The reopening of schools after the December long holiday break had a toll on the revenue generated by telcos from text messages in relation to the first quarter of 2024. According to the latest statistics from the Communications Authority of Kenya, mobile short message service usage dropped by 4.3 percent.

The numbers also point to a drop in both on-net and off-net mobile SMS. On-net dropped 4.7 percent to 11.8 billion messages, while off-net decreased by 5.3 percent to 1.6 billion messages. This drop has been blamed on the end of the long school holiday and the close of the festive season.

The number of text messages sent per month per subscription also went down to an average of 65.8 messages during the quarter from 70.4 messages in the previous quarter. The decrease in the usage of SMS is thus linked, due to new consumption habits, to a users’ change towards more and more voice calls.

Voice traffic also jumped to 25.2 billion minutes in Q1 2024 from 23.6 billion minutes in Q4 2023, услed by a host of promotions and offers that made their way back to spur usage of voice calls. Term two dates had to be changed in view of the prolonged rainfall that caused flooding across the country.

Since July 2023, when the CBK launched its digital trading platform for government debt securities—DhowCSD—it has more than doubled in terms of investor sign-ups to surpass 80,000 new accounts. This certainly manifests one clear indicator of success with regard to attracting retail investors onto the platform for easier and more convenient investment in securities.

DhowCSD is one version of the Central Securities Depository infrastructure that went live on 31 July 2023. The upgrade will make investing in government securities much easier and user-friendly. CBK Governor Kamau Thugge says the number of accounts rose to between 80,000 and 90,000 in less than a year from the 40,000 existing at the time of the launch, indeed rising by 100 percent. Thugge indicated the role of the platform in simplifying the earlier intimidating process of physically visiting CBK offices to open accounts.

It provides a digital platform through which one can open and run CSD accounts via their smartphones and the internet, eliminating the necessity of visiting the CBK offices physically. That has made it easy for retail investors to sell and buy government securities from the comfort of their homes or offices. The CBK is now looking to extend this ease to Kenyans in the diaspora. It eyes increasing remittances by encouraging these Kenyans to invest in government securities.

CBK has engaged with Kenyans in the diaspora, accompanied by investor tours in the US and the UK in popularizing DhowCSD. Governor Thugge underscored its potential to facilitate remittances from Kenyan diaspora plus indicated that it had received warm reception upon presentations in the US. It has plans to increase such outreach to other regions like West Coast of US, China, and Japan.

After the launch of the platform, participation of retail investors in domestic debt auctions has gone through the roof. CBK data shows that as of June 19, retail investors held 12.92 per cent of the government’s domestic debt, equivalent to Sh671 billion. This move went on to cement the efficiency of the platform in democratizing access to Government securities.

The next phase for DhowCSD will be the integration with a revamped M-Akiba, which is a retail infrastructure bond-like product aimed at enhancing financial inclusion as a driver of economic development. After problems faced in the first edition, including liquidity challenges and low market understanding, M-Akiba is now set to be moved from the National Treasury to the CBK. The new platform is due to start running in the second half of 2024, solving these problems with the view of allowing ease of entry and exit into the market by investors with a minimum of Sh600 to invest.

Among the many successes chalked up by DhowCSD, CBK has been awarded the prize of Central Banking’s Payments and Market Infrastructure Initiative Award this March. The award recognizes the platform as having provided broadened access to government debt securities for all Kenyans, which is hereby scored in support of CBK’s commitment toward financial innovation and inclusion.

With CBK set to further improve on DhowCSD while adding the instrumental M-Akiba to its platform, the outlook remains bright for retail investors who eye efficient and accessible ways to invest in government securities.

The Ministry of Health’s transition committee has advised deferring the implementation of the new SHIF, which is expected to become operational on July 1, citing technical glitches on the digital platform designed for contributions and registrations.

The committee overseeing the Social Health Authority, the entity set up to administer SHIF and eventually replace the National Health Insurance Fund, NHIF, said a dry run on an Information Communication Technology, ICT, system they are to use revealed a high level of unpreparedness. This recommendation comes less than a week to the expected rollout date.

