The post OPINION: What will the bank of the future in East Africa look like? appeared first on Biz Post Daily.
]]>The banking sector globally has undergone significant changes in the last decade. The global economic crisis resulted in major regulatory reforms affecting the industry, but other trends including step changes in technological advancement, new sources of competition and changing customer needs have had a profound impact in shaping the sector.
COVID-19 is likely to have an even more substantial impact on the global economy overall, with transformative reverberations in the financial services sector yet to come.
In East Africa, these and other trends are accelerating. Their trajectory helps to indicate what we can expect from the financial services industry over the next 10 years.
Big tech and digital banking
For many industries, COVID-19 has proven to be a catalyst accelerating the shift from ‘brick and mortar’ to technology-enabled, remote service delivery. The focus now is on productivity, which requires ongoing investment in technology and the workforce.
Organizations that had made investments in their technology infrastructure and developed digital channels and capabilities prior to the pandemic have fared much better and are now more competitive and agile as a result.
Leading institutions will continue to digitize their customer-interaction models, shift to cloud-based, modern architecture and strengthen digital sales, operations and service models. Focusing on these priorities will put even more pressure on any remaining legacy infrastructure, support functions and branch infrastructure.
In East Africa, digitization and innovation were already widely embraced by financial services organizations The pandemic accelerated this shift, but many customers already expected cashless transactions and remote access to services.
Bigtech and Fintech have emerged either as standalone players or providing complementary services, such as remittance, payments, and digital lending.
In many cases, banks and technology companies have partnered to create mutually beneficial technology solutions that often supplement the customer experience. Going forward, I foresee even greater collaboration between banks and third parties to drive innovation – and more scrutiny by the regulator.
Consequently, East Africa’s financial services industry is in no danger of being taken over by technology companies. Banks have earned their reputations as trusted advisors, and banking remains a critical facilitator of local and global economies and commerce.
Shifting customer trends
In some ways, the expectations that customers had a decade ago are very different from today. The current client-driven shift to digital platforms and service delivery models is likely to inspire successive waves of disruption for financial services.
And yet trust remains the underlying factor; with a wider and evolving set of products and services to choose from, banking clients will place an even higher premium on trust in choosing a service provider. They also value speed and affordability.
With a youthful, rapidly urbanizing and increasingly educated population, Africa’s banking customers have certain expectations around efficiency and accessibility. They expect to open accounts, apply for loans, transact, and access different services on their smartphones.
East Africa, and Kenya in particular, has made headline progress over many years in implementing mobile money. That trend has accelerated elsewhere in Africa and globally during the pandemic.
Electronic payment platforms linked to digital currencies have only just begun to gain acceptance at an institutional level in some countries, but it is possible that we are on the cusp of major global disruption.
A bank that does not respond to these and other customer-driven and customer-centric trends will soon become irrelevant.
Increased regulation
There are very good reasons for the banking industry’s regulatory framework, which governs services as well as operations. Banks of the future can anticipate an acceleration in the implementation of current and planned regulatory measures.
We can anticipate changes in the regulatory regime based on international considerations like sanctions, anti-money laundering and know-your-customer imperatives as well as LIBOR replacement/reference rate reform, amongst others.
The implementation of the latest Basel conventions in measuring capital and risk, tighter liquidity requirements and stress testing may challenge traditional business models and institutions.
None of these developments is unheard-of; what is uncertain is the timing and the method and sequence of implementation.
Digital disruption poses an interesting challenge for regulators in East Africa, who must strike a balance between protecting financial system stability and the security of consumers, with supporting an innovative ecosystem. The extent to which that balance is maintained – or not – can create another layer of uncertainty.
Mergers and acquisition
It is not a new observation that the banking sector in East Africa is overcrowded with too many players, particularly small players that struggle with margins, liquidity, meeting capital requirements or attracting deposits at a reasonable cost.
As the economies in the East Africa region become more integrated, we are likely to see the emergence and growth of more regional banks.
We have witnessed several mergers and acquisitions in recent years, and that trend is likely to continue. Consolidation will be driven by business imperatives, not just regulatory action.
