What we are asking of the mobile phone operators is similar to the banks' settlement payment system," said Mr Nduati.
A central clearing house for mobile phone payments is likely to increase usage of the service just like sharing of ATMs by banks has increased uptake of debit cards, Mr Mwaura said.
The clamour for a common mobile money transfer system follows a request by Airtel in February to have a seamless withdrawal mobile money transfer service, but the market leader Safaricom said this was likely to kill innovation in the money transfer industry as subscribers may not receive money sent to them instantly.
Currently, recipients of money across networks receive an SMS notifying that money has been sent to them and then use the message to withdraw from an agent of the transmitting operator.
The Prime Minister's office left the system formation to the operators.
"The Task Force recommends that this aspect of the industry be regulated through inter-operator co-operation just like the case of banking sector", read part of the task force report, adding; "The operators should get together to model a settlement system based on international best practices."
On Tuesday, Airtel managing director Rene Meza said operators should be discouraged from entering into exclusive agreements with the agents in order for this to be achieved.
"Most of the agreements drawn between the operators and agents are exclusive in nature; therefore restricting the agents from conducting business with the operators' competitors, with huge inconvenience to customers"
Airtel says that the operators need to support the inter-operability and that regulators CBK and CCK take leadership to implement this with a time-bound plan while sensitizing operators on the benefit to the economy at large.
A task force set up by the Prime Minister's office has recommended that mobile firms should create a seamless mobile money transfer system regulated by Central Bank of Kenya.
Mr Mwaura Nduati, the head of the national payment system at CBK and also a member of 12-member team that formed the task force, said CBK would not force any of the mobile firm's operators to share its mobile money network agents.
"What we are asking of the mobile phone operators is similar to the banks' settlement payment system," said Mr Nduati.
A central clearing house for mobile phone payments is likely to increase usage of the service just like sharing of ATMs by banks has increased uptake of debit cards, Mr Mwaura said.
The clamour for a common mobile money transfer system follows a request by Airtel in February to have a seamless withdrawal mobile money transfer service, but the market leader Safaricom said this was likely to kill innovation in the money transfer industry as subscribers may not receive money sent to them instantly.
Currently, recipients of money across networks receive an SMS notifying that money has been sent to them and then use the message to withdraw from an agent of the transmitting operator.
The Prime Minister's office left the system formation to the operators.
"The Task Force recommends that this aspect of the industry be regulated through inter-operator co-operation just like the case of banking sector", read part of the task force report, adding; "The operators should get together to model a settlement system based on international best practices."
On Tuesday, Airtel managing director Rene Meza said operators should be discouraged from entering into exclusive agreements with the agents in order for this to be achieved.
"Most of the agreements drawn between the operators and agents are exclusive in nature; therefore restricting the agents from conducting business with the operators' competitors, with huge inconvenience to customers"
Airtel says that the operators need to support the inter-operability and that regulators CBK and CCK take leadership to implement this with a time-bound plan while sensitizing operators on the benefit to the economy at large.
Kenya: CBA's Interest Rate Raise Signals Climb in Cost of Loans
The Commercial Bank of Africa (CBA) has raised its interest charge on loans by 1.5 per cent, signalling a possible surge in the cost of debt as other lenders adjust their base rates to safeguard their profit margins.
The bank has raised the minimum lending rate on shilling denominated loans to 14.5 per cent from 13 per cent effective from July 11.
The revision puts CBA's lending rate above the industry average of 13.92 per cent according to the Central Bank of Kenya (CBK's) data.
CBA's revision comes barely three months after it had reviewed the rate downward by one per cent in a bid to grow its loan book and increase interest income.
"This is a normal revision that has taken into account the changing circumstances in the market. The recent shift in short-term rates as well as the Central Bank Rate (CBR) and cash reserve requirement revision have been considered in this shift," said Jeremy Ngunze, the CBA group head of business management.
The Monetary Policy Committee of the CBK in its end of May policy changes continued with monetary tightening stance increasing both the CBR and the proportion of deposits that banks hold with the regulator by a quarter percentage points.
"These would have the effect of increasing the cost of funds for banks. The individual banks would therefore need to make strategic decisions on the way forward of either increasing lending rate to protect the margin or maintain lending rate and go for marketshare," said the industry lobby Kenya Bankers Association CEO, Mr Habil Olaka.
With the average interest payment on deposits stuck at 3.47 per cent, banking are earning a margin of 10.45 per cent.
The Central Bank has reviewed the monetary policy rate upwards by half a percentage point since the time of the March downward revision by Commercial Bank of Africa.
Banks responding
The regulator raised the rate to six per cent from 5.75 per cent in March and followed it up with a 0.25 basis points increase at the end of May to settle at the current 6.25 per cent.
"Because of competition for deposits and rising inflation the deposits rates have risen in the last three months. There is usually a lag time before banks can respond, so they could be reacting to that," said Alex Muiruri a fixed income dealer at African Alliance Investment Bank.
There is expectation for the interest rates to rise across the industry due to CBK actions, a weakening shilling and high inflationary pressures.
"With inflation rates going up the treasury bill rate has also been going up as CBK sought to mop out the liquidity," said Ashif Kassam, the managing partner at consulting firm RSM Ashvir. "What remains to be seen is whether the rise in interest rates will be proportional to that of deposit rate," he added.
In the last auction investors bought the treasury bill at nine per cent with the result being the Central Bank raising Sh17 billion five times more than it had targeted.
"The budget deficit also signals more borrowing by the government which could crowd out the private sector," said John Kamunya an analyst with Dyer and Blair Investment Bank.
High illiquidity has seen banks borrowing more from the punitive central bank emergency window at a rate of 6.25 per cent while the interbank rate stood at 6.21 per cent.
The borrowing from the two sources was almost equal with Sh16.9 billion borrowed through the interbank window and Sh16.7 billion borrowed through the emergency window as of Monday this week, a figure that analysts said was "higher than average."
The bank has raised the minimum lending rate on shilling denominated loans to 14.5 per cent from 13 per cent effective from July 11.
The revision puts CBA's lending rate above the industry average of 13.92 per cent according to the Central Bank of Kenya (CBK's) data.
CBA's revision comes barely three months after it had reviewed the rate downward by one per cent in a bid to grow its loan book and increase interest income.
"This is a normal revision that has taken into account the changing circumstances in the market. The recent shift in short-term rates as well as the Central Bank Rate (CBR) and cash reserve requirement revision have been considered in this shift," said Jeremy Ngunze, the CBA group head of business management.
The Monetary Policy Committee of the CBK in its end of May policy changes continued with monetary tightening stance increasing both the CBR and the proportion of deposits that banks hold with the regulator by a quarter percentage points.
"These would have the effect of increasing the cost of funds for banks. The individual banks would therefore need to make strategic decisions on the way forward of either increasing lending rate to protect the margin or maintain lending rate and go for marketshare," said the industry lobby Kenya Bankers Association CEO, Mr Habil Olaka.
With the average interest payment on deposits stuck at 3.47 per cent, banking are earning a margin of 10.45 per cent.
The Central Bank has reviewed the monetary policy rate upwards by half a percentage point since the time of the March downward revision by Commercial Bank of Africa.
Banks responding
The regulator raised the rate to six per cent from 5.75 per cent in March and followed it up with a 0.25 basis points increase at the end of May to settle at the current 6.25 per cent.
"Because of competition for deposits and rising inflation the deposits rates have risen in the last three months. There is usually a lag time before banks can respond, so they could be reacting to that," said Alex Muiruri a fixed income dealer at African Alliance Investment Bank.
There is expectation for the interest rates to rise across the industry due to CBK actions, a weakening shilling and high inflationary pressures.
"With inflation rates going up the treasury bill rate has also been going up as CBK sought to mop out the liquidity," said Ashif Kassam, the managing partner at consulting firm RSM Ashvir. "What remains to be seen is whether the rise in interest rates will be proportional to that of deposit rate," he added.
In the last auction investors bought the treasury bill at nine per cent with the result being the Central Bank raising Sh17 billion five times more than it had targeted.
"The budget deficit also signals more borrowing by the government which could crowd out the private sector," said John Kamunya an analyst with Dyer and Blair Investment Bank.
High illiquidity has seen banks borrowing more from the punitive central bank emergency window at a rate of 6.25 per cent while the interbank rate stood at 6.21 per cent.
The borrowing from the two sources was almost equal with Sh16.9 billion borrowed through the interbank window and Sh16.7 billion borrowed through the emergency window as of Monday this week, a figure that analysts said was "higher than average."
Kenya: Cut Mortgage Rates, Kibaki Urges Banks
Nairobi — President Kibaki has asked mortgage lenders to reduce the cost of borrowing to enable more Kenyans to own homes.
"Many of our people still consider the option of mortgage financing as expensive, risky and a preserve of the rich," said the President.
"We must as a continent develop mechanisms that will make property financing affordable to the majority of our middle and low income population," he said.
The loan size
According to a survey conducted jointly by the Central and the World banks, money lending institutions charge an average interest rate of between 12.2 per cent and 14.1 per cent on mortgage. Many still consider this high.