In light of these findings, the Health Ministry has been entreated to retain the current NHIF structure and withdraw already published regulations by SHIF. The committee emphasized that alternative solutions, with a possible recall of SHA regulations, shall be utilized under the current infrastructure provided by NHIF. This move, however, has financial implications, especially on the licenses for NHIF systems and their renewal contracts.

A pilot test in Marsabit revealed a number of readiness issues with the new system. It was felt that a further pilot, including proxy mean testing, would be required by the committee. ICT experts have been tasked to explore alternative solutions for SHA’s registration and contribution system.

The committee was chaired by Dr. Jason Kap-Kirwok and had the mandate to design this fund following its inauguration on January 30, 2024, by Health Cabinet Secretary Susan Nakhumicha. Early in March, Nakhumicha announced that beginning July 1, SHIF would start running, with all contributions mandatory for all above the age of 18, funding Universal Health Coverage.

Under the proposed SHIF contributions, Kenyan workers will in future pay 2.75% against their gross income, significantly improving the deductions from higher earners at a time when the economy is struggling with rising inflation. For example, those earning Sh50,000 would see their deductions go up to Sh1,375, Sh100,000 at Sh2,750, and Sh500,000 at Sh13,750 gross pay if uncapped. Low-income earners, on the other hand, will find some reprieve, with a worker earning Sh20,000 now seeing deductions drop to Sh550 from Sh750 under NHIF. Those without any source of income will also be obliged to pay a minimum of Sh300 per month to SHIF, towards facilitating UHC.

The recommendations made by the SHA Transition Committee have enveloped the feasibility of the launch of SHIF in big question marks, considering that NHIF, which is expected to form the backbone of SHIF, has myriad problems, including owing private hospitals large amounts in unsettled claims. Members of the Rural Private Hospitals Association of Kenya (Rupha) are reportedly over 400 members who have stopped accepting NHIF cards following unsettled claims amounting to over Sh6 billion, greatly affecting their operations.

The cost for the entire ICT system central to the management of payments to healthcare providers by the SHA is at least Sh 5 billion; a few Members of Parliament haveAssignable Asked for SHIF enrolment suspension with immediate effect, citing discontent over how procurement for the whole process is being handled. According to the Health Committee in Parliament, there are suspicious data security risks and probable corruption relating to procurement.

Section 47 of the SHIF limits the application of secure and trusted technology in digitization and processes, applying the Data Protection Act 2019 and other relevant laws. That notwithstanding, non-transparency and non-readiness of the ICT system remain one big challenge. There has also been concerns in the education sector after the government scrapped cover for the secondary school students in public institutions dubbed EduAfya under the NHIF without a proper alternative.

Testing by the Ministry to identify vulnerable households needing financial assistance has yet to begin. Some high earners who had a ceiling of Sh1,700 under NHIF will also go up under SHIF. Non-salaried people who used to pay Sh500 per month under NHIF will now pay Sh300 under SHIF.

Overview

Over 600,000 users of ‘Pochi La Biashara’ payment service can now access small loans at a flat one-off access fee of 2.76 percent of the total loan amount following a deal inked by Safaricom and Fintech firm Pezesha.

Target Group

The new loan service caters to informal business owners who may not otherwise access loans from the banks and other micro-finance institutions due to lack of a collateral. With Mkopo Wa Pochi, small business owners will be able to borrow money directly and from the convenience of their M-Pesa business accounts, allowing them to differentiate between money meant for business and for personal use.

Credit Management

Pezesha’s vast experience in credit management will be instrumental during the evaluation of the credit history of the borrowers, through the credit bureaus, to ensure that defaulters have their names listed and are denied future loans. “Loans advanced shall be subject to a tenor of seven days and a maximum rollover period of fourteen days during which a roll over fee equivalent to 3.85% for the fourteen days shall be charged. You may only roll over the loan once,” Safaricom says in its terms and conditions.