Scale remains a key consideration for banks; the larger ones will look to scale through organic growth or acquisitions. Some small banks may struggle to make the investments in innovation, technology, and compliance processes that are required to remain competitive.
Blockchain technology, cryptocurrency, and digital currency
Blockchain is a system of recording transactions in distributed ledgers and is the technology that supports cryptocurrencies. Regulators are wary of the use of cryptocurrency as it is unregulated and can be used for money laundering and terrorism financing.
In Kenya, the CBK has cautioned the public against using cryptocurrency and reiterated that it is not legal tender.
Some regulators are piloting official, central bank digital currencies (CBDC). CBDC is legal tender in electronic form backed by the issuing authority. Unlike cryptocurrencies, CBDC is not based on blockchain technology but is issued by a specific authority.
Nigeria became the first country in Africa to launch CBDC officially. The Central Bank of Kenya has recently issued a discussion paper on CBDC, seeking views on potential use of CBDC I Kenya. It is possible that in years to come central bank digital currencies will be used alongside existing currencies in East Africa.
Conclusion
Some commentators have questioned the future of banks, in the face of emerging competition from non-bank players and evolving customer needs. I am convinced that banks have a future, and they are here to stay. Banks do have some significant challenges, however, to remain relevant.
First and foremost, they need to respond to consumer expectations and deliver technologies, innovations and experiences proactively.
The bank of the future in East Africa will be larger, more integrated and technology-enabled and make full use of Artificial Intelligence and Big Data to provide a wider range of more personalized services delivered through digital-first channels.
As the industry changes and adapts, trust will remain the foundation of financial services. The banks of the future will continuously earn that trust amongst their customers, regulators and other stakeholders by delivering value and sustained outcomes.
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]]>The post OPINION: The future of Robotic Process Automation in the banking sector appeared first on Biz Post Daily.
]]>In the recent past, we have witnessed a surge in digital transformation across multiple sectors. Top global industry players have been constantly moulding themselves to fit into the rapidly changing technological advancements. The financial and banking sector has not been left behind either.
There has been a continuous need across these sectors to change the dynamics and modify working styles by embracing new technologies.
As such, the banking sector is under a lot of pressure. This is driven by the need to enhance productivity and increase operational efficiency in order to offer reliable and more secure services to customers. Robotic Process Automation (RPA) plays a crucial role in making this a reality for banks.
RPA offers software automation techniques that allow streamlining mundane and repetitive operations, reducing organizational costs and eliminating human error.
It combines robotic automation and artificial intelligence to automate human activities which may include data entry and simple customer service communications. It is estimated that over the next few years, more than one-fourth of banking procedures will pass through automation.
We have witnessed, as a result of the current pandemic, virtual banking services taking a pivotal position in the banking space. A survey by the Kenya Bankers Association released in February 2022 indicated that “six out of every 10 bank customers preferred Mobile Banking, with another two out of 10 recording their preference for Internet/Online Banking.”
Most banks ended up scaling down a number of their branches as well as ATM machines. A big question would be, going forward, how then are financial institutions going to manage working virtually without coming to the office? The answer is simple. Robotic Process Automation.
The future of banking is definitely filled with a lot of efficiencies as a result of automation of multiple processes. This is likely to directly affect customer queries, compliance, loan processing and report automation.
Banks handle a large number of customer queries that at times may overwhelm call centers. As such, customers may experience longer waiting times that would quickly translate to customer dissatisfaction.
RPA can assist with low priority tasks, allowing the customer service team to handle high priority tasks that call for higher intelligence. Moreover, robots are available 24/7 to handle customer issues, which significantly improves customer satisfaction.
Banks also deal with a wide array of regulations issued by central banks, governments and third parties. It becomes quite difficult for staff to comply with every single regulation.
With RPA working 24/7, it can quickly scan through transactions to identify compliance gaps in diverse areas including know your customer (KYC), anti-money laundering (AML) and fraud detection.
What is even more, the predictive capability of RPA can assist in picking out trends that would materialize to fraud or non-compliance even before they occur.