The survey further indicated that the average mortgage loan size stood at Sh6.6 million last year up from Sh4.9 million in 2007. This was mainly attributed to amongst others, the expensive housing market.
Said the President; "Credit organisations must now rise up to the challenge and develop appropriate mortgage facilities to suit a larger portion of the population."
"In doing this, we must focus on the use of available local materials, which should be transformed through the use of modern technologies that make the construction of housing affordable.
President Kibaki said the government had introduced policy guidelines geared towards empowering commercial banks to extend more credit to real estate sector.
He said the Banking Act had been amended to enable mortgage finance companies operate current accounts, a measure intended to enable them mobilise additional deposits.
"Banks have also been allowed to advance up to 40 per cent of their total deposit liabilities up from 25 per cent for investment in land," he said.
"Many of our people still consider the option of mortgage financing as expensive, risky and a preserve of the rich," said the President.
"We must as a continent develop mechanisms that will make property financing affordable to the majority of our middle and low income population," he said.
The loan size
According to a survey conducted jointly by the Central and the World banks, money lending institutions charge an average interest rate of between 12.2 per cent and 14.1 per cent on mortgage. Many still consider this high.
The survey further indicated that the average mortgage loan size stood at Sh6.6 million last year up from Sh4.9 million in 2007. This was mainly attributed to amongst others, the expensive housing market.
Said the President; "Credit organisations must now rise up to the challenge and develop appropriate mortgage facilities to suit a larger portion of the population."
"In doing this, we must focus on the use of available local materials, which should be transformed through the use of modern technologies that make the construction of housing affordable.
President Kibaki said the government had introduced policy guidelines geared towards empowering commercial banks to extend more credit to real estate sector.
He said the Banking Act had been amended to enable mortgage finance companies operate current accounts, a measure intended to enable them mobilise additional deposits.
"Banks have also been allowed to advance up to 40 per cent of their total deposit liabilities up from 25 per cent for investment in land," he said.
Tanzania: NHC in advanced talks over housing financing
Negotiations are at advanced stage between the National Housing Corporation (NHC) and financial institutions on funding modalities for a massive residential housing project to reduce shortages in many parts of the country.
“We have started well and our discussions are in the final stages,” NHC director general, Nehemiah Mchechu, told The Guardian in an exclusive interview in Dar es Salaam yesterday.
The corporation’s top official said negotiations with seven financial institutions on how to finance the planned massive construction of residential houses, a project that would see 15,000 units and apartments erected countrywide as part of the housing agency’s resolve to supplement government efforts aimed at solving the problem.
“We have to agree before officially signing the contracts with these institutions,” said NHC DG, without mentioning the institutions currently negotiating with the housing agency.
Susan Omari, NHC Head of Pubic Relations and Corporate Social Responsibility, said yesterday that the project needed financial backup from banks, a factor that prompted the corporation to “take financial institutions on board in the implementation this project.”
She said that implementation of the project contained in the NHC five-year strategic plan, would have been impossible without strategic intervention of financial institutions.
According to the official, the project, which is currently at different stages of implementation, required sufficient funding. “We really need interventions of banks in two main aspects. In the first part, NHC need money to facilitate construction of the houses. Secondly, tenants/clients who would purchase NHC houses on loan basis need support of banks,” said Omari, underlining the importance of partnership between the banks and NHC.
“As NHC embarks on the project, support of financial institutions is vital; otherwise we may construct houses with nobody to purchase them. That’s why, we have started laying the groundwork for banks to support clients/buyers in purchasing the structures on loan basis,” she added.
According to Omari, the NHC would set up its own systems for screening applicants for mortgaged houses, but noted that banks, on the other hand, would have their own criterias for providing loans to the respective applicants.
“Securing housing loans would not be automatic. We will set our criteria for screening the applicants, but banks would have their own criterias for screening applicants before giving them loans to purchase the houses,” stressed official.
“The overall objective is to ensure that different social groups access the residential houses according to their incomes,” Omari said.
“We have started well and our discussions are in the final stages,” NHC director general, Nehemiah Mchechu, told The Guardian in an exclusive interview in Dar es Salaam yesterday.
The corporation’s top official said negotiations with seven financial institutions on how to finance the planned massive construction of residential houses, a project that would see 15,000 units and apartments erected countrywide as part of the housing agency’s resolve to supplement government efforts aimed at solving the problem.
“We have to agree before officially signing the contracts with these institutions,” said NHC DG, without mentioning the institutions currently negotiating with the housing agency.
Susan Omari, NHC Head of Pubic Relations and Corporate Social Responsibility, said yesterday that the project needed financial backup from banks, a factor that prompted the corporation to “take financial institutions on board in the implementation this project.”
She said that implementation of the project contained in the NHC five-year strategic plan, would have been impossible without strategic intervention of financial institutions.
According to the official, the project, which is currently at different stages of implementation, required sufficient funding. “We really need interventions of banks in two main aspects. In the first part, NHC need money to facilitate construction of the houses. Secondly, tenants/clients who would purchase NHC houses on loan basis need support of banks,” said Omari, underlining the importance of partnership between the banks and NHC.
“As NHC embarks on the project, support of financial institutions is vital; otherwise we may construct houses with nobody to purchase them. That’s why, we have started laying the groundwork for banks to support clients/buyers in purchasing the structures on loan basis,” she added.
According to Omari, the NHC would set up its own systems for screening applicants for mortgaged houses, but noted that banks, on the other hand, would have their own criterias for providing loans to the respective applicants.
“Securing housing loans would not be automatic. We will set our criteria for screening the applicants, but banks would have their own criterias for screening applicants before giving them loans to purchase the houses,” stressed official.
“The overall objective is to ensure that different social groups access the residential houses according to their incomes,” Omari said.
Tanzania: Oikocredit invites local housing financiers for loans
PROPERTY developers and financial institutions were on Wednesday invited to apply for loans of up to 5 million Euros (over 10bn/-) for construction of cheaper houses for sale to people struggling to own decent homes.
Board Chairman of the Netherlands-based Oikocredit International Fidon Mwombeki said in Dar es Salaam that the global financing institution will start lending to property developers who will in turn give credits to local families.
"Let's help people get their own decent houses through provision of affordable loans," Dr Mwombeki told reporters before the institution started its annual general meeting which was officiated by Deputy Foreign Affairs Minister, Mahadhi Mahadhi on behalf of Foreign Affairs and International Cooperation Minister Bernard Membe.
Dr Mwombeki, a reverend and Secretary General of United Evangelical Mission based in Germany, said Oikocredit was established by World Council of Churches in 1978 and has made a difference among poor people by providing them with affordable loans.
"Oikocredit has proved that poor people do repay loans, the notion that poor rural people don't pay loans is wrong," said Dr Mwombeki whose organization has lent over 26bn/- to individuals, microfinance institutions, savings and credit cooperative society and banks.
Over 80 per cent of the loans have been invested in rural areas targeting agriculture, micro-credit schemes, livestock husbandry and small scale businesses such as tailoring.
Oikocredit Country Director Deus Manyenye said much of their loans are concessional and go to people who cannot access bank loans because of lack of security.
"But our loans are also flexible, we give people a grace period," Mr Manyenye pointed out.
He said loans are provided both in local and foreign currency with a repayment period of between six and ten years.
"Our interest rates are very low compared to what the market charges," Manyenye noted.
Deputy Minister Mahadhi commended Oikocredit for supporting the government's initiative to fight poverty by providing low interest rate credit to the un-bankable majority rural people whose main occupation is agriculture.
"Initiatives such as those of Oikocredit are very important to a country like Tanzania where only about 10 per cent of the over 40 million people have access to bank services," Mr Mahadhi pointed out.
Oikocredit in Tanzania started in 2006 and accounts for 22 per cent of Oikocredit in East Africa which started in 1995 in Kenya.
Uganda accounts for 28 per cent of the portfolio while Rwanda has just joined with EUR 200,000 allocation made last year.
Board Chairman of the Netherlands-based Oikocredit International Fidon Mwombeki said in Dar es Salaam that the global financing institution will start lending to property developers who will in turn give credits to local families.
"Let's help people get their own decent houses through provision of affordable loans," Dr Mwombeki told reporters before the institution started its annual general meeting which was officiated by Deputy Foreign Affairs Minister, Mahadhi Mahadhi on behalf of Foreign Affairs and International Cooperation Minister Bernard Membe.
Dr Mwombeki, a reverend and Secretary General of United Evangelical Mission based in Germany, said Oikocredit was established by World Council of Churches in 1978 and has made a difference among poor people by providing them with affordable loans.
"Oikocredit has proved that poor people do repay loans, the notion that poor rural people don't pay loans is wrong," said Dr Mwombeki whose organization has lent over 26bn/- to individuals, microfinance institutions, savings and credit cooperative society and banks.
Over 80 per cent of the loans have been invested in rural areas targeting agriculture, micro-credit schemes, livestock husbandry and small scale businesses such as tailoring.
