Investments grow amid boom of non-bank institutions

Individuals are pushing money to annuity products to make continuous streams of income

In Summary

•This also means the continued transfer of proceeds into non-bank financial institutions including insurance, pension and private equity firms, as indicated by Kenya National Bureau of Statistics data.

•The investments led to a negative push to money in circulation in September registered at Sh1.42 trillion. This represented a 3.73 per cent drop from August

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money

Kenyans are gradually moving cash to liquid assets and investment products, leading to a declined in the amount of money in circulation.

According to investment analyst Daniel Kuyo, this has been driven by the company's restructuring plans and uptake of retirement benefits and cost-efficiency measures adopted by corporates.

As a result, individuals push money to annuity products to make continuous streams of income. 

 
 
 

“In anticipation to get paid by the government, some companies have held their own payments and rather transfer the cash to a fixed or call deposits,” Kuyo said.

This also means the continued transfer of proceeds into non-bank financial institutions including insurance, pension and private equity firms, as indicated by Kenya National Bureau of Statistics data.

Other investments have been on currency exchanges and some microloan organisations.

Quasi money, funds held in these institutions or as held as treasury bills and short-term bonds, grew by 7.73 per cent to Sh1.406 trillion in September 2019 compared to the same period last year.

However, there the money in this segment grew slightly by 1.30 per cent from August.

Even so, subscription to Treasury bills is still low with the finance ministry had received bids worth Sh13.5 billion against an advertised amount of Sh24.0 billion for the 91- 182- and one-year tenures papers.

This represented a performance of 56.2 per cent even as the interest rates edged up.

The investments led to a negative push to money in circulation in September registered at Sh1.42 trillion. This represented a 3.73 per cent drop from August, having declined from the previous months.

 
 
 

Kuyo added that the effect was coupled by the long regime of interest rate cap and government concentrated efforts to consolidate cash under its austerity measures.

However, a rise in money in circulation is set to resume with following the repeal that will help shift lending focus on domestic debt stock to the customer by banks.

Among the 11 listed banks, six lenders posted total deposits Sh2.22 trillion in nine months to September, a reflection of reduced lending.

Net customer loans and advances were worth Sh1.66 trillion.

“Banks will be motivated to lend out a lot more. Money concentration will be on uplift in the next two to three quarters and normalize after that,” he added.