With regards to lending, RPA provides maximum transparency and visibility of every task across the process. The end-to-end electronic lending process means that financial companies can collect and manage data at every stage of the journey.
This allows for cross-linking with central document management databases and checking a process status within minutes. This can cut down the usually tedious loan processing timelines to only 10-15 minutes.
Like all public companies, banks also have to prepare regular reports to keep all stakeholders in the know of the business performance.
Considering the significance of a report, there is no room for banks or financial institutions to make even minor mistakes. RPA can eliminate the risk of human error by filling all the fields of the report automatically. It enables banks to speed up monthly reporting and deliver more accurate information to their stakeholders.
To successfully implement RPA banks and financial institutions need to identify the correct procedure for automation, evaluate how different applications and business processes overlap, perform automation to the processes via robot and finally monitor and govern the robots for the creation of excellence.
Banks that implement RPA can elevate their customer experience while improving quality and cutting costs. Implementing RPA in banking requires almost no new infrastructure.
Banks can leverage existing IT infrastructure to begin reaping the benefits. One unique feature of RPA is that it can take advantage of the native user interfaces of existing legacy systems to perform its automated tasks, which makes it a “minimally invasive” solution that builds nicely upon existing infrastructure.
Implementing RPA within various operations and departments makes banks execute processes faster. Research indicates banks can save up to 75% on certain operational processes while also improving productivity and quality.
While some RPA projects lead to reduced headcount, many leading banks see an opportunity to use RPA to help their existing employees become more effective.
The digitization of data allows banks to reduce paperwork. RPA can quickly scan through relevant information and glean strategic analytical data.
There are various RPA tools that provide drag-and-drop technology to automate processes with little to no development. Likewise, bots continue working 24/7 to take care of data entry, payroll, and other mundane tasks, allowing humans to focus on more strategic or creative work.
RPAs can also augment human workforce. As the concept of a “digital workforce” continues to emerge due to the advancement of technologies, robots can take care of data entry, payroll, and other data processing tasks, while humans analyze reports for gathering useful insights.
In conclusion, Robotic Process Automation offers a great opportunity for banks to take advantage of digital transformation in a bid to grow their business.
Kevin Birgen is an IT Risk Assurance Manager at PwC Kenya
This article first appeared on BUSINESS DAILY, Pg 9 on 6th April 2022.
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]]>The post OPINION: Firms should go beyond just complying with report rules appeared first on Biz Post Daily.
]]>Presently, effective corporate reporting has become challenging in an environment with declining trust in institutions.
While the range of reporting frameworks that organisations have to comply with has grown significantly, there is the risk that organisations get bogged down with these regulatory requirements and focus less on the ultimate goal of corporate reporting itself.
We have witnessed how a compliance-only mindset towards reporting has led to a culture of short-termism among organisations that have failed to take a big picture approach towards reporting that communicates the role of organisations in society and the drivers of long-term success.
Organisations have become overly focused on the short-term pecuniary benefits attached to delivering quarterly results, boosting share price and attracting financial capital in a highly competitive and globalised market.
Business leaders have begun to recognise that, while delivering good financial results in the short term is valuable, it is more important to focus on the organisation’s ability to create long term value sustainably for all stakeholders.
As a result, organisations are redefining their role in society by formulating comprehensive strategies that address the needs of a host of stakeholders. When properly implemented, these strategies change the entire mindset of how organisations are led at every level.
Therefore, a reporting mindset that looks beyond compliance and on building long-term trust with stakeholders in society is not simply didactic but an outcome of a changed mindset occurring internally in the organisation.
This paradigm shift to reporting is required for organisations to succeed and stand out in the marketplace today.
In an age where rebuilding trust in society is critical, it becomes imperative for organisations to see reporting as a means to achieve this goal and position themselves for a more sustainable future.
A critical step towards implementing beyond compliance mindset is to consistently apply regulatory reporting requirements in a tailored and bespoke manner to organisations. It shifts the focus from the letter to the spirit of regulation.
For example, many organisations do not provide tailored accounting policies on their specific transaction to enable users of their financial statements to understand the nature of their business.