Oikocredit Country Director Deus Manyenye said much of their loans are concessional and go to people who cannot access bank loans because of lack of security.
"But our loans are also flexible, we give people a grace period," Mr Manyenye pointed out.
He said loans are provided both in local and foreign currency with a repayment period of between six and ten years.
"Our interest rates are very low compared to what the market charges," Manyenye noted.
Deputy Minister Mahadhi commended Oikocredit for supporting the government's initiative to fight poverty by providing low interest rate credit to the un-bankable majority rural people whose main occupation is agriculture.
"Initiatives such as those of Oikocredit are very important to a country like Tanzania where only about 10 per cent of the over 40 million people have access to bank services," Mr Mahadhi pointed out.
Oikocredit in Tanzania started in 2006 and accounts for 22 per cent of Oikocredit in East Africa which started in 1995 in Kenya.
Uganda accounts for 28 per cent of the portfolio while Rwanda has just joined with EUR 200,000 allocation made last year.
Tuesday, June 14, 2011
Global: Wall Street Bailouts No Longer An Option, Regulator Says
The era of Wall Street bailouts is over, a top government regulator told Congress on Tuesday.
The financial reform legislation passed last summer bars future taxpayer rescues of financial firms, and it eliminates the need for bailouts by endowing regulators with greater powers, said Michael H. Krimminger, general counsel of the Federal Deposit Insurance Corporation, in testimony before the House Financial Services Committee. The new law, Krimminger said, should end the notion that some firms are too big to be permitted to fail.
But other experts who testified Tuesday challenged that vote of confidence. As law professors and another regulator spoke before the House committee, the hearing highlighted a central concern about the Dodd-Frank law: It may not change the way business is done on Wall Street. Despite requirements limiting firms' ability to take risks, some experts fear the financial system may continue to operate under the assumption that certain firms will be bailed out in times of crisis, in the event that other government efforts cannot stem collateral economic damage.
"It is too early to tell whether Dodd-Frank will ultimately be successful in ending 'too big to fail,' and that success will be dependent on the market's perception of the effectiveness of the actions taken by regulators and Treasury," Christy Romero, acting special inspector general of the bailout fund known as the Troubled Asset Relief Program, said.
"Taxpayers," she continued, "likely won't know about the extent of their continuing exposure until the next crisis."
Congress authorized a $700 billion taxpayer rescue of the financial system in the fall of 2008, as stock markets around the globe were plummeting and massively interconnected firms teetered on the edge of collapse. These companies could take down the entire financial system and even the broader economy if they were to fail, the thinking went.
The subsequent financial reform legislation aimed to end this trait of the financial system -- that a failing company could essentially force the government to extend emergency aid. Regulators adopted a new rule Tuesday ordering large banks to hold a minimum amount of capital against losses, a change required by the financial reform law. The rule is intended to make the banking system safer.
Advertisement
Last year's law also includes measures directly intended to prevent or ameliorate a firm's failure. Firms designated as "systemically important" must compose a plan to dismantle themselves in the event of a crisis. If these companies cannot demonstrate that they have this "living will," regulators could force them to restructure their operations, Krimminger said.
When crisis does strike, the government has the ability under the new law to seize a financial firm, a power similar to the FDIC's ability to seize failing banks. This ability, known as "orderly liquidation authority," or OLA, allows the government to gradually wind down a troubled company, keeping it out of legal bankruptcy and ideally preserving the value of its assets.
"Bailouts are not permitted," Krimminger said.
But the law allows companies in government receivership to borrow funds from the Treasury Department. These loans would automatically be repaid with the failed firm's assets, noted Michael S. Barr, a law professor at the University of Michigan who formerly served as the Treasury's assistant secretary for financial institutions.
This borrowing from the government smacks of a bailout, said Stephen J. Lubben, a law professor at Seton Hall University and a bankruptcy expert. Moreover, failing firms' dependence on taxpayers may continue, even with regulators' new power, Lubben said.
"The orderly liquidation of financial institutions under OLA is primarily achieved by virtue of the FDIC's ability to provide ongoing liquidity to the financial institution, which many would consider a form of bailout of the financial institution's counterparties," Lubben said..
As the House hearing wore on, a more fundamental, and perhaps more disturbing, thesis emerged: the actual ability of regulators like the FDIC to stem the damage from the next financial crisis will only be known once that crisis strikes.
Romero, the TARP special inspector general, quoted remarks from Treasury Secretary Tim Geithner.
"The size of the shock that hit our financial system was larger than what caused the Great Depression. In the future we may have to do exceptional things again if we face a shock that large," Geithner said in December, according to Romero. "You just don't know what's systemic and what's not until you know the nature of the shock."
The financial reform legislation passed last summer bars future taxpayer rescues of financial firms, and it eliminates the need for bailouts by endowing regulators with greater powers, said Michael H. Krimminger, general counsel of the Federal Deposit Insurance Corporation, in testimony before the House Financial Services Committee. The new law, Krimminger said, should end the notion that some firms are too big to be permitted to fail.
But other experts who testified Tuesday challenged that vote of confidence. As law professors and another regulator spoke before the House committee, the hearing highlighted a central concern about the Dodd-Frank law: It may not change the way business is done on Wall Street. Despite requirements limiting firms' ability to take risks, some experts fear the financial system may continue to operate under the assumption that certain firms will be bailed out in times of crisis, in the event that other government efforts cannot stem collateral economic damage.
"It is too early to tell whether Dodd-Frank will ultimately be successful in ending 'too big to fail,' and that success will be dependent on the market's perception of the effectiveness of the actions taken by regulators and Treasury," Christy Romero, acting special inspector general of the bailout fund known as the Troubled Asset Relief Program, said.
"Taxpayers," she continued, "likely won't know about the extent of their continuing exposure until the next crisis."
Congress authorized a $700 billion taxpayer rescue of the financial system in the fall of 2008, as stock markets around the globe were plummeting and massively interconnected firms teetered on the edge of collapse. These companies could take down the entire financial system and even the broader economy if they were to fail, the thinking went.
The subsequent financial reform legislation aimed to end this trait of the financial system -- that a failing company could essentially force the government to extend emergency aid. Regulators adopted a new rule Tuesday ordering large banks to hold a minimum amount of capital against losses, a change required by the financial reform law. The rule is intended to make the banking system safer.
Advertisement
Last year's law also includes measures directly intended to prevent or ameliorate a firm's failure. Firms designated as "systemically important" must compose a plan to dismantle themselves in the event of a crisis. If these companies cannot demonstrate that they have this "living will," regulators could force them to restructure their operations, Krimminger said.
When crisis does strike, the government has the ability under the new law to seize a financial firm, a power similar to the FDIC's ability to seize failing banks. This ability, known as "orderly liquidation authority," or OLA, allows the government to gradually wind down a troubled company, keeping it out of legal bankruptcy and ideally preserving the value of its assets.
"Bailouts are not permitted," Krimminger said.
But the law allows companies in government receivership to borrow funds from the Treasury Department. These loans would automatically be repaid with the failed firm's assets, noted Michael S. Barr, a law professor at the University of Michigan who formerly served as the Treasury's assistant secretary for financial institutions.
This borrowing from the government smacks of a bailout, said Stephen J. Lubben, a law professor at Seton Hall University and a bankruptcy expert. Moreover, failing firms' dependence on taxpayers may continue, even with regulators' new power, Lubben said.
"The orderly liquidation of financial institutions under OLA is primarily achieved by virtue of the FDIC's ability to provide ongoing liquidity to the financial institution, which many would consider a form of bailout of the financial institution's counterparties," Lubben said..
As the House hearing wore on, a more fundamental, and perhaps more disturbing, thesis emerged: the actual ability of regulators like the FDIC to stem the damage from the next financial crisis will only be known once that crisis strikes.
Romero, the TARP special inspector general, quoted remarks from Treasury Secretary Tim Geithner.
"The size of the shock that hit our financial system was larger than what caused the Great Depression. In the future we may have to do exceptional things again if we face a shock that large," Geithner said in December, according to Romero. "You just don't know what's systemic and what's not until you know the nature of the shock."
Tanzania: The economy is highly dollarised, say economists
Dar es Salaam. The use of dollars is higher in Tanzania than in Kenya, a report says. According to the report by the International Growth Centre, the percentage share of Tanzania’s bank deposits that are denominated in US dollars is higher than that of Kenya despite the latter being the biggest economy in the East African Community.
Kenya’s financial sector is also the most developed one in the region.According to the report, Tanzania is highly dollarised, meaning the US currency is widely used parallel to or instead of the shilling.
Foreign currency deposits in December 2009 were about 30 per cent of total bank deposits and the ratio of foreign currency deposits to broad money was 25 per cent. Kenya held less than 15 per cent of bank deposits in foreign currencies and the ratio of foreign currencies to broad money was 13 per cent.
In the report titled ‘Dollarisation in Tanzania: Empirical Evidence and Cross-Country Experience’, the centre urges Tanzania to limit the use of the foreign currency as a medium of exchange for goods and services in its economy.
