The Mwango Capital Podcast

In this episode recorded on 12.09.2024, we are joined by AAR Insurance’s CEO, Justine Kosgei, and Head of Distribution, James Kamau, as we explore affordable and flexible insurance solutions for families and businesses.

We also cover insurance penetration in the country, their ShwAARi product, implementing cloud Infrastructure and digital transformation to enhance service provision, and their partnerships with various stakeholders to provide effective insurance coverage.

Subscribe to get notified when we make a new post.

Key Quotes

“There are quite a number of barriers that make insurance not accessible amongst Kenyans. One of them is affordability. For a fact, insurance is expensive compared to some of the other priorities in the household…The other barrier to insurance would be probably the product designs, maybe they're a bit complicated for the ordinary person to understand. And the other would be probably trust.”

James Kamau

“The ShwAARi proposition was all about bringing that simplicity to medical insurance and the product has very unique features. It is a very innovative product. It has what we call a one-limit. Most, in fact, all health insurance products have an aspect of inpatient-outpatient and then quite a number of sub-limits to address other concerns like dental, optical maternity and what have you, pre-existing conditions. So what ShwAARi does is to create a solution that is one limit. It gives you a lot of empowerment because you are able to decide on the limit that you have bought.”

James Kamau

“As a result of having our systems in the cloud, we're able to have platforms that provide services in a paperless and electronic manner. So we have a core platform that supports us, especially on claims. One area of this is our claims. That means that, for our customers, we have used this to ensure that they can access services digitally. Using mobile, you can view your health insurance benefits. Using the mobile, you can go to the hospital and be identified using biometrics. Your fingerprints can be used to access your insurance card, and then you can be given services. Then using the same platform hospitals can submit their claims digitally because the platform connects the hospital systems to our systems and therefore we do not need human intervention or paperwork to do that.”

Justin Kosgei

“Finally, I'd like to just highlight one more thing, which we tested again in partnership with our M-TIBA providers, where we worked with transport sectors Saccos to have an evacuation product because of the huge number of accidents that we have in the country. I think recently we've had a lot of accidents happening. Things that we noticed is that whenever accidents happen, there's a delay in getting emergency help. Normally there's a lot of lives that can be saved within that time frame.”

Justin Kosgei

Show Notes

00:00:00 Introduction

00:05:16 Insurance Penetration

00:08:20 Technological and Innovative Solutions 

00:14:25 Affordability and Transparency 

00:16:41 Insurance Products for Women and Youth

00:25:06 Microinsurance

00:32:53 Cloud Infrastructure and Digital Transformation

00:34:20 ShwAARi

00:39:18 Restrictive Limits on Dental and Optical

00:45:53 Flexible Solutions for the Underserved Market

00:50:43 Home and Business Insurance Products

In this episode recorded on 17.09.2024, we are joined by Stanbic Bank’s Asset Management Portfolio Manager Jimmy Karanu, and Head of Asset Management - Christian Mwirigi as we explore wealth creation with Stanbic Asset Management. We also discuss their product offerings, fees, investment allocation, asset classes, and risk management.

Subscribe to get notified when we make a new post.

Key Quotes

“With as little as a thousand Kenya shilling, you can be able to partake in our money market offering, and with as little as 100 USD, you are able to partake in the U. S. dollar offering. That is quite intentional because from where we sit we want to equally provide accessibility to these solutions because we believe that's part and parcel of promoting financial inclusion.”

“A money market fund is the safest form of what we call unit trusts that you can partake in. It is designed to ensure that the investments that are contained within that pool are as liquid as possible, are as stable as possible to be able to not only give you a competitive return, but also ensure that your funds are actually readily accessible should you need to access the money.”

“When you look at money market funds, they are designed to minimize risk through something that is called diversification. At the end of the day, the structure of the fund is that, it being a pooled investment, you basically have what you call indirect exposure to multiple asset classes.”