Rather than merely regurgitating boilerplate accounting standards, organisations can customise their reporting to reflect their circumstances and context. Another step towards beyond compliance is providing linkages on the financial impact of non-financial matters on an organisation.
Organisations are also required to exercise judgement when defining their boundary of responsibility. This exercise articulates and brings into scope the non-financial issues (NFIs) impacting the organisation such as ESG.
In addition, these NFIs should be reported on even when there are no regulatory mandates. There is no fine line for determining this boundary, and each organisation must begin to operate from this perspective to imbibe a culture beyond compliance.
Finally, organisations should embrace best practice reporting principles and frameworks even in circumstances where they are not mandatory. This is one key attribute of organisations that approach reporting beyond compliance.
It enables organisations to benchmark themselves with the best-in-class reporting, keeping them agile. An important trait required to succeed in the highly competitive and disruptive environment in which organisations operate today.
Organisations that embrace the beyond compliance mindset will better navigate disruptions and challenges due to changes in the regulatory environment. Also, such organisations can lead even in an environment where regulations are absent.
After all, they embrace best practices irrespective of the local requirements. One example has been the adoption of the corporate governance reporting principles of King IV, which many organisations have started to embrace even when they are not mandated locally.
Therefore, organisations should approach corporate reporting beyond compliance to achieve sustainable growth in the long term.
This article was first published by BUSINESS DAILY on 21/02/2022.
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]]>The post OPINION: Black History Month is an opportunity to celebrate Kenyans in the Diaspora appeared first on Biz Post Daily.
]]>February marks the annual observance of Black History Month in the US and Canada. Black History Month began in the US in the 1970s[1] as a way of remembering important people and events in the history of the African diaspora.
Although its observance was initially limited to academic institutions in the US, it has evolved through the years into a global movement amid growing recognition of the immense contributions that Africans around the world have made in different fields. Today, Black History Month is officially recognized by the governments of the Republic of Ireland and the UK, who both commemorate it annually in October. It is also observed in different forms in many other countries across the globe and has garnered significant attention from top global businesses keen on demonstrating their commitment to racial equity and diversity.
It is impossible to talk about the contributions of Africans in the diaspora without mentioning the pivotal role that Kenyans and Africans with Kenyan roots in the diaspora have played. There are endless examples of Kenyans or people of Kenyan descent who have left their mark in the diaspora. Some familiar names include Barack Obama Sr., the father of the first black US president, and Lupita Nyong’o, the multiple award-winning US-based actress.
Beyond these well-known examples, we also have many unsung heroes who continue to fly the Kenyan flag high around the world. These are the millions of everyday Kenyans living and working in the diaspora. Though most of their work goes unnoticed in the public eye, the impact they have abroad and back home cannot be gainsaid.
Kenyan migrant workers represent an important part of the labor market abroad. At home, the billions of shillings they send as remittances each year are a key driver of economic and social progress.
The Ministry of Foreign Affairs estimates that there are more than 3 million Kenyans in the diaspora[2]. Despite their number being less than 10 percent of Kenya’s 50 million citizens, they sent home a record $3.718 billion (Sh421.6 billion) in 2021, according to Central Bank of Kenya data. In comparison, Kenya earned Sh146.5 billion from tourism[3] and Sh136 billion from tea last year. This makes Kenyans abroad the largest source of forex, bigger than tourism and tea combined, despite the latter two being the main exports. Of note, Kenya’s annual diaspora inflows have hit a record high each year since 2016[4].
The continued growth of remittance inflows into Kenya bodes well for the economy and the society. At WorldRemit, we’ve conducted multiple surveys over the past five years to understand the uses of remittances in Kenya. Our findings indicate that one of the main uses of remittances in the country is education, which has a well-documented long-term developmental impact. Another main use of remittance is medical bills and healthcare-related spending, which helps support many families’ economic and social welfare by reducing out of pocket medical expenses.
The diaspora community are indeed heroes that we need to celebrate this Black History Month. Many of them stay for months and even years without physically seeing their loved ones back home, yet the connection is never lost but only grows stronger. We saw this at the height of the pandemic when remittances grew despite the economic impact of lockdowns, defying predictions from institutions like the World Bank.