Customers can either pay in instalments or pay in full before the due date of the repayment of the loan. Customers are also advised that if by the due date the loan will not have been repaid, deductions from the wallet will be automatically executed.

Pezesha Funding and Partnership

In May this year, Pezesha received US$ 500,000 from the Development Finance Corporation to improve its credit-scoring technology. This transaction will act as a seal of approval to boost the company’s standing in the credit management market, in which it has already touched over 50,000 MSMEs.

Comparative Analysis With Other Services

In addition to M-Shwari and Fuliza, Safaricom’s ‘Mkopo Wa Pochi’ is another credit facility that has been instrumental in providing urgent short loans to its clients. The success in this business has made a number of loaning applications get into the market; banks have incorporated applications that allow their customers to borrow short-term loans. Most of these small business owners do not require large volumes of capital, since they would struggle to refund such amounts. Short loans are also mostly preferred by them; these are easily refundable and more convenient as they permit the businessman to stock his enterprise within the shortest time possible. It is also true that technology advancement, coupled with the increased penetration of mobile phones, has made these loans lucrative and viable to earners.

Challenges and Perceptions

However, defaulting these loans has been a headache for its providers since 2020. Many customers have also regarded short loan apps and services as ‘stressful inconveniences’ that they could do without, hence they would opt out. But short loan platforms have maintained their services are only useful with business, and not personal, household needs.

The country is witnessing a state of digital transformation, largely powered by locally assembled smartphones, with 390,000 devices sold since the October last year, the initiative was intended to bridge the technology gap by easing access to digital services.

The Rise of Locally Assembled Smartphones

Information, Communications, and the Digital Economy Cabinet Secretary Eliud Owalo has hailed the milestones so far made in the production of affordable smartphones locally. Owalo said this while speaking during the launch of the Jitume Project at Seme Technical and Vocational College in Kisumu County, rooting for accessible and affordable technology that would help bridge the digital divide.

Many Kenyans still lack access to a smartphone. In contact with the private sector, the government has initiated the local assembly of affordable Kenyan smartphones. This means that we won’t need to import phones from places like China or Korea, said Owalo.

The Neon Brand: Accessible and Affordable

The Neon brand handset which is locally assembled and retailing at Sh7,499 per unit, is now available in all Safaricom branches and Jamii Telecom shops countrywide. The handsets are designed to give pertinent features that would allow one to access government services conveniently from anywhere.

“These smartphones come with all essential features, allowing users to access government services conveniently from anywhere. There will no longer be a need to visit government offices in person,” Owalo added.

Digital Transformation and Government Services

The Kenyan government, under the leadership of the administration of the Kenya Kwanza, leads a digital transformation to ensure efficient and effective service delivery of government services. Owalo assured this would eliminate the need for personal connections in having such services.

“This shall be a direct interaction between you as a Kenyan and your phone and the government. You won’t require to know anyone in any government office to access these services. You will be able to apply for an ID or a passport virtually,” he explained.

Bigger Digital Infrastructure

The government has teamed up with the Kenya Power Company in an effort to support the agenda for digital transformation by further expanding fibre connectivity, ensuring reliable and long-term ability to sustainably connect with the Internet anywhere across the country. As of January 2023, about 11,000 kilometres of fibre optic cables were laid out, with the projection to attain 100,000 kilometres by 2026.

“We are dumping the old method of laying fibre cables underground, which has been vulnerable to acts of vandalism. This time, we shall ride on Kenya Power’s transmission lines,” said Owalo. Kenya Power has hired 300 contractors, spread in equal number throughout the country that have started on this vast undertaking.

Buildout

The plan is that fibre connectivity will be extended to all existing transformers that number 74,000 countrywide. In a short and long-term move, this will see institutions and public places such as market centres within the surroundings where the transformers are located get Internet connections.

“We will extend fibre connectivity to all existing 74,000 transformers. Once fibre is connected to these transformers, we can provide internet access to nearby institutions and public spaces such as market centres”, the CS noted.

Further, Owalo confirmed the ongoing of the last mile electricity connectivity project to ensure sufficient electricity supply which supports the digital infrastructure.