“A more direct intervention would be for authorities to impose a regulation that requires that only the Tanzania shilling used as a medium of exchange in domestic transactions,” the report noted.
Financial gurus say the dollar is widely used in Tanzania partly because many public and policy makers focus on increasing the volume of money paid to them instead of raising the shilling value.
“This is not a good thing at all since it has a direct link to inflation,” warned Dr Elisante ole Gabriel, a marketing lecturer with Mzumbe University. “The country should concentrate on the maximum use of economic activities requiring less inputs such as tourism and recreation to raise the shilling value.”
However, Tanzania’s ratio of foreign currency deposits to total deposits declined from 39 per cent in July 2007 to about 30 per cent in December 2009.In Kenya, the ratio of dollar deposits to total deposits has generally been stable (in the range of 10 to 15 percent) throughout the sample period.
In Burundi, the ratio of dollar deposits has been somewhat volatile and rapidly rising.The trend however, was reversed in July 2008 presumably due to the impact of global financial crisis, only recently, has the ratio started to rise again.
However, the report says policy measures should generally aim to enhance the attractiveness of Tanzanian currency rather than seeking to outlaw the use of foreign currencies, but a minimum amount of direct intervention such as instituting certain laws may also be warranted.
Measures to improve the attractiveness of the domestic currency, in addition to maintaining stable exchange rate, could include increasing the denomination of Tanzanian banknotes, it said.The largest denomination of Tanzanian shilling is currently the equivalent of about $7.5, which is the smallest in EAC.
Kenya’s financial sector is also the most developed one in the region.According to the report, Tanzania is highly dollarised, meaning the US currency is widely used parallel to or instead of the shilling.
Foreign currency deposits in December 2009 were about 30 per cent of total bank deposits and the ratio of foreign currency deposits to broad money was 25 per cent. Kenya held less than 15 per cent of bank deposits in foreign currencies and the ratio of foreign currencies to broad money was 13 per cent.
In the report titled ‘Dollarisation in Tanzania: Empirical Evidence and Cross-Country Experience’, the centre urges Tanzania to limit the use of the foreign currency as a medium of exchange for goods and services in its economy.
“A more direct intervention would be for authorities to impose a regulation that requires that only the Tanzania shilling used as a medium of exchange in domestic transactions,” the report noted.
Financial gurus say the dollar is widely used in Tanzania partly because many public and policy makers focus on increasing the volume of money paid to them instead of raising the shilling value.
“This is not a good thing at all since it has a direct link to inflation,” warned Dr Elisante ole Gabriel, a marketing lecturer with Mzumbe University. “The country should concentrate on the maximum use of economic activities requiring less inputs such as tourism and recreation to raise the shilling value.”
However, Tanzania’s ratio of foreign currency deposits to total deposits declined from 39 per cent in July 2007 to about 30 per cent in December 2009.In Kenya, the ratio of dollar deposits to total deposits has generally been stable (in the range of 10 to 15 percent) throughout the sample period.
In Burundi, the ratio of dollar deposits has been somewhat volatile and rapidly rising.The trend however, was reversed in July 2008 presumably due to the impact of global financial crisis, only recently, has the ratio started to rise again.
However, the report says policy measures should generally aim to enhance the attractiveness of Tanzanian currency rather than seeking to outlaw the use of foreign currencies, but a minimum amount of direct intervention such as instituting certain laws may also be warranted.
Measures to improve the attractiveness of the domestic currency, in addition to maintaining stable exchange rate, could include increasing the denomination of Tanzanian banknotes, it said.The largest denomination of Tanzanian shilling is currently the equivalent of about $7.5, which is the smallest in EAC.
Global: Bank of America Fights to Deflect Fraud Investigations
The battle is intensifying to hold Bank of America accountable for faulty foreclosures that may have scammed taxpayers out of billions is intensifying on a state level. In a lawsuit filed by the state of Arizona against the nation's largest lender, a federal auditor says that Bank of America "significantly hindered" a review of its foreclosure practices on loans insured by the Federal Housing Administration.
William Nixon, a fraud examiner with the U.S. Department of Housing and Urban Development, accuses the bank of withholding key information and delaying the investigation. In court-submitted document filed in court June 8 but obtained by the press Monday, Nixon says that Bank of America failed to comply with subpoenas, kept his team from reviewing the bank's documents unit, and in one instance, only supplied the watchdog unit with only one third of the records requested. At one point last year, the bank's "reluctance" to comply with requests forced Nixon to request help from the Justice Department. A Bank of America spokesperson denied the allegations.
The lawsuit in Arizona is part of a larger probe into the nation's top five mortgage lenders pursued by a coalition of federal agencies and attorneys general from all 50 states. Lately, however, it seems increasingly apparent that the states are being more aggressive than Obama officials in moving the investigation forward--especially with regard to Bank of America.
In recent weeks, New York Attorney General Eric Schneiderman quietly launched a new probe into the bank's mortgage practices, especially the packaging and sale of loans to investors. According to the Huffington Post's Shahien Nasiripour, this investigation bears serious consequences for Bank of America as well as other top lenders:
The inquiry could prove explosive: Wall Street's great mortgage securitization machine took millions of home loans and bundled them into securities for sale to investors. If the legal steps that guide securitization -- like taking mortgage documents from one party to another, a critical step under New York law -- were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.
As state investigators dig in, the Obama administration are eager to reach a settlement with the five big banks. The latest reports show that the banks are preparing themselves to pay up to $20 billion for the alleged mortgage abuses.
William Nixon, a fraud examiner with the U.S. Department of Housing and Urban Development, accuses the bank of withholding key information and delaying the investigation. In court-submitted document filed in court June 8 but obtained by the press Monday, Nixon says that Bank of America failed to comply with subpoenas, kept his team from reviewing the bank's documents unit, and in one instance, only supplied the watchdog unit with only one third of the records requested. At one point last year, the bank's "reluctance" to comply with requests forced Nixon to request help from the Justice Department. A Bank of America spokesperson denied the allegations.
The lawsuit in Arizona is part of a larger probe into the nation's top five mortgage lenders pursued by a coalition of federal agencies and attorneys general from all 50 states. Lately, however, it seems increasingly apparent that the states are being more aggressive than Obama officials in moving the investigation forward--especially with regard to Bank of America.
In recent weeks, New York Attorney General Eric Schneiderman quietly launched a new probe into the bank's mortgage practices, especially the packaging and sale of loans to investors. According to the Huffington Post's Shahien Nasiripour, this investigation bears serious consequences for Bank of America as well as other top lenders:
The inquiry could prove explosive: Wall Street's great mortgage securitization machine took millions of home loans and bundled them into securities for sale to investors. If the legal steps that guide securitization -- like taking mortgage documents from one party to another, a critical step under New York law -- were not undertaken, then the investors who bought the bundled loans could force the companies to buy them back, compelling them to eat enormous losses.
As state investigators dig in, the Obama administration are eager to reach a settlement with the five big banks. The latest reports show that the banks are preparing themselves to pay up to $20 billion for the alleged mortgage abuses.
Tanzania: 2011/2012 Budget highlights
General provisions
Income Tax
••Income tax exemptions on allowances paid to government employees and institutions who receive government funding for their operations.
•• Abolishing of withholding tax on fish transport for foreign freight.
VAT
•• VAT exemption on spare parts for agricultural equipments such as threshers, rice dryers and mills, planters, trailers and power tillers used in organised farming (registered groups and cooperative unions).
•• VAT exemption on NASCOR pellet feed used for poultry.
•• Nylon fishing twines used for making fishing nets are now exempt from VAT.
•• Exempt VAT on spare parts for grain conveyors, sprayers and harrows.
•• Introduction of VAT refund system to retail exports purchased in the country by non-residents for purchases valued at 400,000/- and above.
•• Abolish VAT exemption on sale and lease of residential buildings by the National Housing Corporation (NHC).
•• Abolish VAT special relief on charitable community based organisations and Non-Government Organizations (NGOs). This change will not affect religious organizations.
•• Introduce VAT special relief to NGOs when they donate food supplies to children and orphanage care centres and schools.
Import Duties
•• Extend the stay of application of CET rate of 35% on wheat grain and apply 10% for a period of one year.
•• Grant remission of duty on:
--raw materials used in manufacture soaps, toilets and medicated soaps (palm stearin, RBD) for one year;
--duplex boards; and
-- grant copper cathodes which are raw materials used to manufacture refined copper and copper alloys.
•• Split the tariff on raw materials HS Code 2710.19.59 to provide white oil used in cosmetic industry, to be subject to 0% duty.
•• Split the tariff HS Code 2309.90.00 and provide for
0% on premixes used in the manufacture of animal and poultry feeds.
•• Increase duty rate from 0% to10% on Galvanised plated/coated wire.
•• Reduction of duty from 25% to 10% on:
--aseptic bags;
--component parts and inputs for assembler of refrigerators and freezers connectors;
--on raw materials used in the manufacture of scent sprays and other similar toilet sprays; and
-- materials for manufacture of solar panels.