We must support Kenyans in the diaspora to continue benefiting from the social and economic impact they have back home. A good starting point is advocating for safer, more reliable, and more affordable digital channels of sending and receiving money that allow them to get the maximum value from their hard-earned money. We should also address the cultural, social and political barriers that make it difficult for them to reintegrate with friends and families when they relocate back home.
Although the world we live in today has gotten more globalized than ever, heritage and culture are still among the most defining values for many Africans living in the diaspora. This Black History Month let’s spare some time to check up on friends and family abroad. They may be thousands of miles away, but their hard work and sacrifice continue to make a difference in our lives and the progress of our country.
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]]>The post How Brands Can Navigate the NFTs Revolution – Chapter 2 appeared first on Biz Post Daily.
]]>Early last year, NFTs (non-fungible tokens) became, along with “metaverse”, one of the most popular and talked about terms in the technology and business worlds. Today, an entire industry is being built around them.
To truly understand NFTs as one of the pillars of The New Internet (a.k.a. the metaverse), it’s worth mentioning the technology behind them: the blockchain. Blockchain (another of today’s most prominent buzzwords due to its unparalleled “security”), is the basis of everything in the current metaverse, from crypto currencies (like Bitcoin or Ethereum), to digital wallets, and of course, NFTs. Unimaginable a few years back, blockchain technology is best described as a de-centralized ledger, which brings the peace of mind needed for everyone to embrace their digital possessions or assets.
That is why NFTs were such an exciting and unfamiliar concept. Because they’re backed by the blockchain, things that were previously un-ownable—like a JPEG, a song, or a digital work of art—can now be owned by an individual. It is akin having a digital certificate of authenticity. Or, to put it in terms of a more traditional art collection: anyone can buy a Picasso print, but only one person can own the original. That is what is meant by the term “non-fungible” – they can’t be exchanged like for like, and the original work can be verified.
In this chapter of our series on Brands in the Metaverse, we will unlock why these digital possessions are so important for the present and future of the metaverse, how they affect the very meaning of ownership, and how brands can tap into them.
Read Chapter 1 — How Brands Can Shape the Metaverse to Their Advantage
Chapter 2 — How Brands Can Navigate the NFTs Revolution
Understanding the Hype
As with many things in the digital era, NFTs started to get noticed by the mainstream because of a financial bubble. An artist created a digital art piece and sold it as an NFT for thousands of dollars. Followed by the sale of Beeple’s NFT for $69 million, and traditional auction houses Christie’s and Sotheby’s starting to venture into the space, people started to pay attention (and potentially look for a pay day of their own).
It’s important to note that not every NFT makes you a millionaire. A recent analyst determined only 1% of NFTs sell for more than $1,500, and 75% sell for $15 or less. Most of them don’t even sell at all.
So, instead of just blindly following the money, we should pay attention to the value of owning NFTs and the utility that comes with them.
NFT’s are Reshaping Ownership
NFTs add value to digital ecosystems. They can help users to enhance their digital personality in a game or digital platform, they can grant users access to an exclusive event, or they can be a part of a communal experience.
Enhancing your virtual identity
Granting access to exclusives
Becoming a part of a communal experience
Owning a NFT is just the first step. The utility and what you can do with it is the big question everyone wants to answer, and brands will have a say.
A new way for brands to redefine engagement
There are a few ways that brands can engage with NFT’s, with the caveat that this is an ever-evolving landscape.
Ultimately, NFTs are ways for brands to get next-level engagement, one that lasts and could create more than advocacy. So, in order make sure the token in question is well received, or desired, brands will need to go make sure they understand their current value in people’s lives, the “distinctive assets” that matter most, and their long-term engagement plan with consumers (as in, what else can people get out of it today and tomorrow).
Coming up in Chapter 3…
In the next chapter of our series on Brands in the Metaverse, we ask: How do you build a metaverse – sustainably? And what role should your brand play in building that greener future digitally and in real life? Opportunities abound in the metaverse, but as we explore a whole new world, let’s better understand the environmental impacts too – both the good and the bad.
