Mohammed Hersi . A hotelier passionate about Tourism & Governance in Africa

This Sunday I would like to share my thoughts about the state of our economy. I am not here to shout about Finance bill it’s merits or demerits. There is enough debate on that.

I think banks in Kenya have played a major role to help dig a deeper hole to sink Kenya. Well you may say it’s business but it’s about time GOK addressed how they borrow locally and I believe this is one thing that our new goverment of Kenya Kwanza should address by clamping on borrowing which cannot happen overnight.

You see Kibaki decided NOT to borrow locally and if he did it was for a very specific reason and period and most importantly not for recurrent expenditure like paying salaries etc.

He made banks to sweet talk Wanjiku to borrow. You will note that from 2013 Jubilee regime decided to push Wanjiku out and opted for easy way out by borrowing from anyone who will care lend both domestic and international . Well in 2023 the hens have come home to roost.

Fact is that from 2013 to 2022 we went on a borrowing spree never seen before in this country granted that we have also seen tremendous infrastructure development never seen before but not all the borrowing went into infrastructure development but recurrent.

We have both domestic and international borrowing which is currently almost at 50/50 Ksh4.8 Trillion and Ksh 4.3Trilion respectively.

✅️️Fact 1. Most of the domestic borrowing was for recurrent and it was easy money to find and banks also find it safer to lend to goverment . They prefer goverment since they are guaranteed to be paid unlike lending to Wanjiku .

✅️Fact 2. In our debate on goverment borrowing we hardly ever discuss interest rates . The budget & appropriation commitee report 2023/24 ( this is in public domain ) estimate shows that GOK will spend almost an equal amount to settle both interest and principal loan which should NOT be the case. If there is deep state I dare say banks in Kenya are deep state. If you consider lending to government safer then why the obscene interst rates.

✅️Fact 3. The proposed budget 2023/4 servicing our public debt Ksh 850B on principal while we will fork out Ksh 775B in interest . It now gets even more frightening, the Ksh 775B 81% will be going to pay interst on domestic debts . Simple back of the envelope working it means goverment will be spending Ksh1.7 B daily to settle interst on domestic debts while we will be paying Ksh402B for our international borrowing. Imagine if the Ksh behaved it means we would have paid even far lower to our international lenders .

It means goverment will spend close to 4 times what we pay as interst to our foreign lenders yet domestic vs foreign loan is almost split 50/50. It’s no brainy what is hurting us .

✅️Fact 4. Now that Wanjiku cannot acess loans from the banks they end up blowing from other platforms hence the digital lenders have grown milking what is left in Wanjiku. The irony is that the same banks that cannot lend to Wanjiku are able to lend to anyone on the digital platform be it Fuliza, Mshwari , M kopa , Tala et al. It is said that we have over 110 digital lenders . Interst rate is as high as 320% a year even your loved fuliza is 240% per year and Mshwari is not any better. You now understand how fundi or Mama mboga you want to pay via Mpesa is telling you ” Usitume kwa hii number tuma kwa hii nyingine”.

Way forward.

✅️1. H.E The President inherited the mess. It is what it is . I am afraid debate that he was in Jubilee goverment bla bla as DP will not help us. He is now our President We are in a hole and we need to find a way out and way out pretty fast.

Banks in Kenya while they are in business I am afraid they have also played a big role to help dig for us a deeper hole. A thriving economy is where every sector makes money, we achieved that under Kibaki.

Banks must be made to renegotiate their loans with goverment and imagine if that interst rate was cut by 25% it means we will easily have Ksh200B+

On the other hand if local banks are not willing to play ball then we cannot afford to continue paying exorbitant interest rates . GOK should negotiate with foreign lenders and pay our local lenders off we rather pay a foreign lender then hedge on the currentky fluctuation. They will then be forced to go back to Wanjiku since GOK would have denied them the easy money. We must stop GOK crowding out private sector when it comes to accessing loans.

Well in last financial year 10 top banks made close to Ksh230B pre tax profit led by KCB at almost Ksh50B and Equity at Ksh 42B then Coop Bank Ksh 27B , DTB Ksh22B & NCBA Ksh 20B respectively. When banks is the only sector making money then we are living one big lie . Even Safaricom is now making more money through Mpesa as opposed to revenue from voice.

✅️2. While GOK is addressing No 1 , they should also urgently relook at digital lenders way of doing business. When borrowing is made too easy then planning and responsible borrowing is thrown out of the window. Anytime you don’t have sufficient funds , Fuliza will entice you only the strong willed will resist the urge. That facility should be on the App and it should take some effort to go and look for it. The message should only read insufficient fund but making Fuliza easily available has hooked Kenyans moreso the ones at the bottom of the pyramid. Fuliza and any other digital lender is like getting hooked on drugs.

In the past before you take any soft loan you’ll plan and you also have an idea how you will payback but with this Fuliza prompt you take the money then worry later how to pay hence hooking Kenyans to borrowing vice. Trust me It’s an illness on its own.

Well I hope I am.making sense and I would like to hear your thoughts .

As always I choose to remain an optimist.

Mohammed Hersi
Mombasa