•• Extension of charging 10%:
--on motor vehicles carrying more than 25 persons for one year; and
--on motor vehicles transporting goods with gross vehicle weight exceeding 5 tonnes but not exceeding 20 tonnes for one year.
•• One year extension of duty remission from 25% to
0% on motor vehicles with gross weight exceeding 20 tonnes.
•• Extending the import duty exemption on buses under
HS 8704.90.99 to be used in the Dar es Salaam Fast
Truck Bus Project and apply import duty rate of 10% for the period of one year.
•• Split HS 8703.90.10 to provide import duty exemption on motorcycle ambulances.
•• Split HS 2106.90.90 to provide for 10% for food supplements.
•• Grant stay of application of EAC -CET on road tractor and apply import duty rate of to 0% for the period of one year.
•• Extend the exemption regime granted to Armed Forces Canteen for one year.
•• Grant of import duty exemption to the police force
•• Exempt import duty on tsetse fly traps.
•• Exempt import duty on security equipments ( hand held metal detectors, walk through metal detectors,
CCTV, cameras, bomb detectors and undercarriage mirrors.
•• Grant remission of import duty on imported solar panels.
•• Exempt import duty on battery operated vehicles/golf carts for use in hotels, hospitals and airports.
•• Import duty on apron buses which are used to transfer passengers at Airports.
•• Reduction of destination inspection fees from
1.2% to 0.6% of Free On Board (FOB) of imported products.
Excise Duties
•• Reduction of excise duty on HFO (heavy fuels) from
Tsh 80 to Tsh 40 per litre.
•• Reduction of excise duty for plastic bags with more than 30 microns (HS: CODE 3923.2900) from 120% to 50%.
•• Adjust the specific excise duty rates on petroleum products by 10% as follows:
-- carbonated soft drinks from Tsh 63 per litre to Tsh
69 per litre;
--beer made from the local un-malted cereals from
Tsh 226 per litre to Tsh 249 per litre;
--other beers from Tsh 382 per litre to Tsh 420 per litre;
--wine produced with more than 25% imported grapes from Tsh 1,223 per litre to Tsh 1,345 per litre;
--wine with domestic grape content exceeding 75%
Tsh 420 per litre; and
--spirits from Tsh 1,812 per litre to Tsh 1,993 per litre.
•• Excise duty on cigarettes has been amended as follows:
-- cigarattes without filter tip and containing domestic tobacco more than 75% from Tsh 6,209 to Tsh 6,830 per thousand cigarattes;
--cigarettes with filter tip and containing domestic tobacco more than 75% from Tsh 14,649 to Tsh
16,114 per mil;
--other cigarettes not mentioned in above from Tsh
26,604 to Tsh 29,264 per mil;
-- cut rag or cut filler from Tsh 13,436 per kilogram to Tsh 14,780 per kilogram; and
--excise duty rate on “cigars” remains at 30%.
Skill and Development Levy
•• Allocation of revenue collected from Skills
Development Levy (SDL) of 6% of employers costs to change to 4% to be allocated to Higher Education
Loans Board (HELB) and 2% to be allocated to Vocational Education and Training Authority (VETA).
Stamp Duty
•• Exemption of stamp duty on transfer of ownership of assets to Special Purpose Vehicles (SPVs) for the purpose of issuing asset backed securities.
Business Licensing
Imposition of business licence fee as follows:
•• city, town and municipal councils – licence fee of Tsh
50,000 per annum for each type of business eligible for a business licence (other than bars);
•• district councils – licence fee of Tsh 30,000 per annum; and
•• village councils – licence fee of Tsh 10,000 per annum.
Oil and Gas
•• Exemption of fuel levy charged on fuel for vessels, rigs and other equipments used in oil and gas exploration. The exemption will be granted through issuance of Government Notices (GNs).
The applications will have to be verified by TPDC before being submitted to the Ministry of Finance.
Mining
•• Introduction of a special escrow account by TRA where mining companies will be required to draw their estimated annual consumption plans and deposit money on account equal to estimated taxes on petroleum products consumed in a given month.
Motor taxes
•• Increase traffic notification fee from Tsh 20,000 and
Tsh 300,000.
SOURCE: THE GUARDIAN
Income Tax
••Income tax exemptions on allowances paid to government employees and institutions who receive government funding for their operations.
•• Abolishing of withholding tax on fish transport for foreign freight.
VAT
•• VAT exemption on spare parts for agricultural equipments such as threshers, rice dryers and mills, planters, trailers and power tillers used in organised farming (registered groups and cooperative unions).
•• VAT exemption on NASCOR pellet feed used for poultry.
•• Nylon fishing twines used for making fishing nets are now exempt from VAT.
•• Exempt VAT on spare parts for grain conveyors, sprayers and harrows.
•• Introduction of VAT refund system to retail exports purchased in the country by non-residents for purchases valued at 400,000/- and above.
•• Abolish VAT exemption on sale and lease of residential buildings by the National Housing Corporation (NHC).
•• Abolish VAT special relief on charitable community based organisations and Non-Government Organizations (NGOs). This change will not affect religious organizations.
•• Introduce VAT special relief to NGOs when they donate food supplies to children and orphanage care centres and schools.
Import Duties
•• Extend the stay of application of CET rate of 35% on wheat grain and apply 10% for a period of one year.
•• Grant remission of duty on:
--raw materials used in manufacture soaps, toilets and medicated soaps (palm stearin, RBD) for one year;
--duplex boards; and
-- grant copper cathodes which are raw materials used to manufacture refined copper and copper alloys.
•• Split the tariff on raw materials HS Code 2710.19.59 to provide white oil used in cosmetic industry, to be subject to 0% duty.
•• Split the tariff HS Code 2309.90.00 and provide for
0% on premixes used in the manufacture of animal and poultry feeds.
•• Increase duty rate from 0% to10% on Galvanised plated/coated wire.
•• Reduction of duty from 25% to 10% on:
--aseptic bags;
--component parts and inputs for assembler of refrigerators and freezers connectors;
--on raw materials used in the manufacture of scent sprays and other similar toilet sprays; and
-- materials for manufacture of solar panels.
•• Extension of charging 10%:
--on motor vehicles carrying more than 25 persons for one year; and
--on motor vehicles transporting goods with gross vehicle weight exceeding 5 tonnes but not exceeding 20 tonnes for one year.
•• One year extension of duty remission from 25% to
0% on motor vehicles with gross weight exceeding 20 tonnes.
•• Extending the import duty exemption on buses under
HS 8704.90.99 to be used in the Dar es Salaam Fast
Truck Bus Project and apply import duty rate of 10% for the period of one year.
•• Split HS 8703.90.10 to provide import duty exemption on motorcycle ambulances.
•• Split HS 2106.90.90 to provide for 10% for food supplements.
•• Grant stay of application of EAC -CET on road tractor and apply import duty rate of to 0% for the period of one year.
•• Extend the exemption regime granted to Armed Forces Canteen for one year.
•• Grant of import duty exemption to the police force
•• Exempt import duty on tsetse fly traps.
•• Exempt import duty on security equipments ( hand held metal detectors, walk through metal detectors,
CCTV, cameras, bomb detectors and undercarriage mirrors.
•• Grant remission of import duty on imported solar panels.
•• Exempt import duty on battery operated vehicles/golf carts for use in hotels, hospitals and airports.
•• Import duty on apron buses which are used to transfer passengers at Airports.
•• Reduction of destination inspection fees from
1.2% to 0.6% of Free On Board (FOB) of imported products.
Excise Duties
•• Reduction of excise duty on HFO (heavy fuels) from
Tsh 80 to Tsh 40 per litre.
•• Reduction of excise duty for plastic bags with more than 30 microns (HS: CODE 3923.2900) from 120% to 50%.
•• Adjust the specific excise duty rates on petroleum products by 10% as follows:
-- carbonated soft drinks from Tsh 63 per litre to Tsh
69 per litre;
--beer made from the local un-malted cereals from
Tsh 226 per litre to Tsh 249 per litre;
--other beers from Tsh 382 per litre to Tsh 420 per litre;
--wine produced with more than 25% imported grapes from Tsh 1,223 per litre to Tsh 1,345 per litre;
--wine with domestic grape content exceeding 75%
Tsh 420 per litre; and
--spirits from Tsh 1,812 per litre to Tsh 1,993 per litre.
•• Excise duty on cigarettes has been amended as follows:
-- cigarattes without filter tip and containing domestic tobacco more than 75% from Tsh 6,209 to Tsh 6,830 per thousand cigarattes;
--cigarettes with filter tip and containing domestic tobacco more than 75% from Tsh 14,649 to Tsh
16,114 per mil;
--other cigarettes not mentioned in above from Tsh
26,604 to Tsh 29,264 per mil;
-- cut rag or cut filler from Tsh 13,436 per kilogram to Tsh 14,780 per kilogram; and
--excise duty rate on “cigars” remains at 30%.
Skill and Development Levy
•• Allocation of revenue collected from Skills
Development Levy (SDL) of 6% of employers costs to change to 4% to be allocated to Higher Education
Loans Board (HELB) and 2% to be allocated to Vocational Education and Training Authority (VETA).
