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Victor Otieno emphasises transparency in insurance products: A recap of Kenyan business headlines
Kenya has seen an active few days in business headlines, from Kenyan lender, Equity Bank, looking to acquire Banque Commercial du Congo, to a drop in cumulative insurance profits, to the Kenyan Revenue Authority (KRA) possibly reducing tax incentives to manufacturers, to unpack it all, Analyst and SME Consultant, Victor Otieno joins CNBC Africa for more.
Tue, 10 Sep 2019 10:39:57 GMT
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AI Generated Summary
- Equity Bank's strategic acquisitions in response to financial sector challenges
- Systemic issues affecting Kenya's insurance industry resulting in profit decline
- Implications of scrapping tax incentives for manufacturers by the KRA
Kenya has been abuzz with business headlines in recent days, from Equity Bank's acquisition talks with Bank commercial Aldukong to a significant drop in insurance profits and potential plans to scrap tax incentives for manufacturers by the Kenyan Revenue Authority (KRA). Analyst and SME Consultant, Victor Otieno, joined CNBC Africa to provide insights into these developments. Equity Bank's move towards consolidation through mergers and acquisitions comes as a strategic response to the challenges faced by the Kenyan financial sector since the introduction of an interest rate cap in 2016. The cap had a direct impact on the profitability of banks, prompting them to explore alternative revenue streams. By expanding their customer base through acquisitions, banks like Equity aim to mitigate the effects of the interest rate cap and compete with emerging Fintech players in the market. Victor Otieno highlighted the potential benefits for shareholders in terms of dividend growth but expressed concerns about the accessibility of credit for SMEs and high-risk individuals due to the regulatory constraints in the sector. The insurance industry in Kenya witnessed a sharp decline of 61.5% in profits in 2018, reflecting systemic challenges that have plagued the sector for years. Factors such as price undercutting, increased operational costs, fraud, and decreased disposable income have contributed to the industry's struggles. Otieno emphasized the need for insurers to redesign their products using modern methodologies like human-centered design to resonate better with consumers. Transparency in product offerings and heightened awareness could help address the prevalent issue of fraud in the insurance sector. As the KRA considers eliminating tax incentives for manufacturers to boost revenue collection, concerns arise about its potential impact on foreign direct investment and the overall economy. Otieno suggested a more collaborative approach involving stakeholders in the manufacturing sector to review and optimize the incentive framework instead of abrupt changes. By conducting a comprehensive cost-benefit analysis, the KRA can strike a balance that benefits both the government and industry players. In light of the evolving business landscape in Kenya, transparency, innovation, and collaboration are key pillars for sustainable growth and prosperity.
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