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]]>The post Kemsa Says It’s Ready to Fulfil UHC Implementation Demands appeared first on Biz Post Daily.
]]>Following the success of the UHC pilot project in 2018, President Uhuru Kenyatta has this afternoon launched the national UHC Scale-Up, an essential delivery under the Government’s Big Four priority agenda.
While welcoming the scale-up, KEMSA Chairperson Mary Mwadime confirmed that the national pharmaceuticals supply Authority had actively participated in the UHC Pilot project and is now ready to facilitate the scale-up to all 47 counties.
Under President Uhuru Kenyatta’s visionary leadership to facilitate access to quality healthcare services to all citizens, KEMSA, among other players in the health sector, she assured are working in concert to improve health outcomes.
Within the national UHC Scale-up commitments, the Government has committed to ensuring 100% access to essential medicines for all Kenyans visiting public health centres. In the last financial year and towards the achievement of UHC, KEMSA procured Health Products and Technologies (HPTs) worth KShs. 35.84 billion, with about 11,500 health facilities managing to draw down 97% of these commodities.
The Authority, Ms Mwadime said, has put in place strategic measures to significantly contribute to the attainment of Universal Health Coverage (UHC) as a strategic delivery partner. “At the UHC pilot stage, we learnt some invaluable lessons that we will apply to facilitate the provision of equitable, affordable and quality health services. KEMSA is a crucial pillar on this journey, and we celebrate the milestone,” she said from Port Reitz Hospital in Mombasa at the launch of the UHC National scale-up programme.
As part of KEMSA’s commitment to supporting UHC delivery, the Authority, Ms Mwadime said, maintains a robust infrastructure and supply chain capacity to guarantee access and delivery of quality HPTs to about 11,500 facilities in the national public health care system.
On his part, KEMSA Acting CEO Mr John Kabuchi confirmed that the Authority had undertaken specific measures to support the national UHC delivery. The measures, he said, include KEMSA policy alignment efforts with the draft UHC Policy 2020-2030 earlier developed to guide the realisation of the UHC. The Authority, he disclosed, is collaborating with players in the public health system, including the Ministry of Health and the National Health Insurance Fund (NHIF) and County Governments to actively ensure supply chain excellence to the remotest parts of the country for essential medicines, among other HPTs.
“KEMSA’s role in the success of UHC is the provision of quality, accessible and affordable Health Products and Technologies sourced from local and international suppliers,” Mr Kabuchi said. He added that “the ongoing efforts to scale up the rollout of UHC are laudable and KEMSA will be at hand to play its facilitative role particularly the competitive sourcing, quality assurance, warehousing and the last mile delivery of essential medicines countrywide.”
Ms Mwadime reiterated that “At KEMSA, we have re-engineered many of our financial management and procurement processes and adopted information technology systems. This is to ensure that we achieve excellence by providing critical assurance of ethical conduct to all our stakeholders.”
All KEMSA business processes are fully automated through the Authority’s Enterprise Resource Planning (ERP), Logistics Management Information System (LMIS) and the KEMSA e-mobile service that facilitate on-time stocks fulfilment to public health facilities countrywide.
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]]>The post OPINION: ESG as a tool for strategic corporate communication appeared first on Biz Post Daily.
]]>Strategic corporate communication is described as an expressive form of communication that seeks to establish, represent, and express a company’s identity.
Through strategic corporate communication, stakeholders are informed and aware of a company’s reputation promise. Therefore, strategic corporate communication ensures that organisations present and express themselves in a manner consistent with their reputation promise.
It ensures that organisations are trustworthy and earn the trust of stakeholders. Strategic corporate communication plays a significant role in managing a company’s corporate reputation and identity in a sustainability context.
It ensures that companies communicate in alignment with their reputation promise to earn the trust and support of stakeholders in the long term. It is a communication approach that is not short-term driven but focused on the long-term existence of an entity.
A company’s corporate identity rests on how aligned the company’s promise, behaviour and image are, as noted by Dr Adri Van der Merwe of the University of Pretoria. These three elements of corporate identity would play an important role in a company’s ESG strategy formulation and reporting.