Show Notes

00:00:00 Introduction and Career Journey

0:03:58 Overview of Stanbic Asset Management 

00:05:59 Understanding Unit Trusts and Key Players

00:12:23 Product Offerings and Fees

00:17:01 Investment Allocation, Asset Classes, and Risk Management 

00:25:07 The Investment Process, and Value Dates

00:29:38 Investing for the Long Term

00:38:02 Future Plans and Diversification 

00:44:32 Advice for Young Investors

In this episode recorded on 06.09.2024, our guest host, Terryanne Chebet, is joined by Grace Vihenda - Manager, Innovation and Sustainability at KenyaAirways to discuss the airline’s sustainability efforts through The Aviation Challenge.

We also cover the economic and social aspects of sustainability, the cost-benefit analysis of sustainability efforts, and engaging passengers in sustainability.

Subscribe to get notified when we make a new post.

Key Quotes

“Sustainability really is a philosophy. I would put it like that. It's a philosophy, a way of working and running a business, it's not necessarily the thing that you do on the side. Now let's do sustainability, no, it's actually part and parcel of what the organization does every day and is ingrained in the actual strategy of the company.”

Grace Vihenda

“There are ways that sustainability can help to reduce costs. So in many words, I'm saying it's not really a conflict. It's about how can we be smart enough and strategic enough to make sure that our sustainability initiatives are contributing to profitability as opposed to taking away from profitability. So that can include just having to think out of the box and be creative. And for me, that's the one thing I totally love about my combined role of innovation and sustainability because, on the one hand, we have this and have to drive this creative thinking, yes, this is what we need to do. How can we do it in a way that is actually bringing profit to the company as opposed to taking our profit from the company?”

Grace Vihenda

“When you change the way you look at things, the things you look at change.”

Wayne Dyer

Show Notes

00:00:00 Introduction

00:04:08 Innovation and Sustainability

00:05:49 Economic and Social Aspects of Sustainability

00:08:23 Environmental Initiatives and Upcycling

00:10:06 Sustainable Aviation Fuel and Local Partnerships

00:12:01 The Aviation Challenge (TAC)

00:20:49 Cost-Benefit Analysis of Sustainability Efforts

00:25:30 Tree Planting, Climate Action, and Sustainable Fuel Initiatives

00:29:18 Engaging Passengers in Sustainability

00:30:38 Sustainability vs Profitability

00:34:37 Closing Remarks

In this episode recorded 15.08.2024, our guest host, Rhina Namsia, is joined by Wilson Wariari - Chief Investments Officer at ArvoCap Asset Managers and Bill Oloo, CFA - Portfolio Manager at Kuza Asset Management on an insightful discussion on understanding unit trusts and their importance as investment tools.

We also explore the risk and return of different unit trust products, the investment decision process, assessing a fund manager’s performance, management fees, and macroeconomic factors affecting unit trusts.

Subscribe to get notified when we make a new post.

Key Quotes

“According to the Capital Markets Authority, a unit trust is simply a pool of assets, which have been gathered together based on the contributions of members. And according to the regulations, we have a variety of unit trusts. We have a money market fund. We have an equity fund. We have a fixed-income fund, and at the same time, we have a balanced fund. And if you have to look at the latest statistics around 86% of the funds are domiciled in money market funds and fixed-income funds. And according to the latest statistics we have, at the end of the first quarter of the year, we had around 225 billion shillings in unit trusts.”

“A client wants the highest possible return while taking the most appropriate level of risk, not necessarily the smallest, but the most appropriate level of risk.”

“One should try as much as possible to expose oneself to asset classes whose returns are not necessarily conjoined. By conjoined, they don't necessarily go up together or they don't exactly go down together. So in other words, you need to expose yourself to a basket of security so that at least from a risk perspective, one is effectively covered.”

“One key aspect that would be able to determine whether or not one can be successful from a long-term perspective, just in terms of gathering wealth would be discipline, and the ability to just be goal oriented.

Show Notes

00:00:00 Introduction 

00:05:21 Understanding Unit Trusts

00:09:15 Risk and Return

00:13:03 Momentum Fund

00:16:52 Investment Decision Process

00:20:45 Assessing Fund Managers’ Performance

00:23:28 Diversification and Advantages of Unit Trusts

00:30:09 Active Funds vs Passive funds

00:40:41 Investment Decisions in Active Funds 

00:48:33 Minimum Investment Amount

00:53:55 Management Fees and Costs 

01:00:00 Macroeconomic Factors Affecting Unit Trusts

In this episode recorded on 22.08.2024, we host NCBA Bank CEO and Kenya Bankers Association Chairman, John Gachora, to discuss the bank’s H1 2024 performance.