Stamp Duty
•• Exemption of stamp duty on transfer of ownership of assets to Special Purpose Vehicles (SPVs) for the purpose of issuing asset backed securities.
Business Licensing
Imposition of business licence fee as follows:
•• city, town and municipal councils – licence fee of Tsh
50,000 per annum for each type of business eligible for a business licence (other than bars);
•• district councils – licence fee of Tsh 30,000 per annum; and
•• village councils – licence fee of Tsh 10,000 per annum.
Oil and Gas
•• Exemption of fuel levy charged on fuel for vessels, rigs and other equipments used in oil and gas exploration. The exemption will be granted through issuance of Government Notices (GNs).
The applications will have to be verified by TPDC before being submitted to the Ministry of Finance.
Mining
•• Introduction of a special escrow account by TRA where mining companies will be required to draw their estimated annual consumption plans and deposit money on account equal to estimated taxes on petroleum products consumed in a given month.
Motor taxes
•• Increase traffic notification fee from Tsh 20,000 and
Tsh 300,000.
SOURCE: THE GUARDIAN
Tanzania: `Poor grade cotton denies Tanzania 12bn/- a year`
Tanzania loses between 8bn/- and 12bn/- per annum on the sale of its low-grade, poor quality cotton to buyers in the world market.
This was said by Agriculture, Food Security and Cooperatives minister Prof Jumanne Maghembe at the Eighth Annual Cotton Stakeholders Summit held at Bank of Tanzania Hall in Mwanza on Saturday.
The situation is a result of actions by unscrupulous farmers who pollute locally grown cotton according to the minister, who said this has given Tanzanian cotton bad reputation in global markets.
He argued that farmers in Mwanza, Shinyanga and Tabora regions do not cultivate cotton in line with required global standards, making quality control a big challenge.
Farmers in some areas in the districts of Bariadi, Maswa, Meatu and Kishapu practice mixed farming, planting cotton and maize during the same cycle, he said. He added that this affects both the quantity and quality of their harvests.
“We need to help them stop this,” he said adding, “because maize plants are taller, they fight for nutrients with cotton and block essential sunlight, with the result that the farmer gets very little cotton and very little maize.”
Moreover, the pesticides used on cotton are harmful to human beings, and could affect them if they ate contaminated maize, according to the Agricultural minister. It’s a practice that needs to be stopped, according to Prof Maghembe.
He instructed the Tanzania Cotton Board (TCB) to work with its officials to enforce statutes governing production of quality and pure cotton to mitigate the financial loses Tanzania incurrs in the world market.
He further said that the Board has to work on a campaign to promote local cotton as a high quality alternative to international buyers.
SOURCE: THE GUARDIAN
This was said by Agriculture, Food Security and Cooperatives minister Prof Jumanne Maghembe at the Eighth Annual Cotton Stakeholders Summit held at Bank of Tanzania Hall in Mwanza on Saturday.
The situation is a result of actions by unscrupulous farmers who pollute locally grown cotton according to the minister, who said this has given Tanzanian cotton bad reputation in global markets.
He argued that farmers in Mwanza, Shinyanga and Tabora regions do not cultivate cotton in line with required global standards, making quality control a big challenge.
Farmers in some areas in the districts of Bariadi, Maswa, Meatu and Kishapu practice mixed farming, planting cotton and maize during the same cycle, he said. He added that this affects both the quantity and quality of their harvests.
“We need to help them stop this,” he said adding, “because maize plants are taller, they fight for nutrients with cotton and block essential sunlight, with the result that the farmer gets very little cotton and very little maize.”
Moreover, the pesticides used on cotton are harmful to human beings, and could affect them if they ate contaminated maize, according to the Agricultural minister. It’s a practice that needs to be stopped, according to Prof Maghembe.
He instructed the Tanzania Cotton Board (TCB) to work with its officials to enforce statutes governing production of quality and pure cotton to mitigate the financial loses Tanzania incurrs in the world market.
He further said that the Board has to work on a campaign to promote local cotton as a high quality alternative to international buyers.
SOURCE: THE GUARDIAN
Rwanda: The Success of Financial Inclusion Needs Real Ownership at Grassroots Levels
The government targets to have at least 80 percent of the total population under formal banking system by 2017.
Achieving this, will not only require the presence of financial institutions at the grassroots level, but also ownership by the local leaders, whereby they continuously sensitize the population about the advantages of saving and using the services of financial institutions.
By helping integrate the rural majority into the modern banking sector, local leaders will have done a great service to the economy as the ordinary Rwandan will be able to access credit that will finance their income generating projects.
Indeed, there are signs showing that if the momentum is maintained, the set target of over 80 percent of the entire population can even be surpassed.
The main ingredient to success lies in blending policy making at national level with local inputs, to ensure that there is real ownership by the intended beneficiaries.
The success of the grassroots savings mobilization scheme-Umurenge Saccos, so far demonstrates that the goal to have the majority of the Rwandan people integrated into the modern banking system is easily achievable.
Achieving this, will not only require the presence of financial institutions at the grassroots level, but also ownership by the local leaders, whereby they continuously sensitize the population about the advantages of saving and using the services of financial institutions.
By helping integrate the rural majority into the modern banking sector, local leaders will have done a great service to the economy as the ordinary Rwandan will be able to access credit that will finance their income generating projects.
Indeed, there are signs showing that if the momentum is maintained, the set target of over 80 percent of the entire population can even be surpassed.
The main ingredient to success lies in blending policy making at national level with local inputs, to ensure that there is real ownership by the intended beneficiaries.
The success of the grassroots savings mobilization scheme-Umurenge Saccos, so far demonstrates that the goal to have the majority of the Rwandan people integrated into the modern banking system is easily achievable.
Rwanda: African Central Bankers Coordinate Financial Growth Vision
From Monday May 30 to June 1, 2011, a group of African central bankers, representatives from African Development Bank and economic experts gathered in Kigali to discuss how African central banks can play a leading role in financing development to help the continent achieve its Millennium Development Goals (MDGs), in particular its target of halving poverty levels by 2015. The seminar was attended by 60 delegates from 21 institutions and the representatives of African and international institutions.
On average Africa should have Foreign Direct Investments amounting to 30 percent, savings worth 20 percent and a growth rate of seven percent if MDG's are to be attained. Figures from Africa Economic Outlook indicate that the continent is expected to grow at 5.2 percent this year, and before the global financial crisis, domestic savings in Sub-Saharan Africa was at 22 percent of GDP, compared to 30 percent in North Africa.
The theme of the 35th annual African central banks meeting was selected to mitigate the new risks that emerge with globalization and interconnectivity. Last year, a similar meeting focused on payment system and creating conducive infrastructure to ease operations.
In three different plenary sessions participants discussed strengthening synergy between all stakeholders, mobilizing domestic savings for the development and financial sector, and financial inclusion.
"You can't coordinate macro-economic policy if you cannot coordinate fiscal and monetary policies," explained Vice Governor of National Bank of Rwanda, Monique Nsanzabaganwa. "If there is anything that is very harmful to the economy it is when one player has information another one doesn't have. The imbalance in information was one of the factors that contributed heavily to the global financial crisis."
In 2009, the government of Rwanda launched a campaign to mobilize citizens to form grassroots-based savings and credit cooperatives, known as Umurenge Saccos, after many micro-finance institutions were reported to be mismanaged while others went bankrupt. Although the initiative is still facing management challenges, public confidence in Umurenge Saccos has picked up, with their membership rising to more than 1.2 million.
During the meeting, central bankers explained that further growth in the banking sector, which includes innovation and introduction of new financial products, increase use of information technology and increasing global and regional integration of African financial markets, impose new challenges.
To meet these challenges central banks will facilitate the development of specialized schemes such as the deposit insurance scheme, agriculture insurance scheme and a small and medium enterprises (SME) guarantee scheme. Other recommended solutions include strengthening credit reference bureaus, which provide and maintain background information on all people seeking financial credit to facilitate lenders in the evaluation of the client's loan requests, as well as collateral registries, which register securities created by borrowers to secure credit facilities.
"We see African Banking industry with an abundant liquidity, which is a result of different reforms, and central banks need a close supervision of activities," said Samuel Maengo, Executive Secretary of Association of African Central Bankers. "Africa is indeed lagging behind in terms of development...as central banks we need to go beyond price stability."
Given the different history of African states, the meeting also pointed out that government's dominance in financial market contributes to low confidence by investors. "There is dominance of government in monetary system," a representative from Ghana observed. "Government should withdraw from financial markets, borrow less and give incentives to private sector."
Prof. Paul Collier, a Professor of Economics and Director for the Centre for the Study of African Economies at Oxford University, warned that the challenge for Africa is to avoid repeating its history of the 1970s when the continent's commodity boom lead to debt accumulation in the 1980s. "Africa's central banks are key institutions in ensuring that Africa learns from its history rather than repeating it," said Collier during the meeting.
Collier also pointed out the opportunities that African economies must exploit to increase national gross debts and developing the mortgage market for ordinary people. "This will be a double win, create many job opportunities and provide simple but sound homes for many ordinary people," he stressed.