We cover the current state of the economy, the acquisition of AIG Kenya, regional subsidiaries and expansion into West Africa, the risk-based pricing model, and the impact of Kenya’s credit rating downgrade.

Subscribe to get notified when we make a new post.

Show Notes

00:00:00 Introduction and H1 2024 Performance Highlights 

00:02:33 Managing NPLs and the State of the Economy

00:11:24 Regional Subsidiaries and Expansion to West Africa

00:15:52 FX Performance and the Acquisition of AIG Kenya

00:19:32 M&A and Capital Requirements

00:22:49 Risk-Based Pricing Model

00:24:03 Digital Banking Strategy

00:27:49 Dividend Policy

00:29:23 Rising Staff Costs and Strategic Hiring

00:32:41 Mobile and Digital Loan Offerings

00:38:15 Impact of Kenya’s Credit Rating Downgrade

00:40:41 H2 2024 Outlook

In this episode recorded on 30.07.2024, we explore the challenges and expectations for John Mbadi as Kenya's now Treasury CS, focusing on fiscal strategies, cost-cutting, tax policy, public debt management, and the impact of debt restructuring on financial institutions. The discussion also covers how citizens can hold the government accountable and the importance of transparent and efficient fiscal management.

Our host is Ramah Nyang who is joined by Churchill Ogutu - Economist at IC Group, Stephanie Kimani - Economist, and Ruth Kendagor - Head of Research at The Institute of Public Finance.

This episode is brought to you in partnership with The Institute of Public Finance.

Subscribe to get notified when we make a new post.

Key Quotes

“Instead of looking at introducing new taxes and increasing tax rates, I would suggest he focuses on just enhancing the tax collection mechanism, as well as broadening the tax base to increase government revenues. Broadening the government tax base, in this case, is based on the use of digital tax systems just to minimize tax evasion as well as optimize the compliance in overall tax collection and remittance.” - Stephanie Kimani, Economist

“Our tax system has inclined quite significantly on consumption taxes, VAT, and excise tax. Excise tax is meant to be a sin tax. Let it be a sin tax and let's stop the creativity of saying maybe if we include financial services here, we'll get some extra coin. It's a sin tax, let it be a sin tax. Do not impose a fine on other components that are not sins, on issues that affect the day-to-day lives of citizens, issues that make people's lives easier, and issues that make business life easier.” - Ruth Kendagor, Head of Research at the Institute of Public Finance

“When there's a need for budget cuts, it's always the development spend that is cut fast or cut more drastically. This provides the government an opportunity to increase the use of PPPs to fund those large infrastructure projects, which would at the very least help the government in its development agenda.” - Stephanie Kimani, Economist

“What has been happening in the space over the last three, four years, actually even longer than that is, we find that measures that are introduced in the 2023 finance bill have now been reverted in the 2024 finance bill. Measures that were introduced in the 2022 finance bill were reverted in the 2023 finance bill. So predictability really affects business planners. Say, for instance, you are investing in a particular industry in the hotel industry or the hospitality industry and the finance bill 2023 had given you a particular benefit in terms of tax exemptions or subsidized rates for you to put in your investment. Now you look for this good money, billions or millions to invest, and just before you finish constructing your hotel, you haven't even finished it for you to recover anything, the law is changed, and the taxes back up. So really it discourages investors and businesses, and one of the responses we've seen is that a number of businesses have cut back because of the unpredictability of the system.” - Ruth Kendagor, Head of Research at the Institute of Public Finance

“Rescheduling has to happen around reforms. As long as we continue having problems with wastage, for as long as we continue having problems with corruption, and leakage, our rescheduling process will happen, but it will happen in a problematic manner. It will affect citizens because of the extra burden, and any additional cost that comes with it, all the additional pressure will be transferred to citizens. It really will not address the root cause that was meant to be addressed because the whole reason why we want to talk about rescheduling is because we had bad decision-making when we were borrowing debt. And so if these reforms are not put in place, the rescheduling will not really translate much. Finally, rescheduling needs to happen within an environment where there are prospects for economic growth, where you know that we're rescheduling this debt at this particular time, using these resources to invest in this particular area so that we spark growth and the revenues that will be generated from the growth sectors, then you'll be able to pay off that debt.” - Ruth Kendagor, Head of Research at the Institute of Public Finance

Show Notes

00:00:00 Introduction

00:01:37 Top things expected of John Mbadi

00:09:24 What alternatives do Kenyan policymakers have?