Another substantial challenge for the continent will be developing financial markets and different financial products to rural communities. In turn rural citizens must also embrace the reforms to improve their lives. In Rwanda for instance, there is still weak bank coverage in rural areas. Although the country has eight commercial banks, only two have a wider network in rural Rwanda.
On average Africa should have Foreign Direct Investments amounting to 30 percent, savings worth 20 percent and a growth rate of seven percent if MDG's are to be attained. Figures from Africa Economic Outlook indicate that the continent is expected to grow at 5.2 percent this year, and before the global financial crisis, domestic savings in Sub-Saharan Africa was at 22 percent of GDP, compared to 30 percent in North Africa.
The theme of the 35th annual African central banks meeting was selected to mitigate the new risks that emerge with globalization and interconnectivity. Last year, a similar meeting focused on payment system and creating conducive infrastructure to ease operations.
In three different plenary sessions participants discussed strengthening synergy between all stakeholders, mobilizing domestic savings for the development and financial sector, and financial inclusion.
"You can't coordinate macro-economic policy if you cannot coordinate fiscal and monetary policies," explained Vice Governor of National Bank of Rwanda, Monique Nsanzabaganwa. "If there is anything that is very harmful to the economy it is when one player has information another one doesn't have. The imbalance in information was one of the factors that contributed heavily to the global financial crisis."
In 2009, the government of Rwanda launched a campaign to mobilize citizens to form grassroots-based savings and credit cooperatives, known as Umurenge Saccos, after many micro-finance institutions were reported to be mismanaged while others went bankrupt. Although the initiative is still facing management challenges, public confidence in Umurenge Saccos has picked up, with their membership rising to more than 1.2 million.
During the meeting, central bankers explained that further growth in the banking sector, which includes innovation and introduction of new financial products, increase use of information technology and increasing global and regional integration of African financial markets, impose new challenges.
To meet these challenges central banks will facilitate the development of specialized schemes such as the deposit insurance scheme, agriculture insurance scheme and a small and medium enterprises (SME) guarantee scheme. Other recommended solutions include strengthening credit reference bureaus, which provide and maintain background information on all people seeking financial credit to facilitate lenders in the evaluation of the client's loan requests, as well as collateral registries, which register securities created by borrowers to secure credit facilities.
"We see African Banking industry with an abundant liquidity, which is a result of different reforms, and central banks need a close supervision of activities," said Samuel Maengo, Executive Secretary of Association of African Central Bankers. "Africa is indeed lagging behind in terms of development...as central banks we need to go beyond price stability."
Given the different history of African states, the meeting also pointed out that government's dominance in financial market contributes to low confidence by investors. "There is dominance of government in monetary system," a representative from Ghana observed. "Government should withdraw from financial markets, borrow less and give incentives to private sector."
Prof. Paul Collier, a Professor of Economics and Director for the Centre for the Study of African Economies at Oxford University, warned that the challenge for Africa is to avoid repeating its history of the 1970s when the continent's commodity boom lead to debt accumulation in the 1980s. "Africa's central banks are key institutions in ensuring that Africa learns from its history rather than repeating it," said Collier during the meeting.
Collier also pointed out the opportunities that African economies must exploit to increase national gross debts and developing the mortgage market for ordinary people. "This will be a double win, create many job opportunities and provide simple but sound homes for many ordinary people," he stressed.
Another substantial challenge for the continent will be developing financial markets and different financial products to rural communities. In turn rural citizens must also embrace the reforms to improve their lives. In Rwanda for instance, there is still weak bank coverage in rural areas. Although the country has eight commercial banks, only two have a wider network in rural Rwanda.
Kenya: National Bank Sued Over Sh75million Loss
The National Bank of Kenya has been sued by a Mombasa based company over alleged unauthorised payments that cost the firm Sh75million. Habo Group of Companies, claimed the bank cleared for payment cheques with glaring forgeries of the account signatures, without counterchecking the genuineness of the cheques and signatures.
The company through its law firm Amuga and Company, also claimed that the bank made payments of crossed cheques over the counter, and other payments of 'obvious' alterations without counter signatures against the same. It now wants the bank to be compelled to pay the Sh75, 805, 099 and interest at bank rates of 15.5 percent per annum.
In documents filed in court, the company has accused the bank of being in breach of banking contract or the duty of care, through negligently allowing huge sums of money to be withdrawn from the account, between April 2009 and August 31 2010.
It was claimed that on diverse dates, the employees of NBK Portway House branch in Mombasa allowed various amounts of money to be withdrawn from its accounts irregularly.
The company has also sued its former chief accountant, Mercy Musera, whom it has accused of being issued with two parallel cheque books bearing the same numbers and serials to actively facilitate fraudulent withdrawals of funds from the account. Habo Group of Companies also claimed that in April 2009, the defendant withdrew Sh1.6million without any authorisation from the plaintiff and converted the cash to her own use.
Several companies have been mentioned as having received the money which was withdrawn through forged cheques. It was also revealed that criminal proceedings have already been instituted against Musera, and three others by the police, regarding to the theft.
Musera has since been restrained from transferring some of her properties, which she allegedly purchased using the stolen funds. She was also stopped from selling, charging or mortgaging her prime piece of land in Nyali, until the case filed against her by her former employer is heard and determined.
The company through its law firm Amuga and Company, also claimed that the bank made payments of crossed cheques over the counter, and other payments of 'obvious' alterations without counter signatures against the same. It now wants the bank to be compelled to pay the Sh75, 805, 099 and interest at bank rates of 15.5 percent per annum.
In documents filed in court, the company has accused the bank of being in breach of banking contract or the duty of care, through negligently allowing huge sums of money to be withdrawn from the account, between April 2009 and August 31 2010.
It was claimed that on diverse dates, the employees of NBK Portway House branch in Mombasa allowed various amounts of money to be withdrawn from its accounts irregularly.
The company has also sued its former chief accountant, Mercy Musera, whom it has accused of being issued with two parallel cheque books bearing the same numbers and serials to actively facilitate fraudulent withdrawals of funds from the account. Habo Group of Companies also claimed that in April 2009, the defendant withdrew Sh1.6million without any authorisation from the plaintiff and converted the cash to her own use.
Several companies have been mentioned as having received the money which was withdrawn through forged cheques. It was also revealed that criminal proceedings have already been instituted against Musera, and three others by the police, regarding to the theft.
Musera has since been restrained from transferring some of her properties, which she allegedly purchased using the stolen funds. She was also stopped from selling, charging or mortgaging her prime piece of land in Nyali, until the case filed against her by her former employer is heard and determined.
Uganda: Banks Should Rethink Expansion Strategies
With nearly 30 years since the financial sector was liberalized, access to financial services still elude many Ugandans. The FINSCOPE report of 2010; financial services access strand; a paltry 28 per cent of 16 years and above are formally served, 42 per cent are informally served and 30 per cent remain excluded.
In 2007, when the same study was under-taken, 62 per cent of Ugandans were reported to have no access to either formal or informal financial services. Commercial banks and regulated Microfinance Institutions (MDIs) only contributed 16 and 2 per cent respectively of the 38 percent that had access to formal financial services at the time. The 20 per cent was contributed by informal financial service providers as SACCOs, Village Savings and Loan Associations and other unregulated MFIs.
In 2007, commercial banks and regulated MFIs access to financial services was only 18 per cent. Three years later, the population served by these institutions grew by a meager 3 per cent to 21% in 2010. However, the informal financial services sector contributed an enormous growth to reduce the excluded Ugandans at 62 per cent in 2007 to a merely 30 per cent in 2010.
Although the banking sector has grown in asset size and number of commercial banks the growth has not steadily translated into an increment in financial access. The strategy by banks can explain low access despite the banking sector growth.
Commercial banks have much of their operations centered around Kampala and major upcountry trading centres with little focus on upcoming, busy and promising business towns. We have seen some banks concentrating 70% or so of their operations in Kampala, with their branches in the city 200 - 300 meters away from each other. The over concentration of banks in Kampala has heightened competition with one promising trader being visited by nearly 15 banks (Sales force) to market their products each-day.
However, opportunities exist elsewhere outside Kampala that can support growth and expansion for banks. Small and up-coming towns are such an option. Hither-too small towns such as Kagadi in Kibaale district have considerably grown. A couple of months when I visited the town, I was told a week prior to my arrival, 7 traders had been robbed of 650 million while transporting it in a commuter taxi to the nearest bank about 65kms. These are just a few who trot long distances to save their money. But if a financial institution opened in such a town, the volume of savings it can collect would be enormous especially including small traders who keep their cash in the bush, and piggy banks.
Other small & promising towns are highway-trading centres. Such an example would be Bweyale. Bweyale is one of the busiest trading centres along the Gulu highway. A couple of years ago while doing a feasibility study for a commercial bank that wanted to start operations in the town, I discovered that during the maize season and harvest of cassava the town receives cash inflows to farmers especially from traders in southern Sudan way above a billion. As the farmers receive this cash, they have nowhere to keep it. Few travel to Luwero while others go to Lira.
Other growth options could include downscaling to serve micro-savers and borrowers. There's a lot of business outside Kampala for banks especially for micro-savers. Strategic identification of small but promising towns could be a good starting point to guide expansion and growth.
Developing the financial system will require that banks spread out to reach the excluded. A deliberate policy by the central-bank to direct banks seeking expansion to areas and towns with good prospects but under-served can be key.
In 2007, when the same study was under-taken, 62 per cent of Ugandans were reported to have no access to either formal or informal financial services. Commercial banks and regulated Microfinance Institutions (MDIs) only contributed 16 and 2 per cent respectively of the 38 percent that had access to formal financial services at the time. The 20 per cent was contributed by informal financial service providers as SACCOs, Village Savings and Loan Associations and other unregulated MFIs.
In 2007, commercial banks and regulated MFIs access to financial services was only 18 per cent. Three years later, the population served by these institutions grew by a meager 3 per cent to 21% in 2010. However, the informal financial services sector contributed an enormous growth to reduce the excluded Ugandans at 62 per cent in 2007 to a merely 30 per cent in 2010.
Although the banking sector has grown in asset size and number of commercial banks the growth has not steadily translated into an increment in financial access. The strategy by banks can explain low access despite the banking sector growth.
Commercial banks have much of their operations centered around Kampala and major upcountry trading centres with little focus on upcoming, busy and promising business towns. We have seen some banks concentrating 70% or so of their operations in Kampala, with their branches in the city 200 - 300 meters away from each other. The over concentration of banks in Kampala has heightened competition with one promising trader being visited by nearly 15 banks (Sales force) to market their products each-day.
However, opportunities exist elsewhere outside Kampala that can support growth and expansion for banks. Small and up-coming towns are such an option. Hither-too small towns such as Kagadi in Kibaale district have considerably grown. A couple of months when I visited the town, I was told a week prior to my arrival, 7 traders had been robbed of 650 million while transporting it in a commuter taxi to the nearest bank about 65kms. These are just a few who trot long distances to save their money. But if a financial institution opened in such a town, the volume of savings it can collect would be enormous especially including small traders who keep their cash in the bush, and piggy banks.
Other small & promising towns are highway-trading centres. Such an example would be Bweyale. Bweyale is one of the busiest trading centres along the Gulu highway. A couple of years ago while doing a feasibility study for a commercial bank that wanted to start operations in the town, I discovered that during the maize season and harvest of cassava the town receives cash inflows to farmers especially from traders in southern Sudan way above a billion. As the farmers receive this cash, they have nowhere to keep it. Few travel to Luwero while others go to Lira.
Other growth options could include downscaling to serve micro-savers and borrowers. There's a lot of business outside Kampala for banks especially for micro-savers. Strategic identification of small but promising towns could be a good starting point to guide expansion and growth.
Developing the financial system will require that banks spread out to reach the excluded. A deliberate policy by the central-bank to direct banks seeking expansion to areas and towns with good prospects but under-served can be key.
Rwanda: Banks to Issue Loans for Bank of Kigali IPO
Commercial banks are willing to offer loans to potential investors interested in buying Bank of Kigali shares during its Initial Public Offer, due to be launched by the end of this month.
BK, Rwanda's largest bank by asset base and profitability, is set to sell 45 percent of its shares to the public in the country's second local IPO.
The loan packages are aimed at facilitating the public to buy BK shares.
According to BK's Chief Operating Officer, the bank has been encouraging its customers to save to enable them buy the shares.
Gloria Nyambok, the Head of Business at the Kenya Commercial Bank (KCB) Group, told Business Times that the bank will facilitate its clients to access loans to buy BK's shares.
"KCB Rwanda will finance 80 percent and a client will contribute the remaining 20 percent of any loan deal," Nyambok explained.
She added that the loan will be reimbursed during a maximum term of three years.
Banque Populaire du Rwanda (BPR)'s Chief Executive Officer (CEO), Herman Klaassen said the bank is yet to decide whether to facilitate its clients.
FINA Bank's Boss, Rao G. Balivada, disclosed that only four banks are authorised to facilitate their clients with loans for the I.P.O and his bank is amongst them.
"We haven't finalised the terms and conditions of the loans but the bank decided that instead of giving large loans to a few individuals, we want to give less but to many clients," Balivada said, adding that, the bank opts to give Rwf 10-11 million per client to facilitate a huge number.
During his budget speech in Parliament on Wednesday, the Minister of Finance, John Rwangombwa, said that government expects to earn Rwf25 billion from the sale of some of its shares in BK and telecom firm, MTN Rwanda.
The launch of BK IPO will be announced when it is approved by the Capital Market Advisory Council (CMAC) and Rwanda Stock Exchange (RSE).
BK, Rwanda's largest bank by asset base and profitability, is set to sell 45 percent of its shares to the public in the country's second local IPO.
The loan packages are aimed at facilitating the public to buy BK shares.
According to BK's Chief Operating Officer, the bank has been encouraging its customers to save to enable them buy the shares.
Gloria Nyambok, the Head of Business at the Kenya Commercial Bank (KCB) Group, told Business Times that the bank will facilitate its clients to access loans to buy BK's shares.
"KCB Rwanda will finance 80 percent and a client will contribute the remaining 20 percent of any loan deal," Nyambok explained.
She added that the loan will be reimbursed during a maximum term of three years.
Banque Populaire du Rwanda (BPR)'s Chief Executive Officer (CEO), Herman Klaassen said the bank is yet to decide whether to facilitate its clients.
FINA Bank's Boss, Rao G. Balivada, disclosed that only four banks are authorised to facilitate their clients with loans for the I.P.O and his bank is amongst them.
"We haven't finalised the terms and conditions of the loans but the bank decided that instead of giving large loans to a few individuals, we want to give less but to many clients," Balivada said, adding that, the bank opts to give Rwf 10-11 million per client to facilitate a huge number.
During his budget speech in Parliament on Wednesday, the Minister of Finance, John Rwangombwa, said that government expects to earn Rwf25 billion from the sale of some of its shares in BK and telecom firm, MTN Rwanda.
The launch of BK IPO will be announced when it is approved by the Capital Market Advisory Council (CMAC) and Rwanda Stock Exchange (RSE).
Tanzania: Dar to Host Meeting on Global Credit Organisation
Dar es Salaam — Oikocredit International will hold its annual general meeting (AGM) in the city this week.
The event is expected to bring together more than 150 delegates from all over the world.
The delegates will also have the opportunity to tour various Oikocredit financed projects in Dar es Salaam, Tanga and Zanzibar. A series of meetings leading up to the AGM have already started and the official Information Day will be held this Wednesday.
The minister for Foreign Affairs and International Cooperation, Mr Bernard Membe, will officiate at the Information Day, which will offer an opportunity to the public to know Oikocredit's activities in Tanzania and East Africa in general.
The Tanzania Country manager for Oikocredit, Mr Deus Manyenye, said Tanzania's hosting of the event was a significant development to promote Oikocredit's activities and showcase the country's peace, beauty and tourism.
"In Tanzania, Sh26 billion has been approved for lending since Oikocredit was inaugurated in the country in 2006," he said. He named institutions that have so far benefitted from Oikocredit as community banks, microfinance institutions, cooperatives, NGOs, fair trade organisations and SMEs.
Oikocredit understands that these institutions do not want to apply for loans from commercial banks for fear that they would be unable to make the repayments, given the high interest rates, lack of tangible securities and other terms and conditions.
"That is where Oikocredit comes in to bridge the gap by providing affordable loans that have relevant social impact in the community," he said.
He emphasised the organisation's central belief in the power of individuals, families and communities to build a better life for themselves if only given a chance.
The event is expected to bring together more than 150 delegates from all over the world.
The delegates will also have the opportunity to tour various Oikocredit financed projects in Dar es Salaam, Tanga and Zanzibar. A series of meetings leading up to the AGM have already started and the official Information Day will be held this Wednesday.
The minister for Foreign Affairs and International Cooperation, Mr Bernard Membe, will officiate at the Information Day, which will offer an opportunity to the public to know Oikocredit's activities in Tanzania and East Africa in general.
The Tanzania Country manager for Oikocredit, Mr Deus Manyenye, said Tanzania's hosting of the event was a significant development to promote Oikocredit's activities and showcase the country's peace, beauty and tourism.
"In Tanzania, Sh26 billion has been approved for lending since Oikocredit was inaugurated in the country in 2006," he said. He named institutions that have so far benefitted from Oikocredit as community banks, microfinance institutions, cooperatives, NGOs, fair trade organisations and SMEs.
Oikocredit understands that these institutions do not want to apply for loans from commercial banks for fear that they would be unable to make the repayments, given the high interest rates, lack of tangible securities and other terms and conditions.
"That is where Oikocredit comes in to bridge the gap by providing affordable loans that have relevant social impact in the community," he said.
He emphasised the organisation's central belief in the power of individuals, families and communities to build a better life for themselves if only given a chance.