00:13:17 Opportunities to cut cost

00:23:55 Unpredictability of tax strategy/laws

00:30:49 Tax cuts

00:40:38 Public debt management

00:44:24 Potential impact of debt restructuring

00:52:06 How can citizens hold the government accountable?

In this episode recorded on 10.07.2024, our host, Ramah Nyang, is joined by David Rogovic - VP and Senior Credit Officer at Moody’s, Jared Osoro - Economist and Director of Credit Markets at FSD Africa, and Tom Ogada - Programme Assistant at Okoa Uchumi to breakdown Kenya’s debt situation.

We also cover the current fiscal challenges, the diminished capacity for fiscal consolidation, the implication of domestic debt restructuring, Moody's assessment of debt exchange, public debt audit, and the credibility of public data.

Subscribe to get notified when we make a new post.

Key Quotes

“We've been talking for a very long time about expanding the tax net. That simply means bringing more people or more economic agents to that tax bracket. The unfortunate reality is that we've been doing so using convenient but not necessarily effective ways and that is leaning more towards indirect taxes consumption-based taxes. We have seen a proliferation of excise duty, and VAT which touches on almost every economic agent. The problem with that is that it may not necessarily lead to the expansion of the tax revenue. In any event, it may actually lead to what you can call a discouraging consumption.”

Jared Osoro, Director of the Credit Markets Program at FSD Africa

“When we think about the key credit challenge for Kenya from Moody's perspective, yes, the debt burden is high, but debt affordability, which we measure as interest to revenue or interest to GDP is really weak, really high interest to revenue ratio. One of the highest among all the sovereigns that we rate. Of the 143 sovereigns rated, it's in the lowest 10, or the bottom 10 sovereigns. And again, without the revenue measures given the current interest rate environment, given the larger fiscal deficits that we're expecting this year, relative to what was expected prior to the cancellation of these tax measures which should imply higher domestic borrowing, debt affordability will worsen even further.”

David, Vice President and Senior Analyst at Moody's Sovereign Risk Group

“If you think about this, the balance between a revenue-based fiscal consolidation versus an expenditure-based fiscal consolidation. The revenue-based one gives us more confidence that the narrowing in the fiscal deficit that we would project for this year would continue for the year after and the year after versus the spending cuts this year. If you agree that they are more temporary in nature, then you would expect at some point spending to rise, and without an equal rise in revenue that means larger fiscal deficits in the future.”

David, Vice President and Senior Analyst at Moody's Sovereign Risk Group

“What we're really looking for is confidence over the fiscal consolidation that limits the deterioration in the debt burden, debt affordability. So whether it's through revenue measures, spending measures, something that gives us confidence that we can comfortably expect to see a narrower fiscal deficit year after year, that's consistent with debt declining or stabilizing at some point in the future that will be really what we're looking for.”

David, Vice President and Senior Analyst at Moody's Sovereign Risk Group

“Let us fix our expenditure and the leakages that we have so that we can see how we can reduce the fiscal deficit that we have because it is what is informing the kind of borrowing and the debt stock that we are seeing.”

Tom Ogada, Programs Assistant at the Civil Society Group, Okoa Uchumi

Show Notes

00:00:00 Introduction

00:02:10 Fiscal Challenges and Debt Restructuring

00:15:06 Public Policy Litigation

00:20:08 Diminished Capacity for Fiscal Consolidation

00:25:40 Market Access

00:27:25 Implication of Domestic Debt Restructuring 

00:29:59 Public Debt Audit and Credibility of Public Data

00:40:17 Moody's Assessment of Debt Exchange

00:43:19 Debt Service Costs and Improving Ratings

00:51:44 Final Thoughts

In this episode recorded on 09.07.2024, we host the Nairobi Securities Exchange (NSE) CEO, Frank Mwiti, for an in-depth conversation on the state of the exchange.

We cover the current state of the securities exchange, market performance in 2024, access to data, listings from the government, the corporate debt market, and his vision for NSE’s future.

Subscribe to get notified when we make a new post.

Key Quotes

“Currently, the participation, for example, by retail investors in Kenya is less than 10%. So, you can see that a huge chunk of our market is reliant on institutional capital. And by the way, more than 60 percent of that institutional capital is foreign.” 

“Given that we are in a high-interest environment, and my view, I think that is going to persist for quite a while, especially given the activities of the last few weeks in our country. The government is going to, in my view, continue borrowing at fairly elevated levels, the upper teens, which means that banks in all likelihood will continue to lend to the private sector in the mid-twenties. And that's a secure debt now, which means there is opportunity potentially to come to the public market and raise funds at potentially more competitive terms including potentially even raising a hard currency denominated funding through our market.”

“The green bonds, let me call it the larger sustainability ESG agenda, there's more capital looking for opportunities than there are opportunities but the single biggest issue is origination and structuring.”

Show Notes

00:00:00 Introduction

00:05:05 Overview of the NSE

00:09:12 Kenyan Capital Markets

00:12:15 2024 Market Performance

00:20:52 Strategies to Attract Investors 

00:35:54 Access to NSE Data and the Earnings Calendar

00:45:43 Listing from the Govt, Tech Companies, and the Impact of AI

00:52:58 The Corporate Bond Market

00:59:56 Cost Of Investing in the NSE

01:05:56 Future Outlook

In this episode recorded on 11.07.2024, we host the AAR Insurance CEO, Justine Kosgei, for an in-depth conversation on the firm.

We cover the firm’s product offering, insurance penetration in Kenya, affordable health insurance, Social Health Insurance Fund (SHIF), and IFRS 17’s implementation and impact.

Subscribe to get notified when we make a new post.

Key Quotes

On insurance penetration:

“Many people don't know how the penetration is calculated. Usually, it's a percentage of total insurance premiums that we have in the industry compared to the GDP. So right now it's below 3%. That is very low compared to other countries such as South Africa. For example, whereas our penetration is 3% as a contribution to the GDP for developed countries and in Africa, places like South Africa, they're talking about 17%. So it means we are very far off. It means that the number of people also that have insurance if you take the number of people who have health insurance in Kenya, or private insurance, is about 2 million. Yet we have 55 million Kenyans in total. Meaning we have  over 50 million Kenyans who have no insurance.”

On cultural aspects:

“We have very strong bonds and very strong support systems that sometimes do not encourage people to take insurance.”

On Insurance cost:

“When you have a smaller pool, you, as actuaries or as statisticians, realize that for you to have adequate premiums together for expenses, you have to charge more. But if we have more penetration, then it will be easier to price and create solutions that are more affordable.”

Show Notes

00:00:33 CEO’s Career Journey

00:09:48 Company History

00:15:47 Insurance Penetration

00:26:20 Product Offering

00:31:37 Affordable Health Insurance

00:35:23 Social Health Insurance Fund (SHIF)

00:38:04 Dos and Donts of Insurance Policies

00:40:27 Responsibilities as a CEO

00:43:57 IFRS17

00:48:49 Closing Thoughts

In this episode recorded on 27.06.2024, our host, Ramah Nyang, is joined by Churchill Ogutu - Economist at IC Group, Stellar Swakei - Senior Research Associate at SIB, Oyoo Wycklife - Council Member at Law Society of Kenya, Nikhil Hira - Partner at Koddy Africa LLP to discuss the legal and economic implications of the Finance Bill 2024's rejection.

Subscribe to get notified when we make a new post.

Show Notes

00:00:00 Introduction

00:03:55 Impact on Ability to Raise Cash

00:05:47 Legal Perspective on the Withdrawn Finance Bill

00:15:43 The Appropriation Bill and the President’s Proposal to Cut Spending

00:23:17 LSK’s Update on Persons Arrested During Protests

00:27:46 How Can Kenya Fix the Debt Problem?

00:43:41 Possible Implications of the President’s Recommendations

00:49:32 Spending Cuts

00:56:48 Laying the Foundations for Future Growth

01:03:47 Fiscal Targets in Relation to the IMF Program

01:13:46 Closing Thoughts