ESG are the set of environmental, social and governance standards used by stakeholders in evaluating a company’s operation to assess its ability to create value sustainably.
It encompasses the risks and opportunities posed to businesses by climate change, resource scarcity, diversity and inclusion, data security, tax transparency, labour practices, social frameworks and more.
In recent years, it has become a hot topic, with investors scrutinizing the ESG strategies of companies.
The PwC 2021 Annual Corporate Directors Survey points to the momentum ESG is gaining in the boardroom, with half of all board meetings having ESG as an agenda item.
The UN climate change conference, COP 26 held last year in Glasgow and the race to NetZero will also require companies to consider the impact of global and national targets set to reduce emissions.
These climate goals will require companies to adopt and invest in new business models and technology to embrace the changing landscape. It also requires businesses to balance the need to reward shareholders in the short term while ensuring that adequate investments are made today for the future.
Having set an ESG strategy with metrics to monitor progress on strategic pillars, companies need to tell an authentic and coherent story. ESG reporting should be viewed as a strategic corporate communication tool that expresses the company’s identity and builds trust with stakeholders.
Investors are eager to understand the long-term impact of their investments and a well-communicated ESG strategy will help achieve this goal.
Having a good understanding of the various ESG standards is an important step for reporting. There are various ESG standards, such as the SASB (Sustainability Accounting Standards Board) and the TCFD (Task Force on Climate-Related Financial Disclosures).
Once understood, companies can leverage the various ESG standards to provide a compelling story that enhances their reputation. The metrics and KPIs reported on also have to be carefully selected to ensure they are aligned to the delivery of long-term value creation by the company so stakeholders can trust them.
The role of data and the use of technology cannot be over-emphasized when it comes to ESG reporting. Data enables companies to gain insights into their business, markets, products, customer engagement and more.
These insights result in a more efficient allocation of capital, influences the sort of information provided to stakeholders and the measurement of KPIs. In addition, employing technology improves efficiency and provides flexibility with the presentation of data.
Through ESG reporting, companies can report on their promise, behaviour and image to enhance their reputation with stakeholders.
This article was first published by BUSINESS DAILY on 07/02/2022.
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]]>The post OPINION: Why Everyone Wants A Piece of DRC appeared first on Biz Post Daily.
]]>When businesses are looking to expand internationally, several factors are put into consideration before deciding to invest. However, the decision-making process is usually lengthy because more often than not SMEs and entrepreneurs are cautious and prefer to do their due diligence before making the decision.
Recently, economists and political analysts have described the current DRC government as one that is keen to establish and implement infrastructure and policies that support the modernization and growth of the local economy. The DRC government has also made a formal application to join the EAC and this was approved at the 18th Extra Ordinary Heads of State Summit making the nation the 7th member of the trade bloc.
The application to join the East African Community followed the signing of bilateral agreements with other member states of EAC including Kenya, Uganda and Rwanda aimed at improving infrastructure, transport, mining and security as well as promoting trade and protecting investments.
However, what perceptions or understanding of the market should local investors looking to venture into the DRC have? From an external perspective, many of us know DRC for its culture particularly Lingala music which has gained popularity across the globe. We also know the country for its rich minerals and mining activities. However, DRC can be described as a land of opportunities with the potential to be a key driver of Africa’s economic influence.
The country also hosts the continent’s 2nd largest river, River Congo popularly known as Flueve Congo in local French dialect. River Congo feeds many households as it is home to many fish species that are fished for local subsistence use and as an economic activity. Beyond feeding many, the river has the potential to position DRC as the future of the energy value chain through the generation of hydroelectric power which is key in providing energy solutions to many homes, businesses and industries. River Congo also plays a great role as a key inland waterway with several inland ports anchoring trade and commerce from the Atlantic Ocean.
Other opportunities for investments also lie in food and agriculture, manufacturing, cross border trade, real estate sector, tourism and construction among many others. The opportunities that DRC offers can only be limited by our aspirations and ambitions as well as socio-economic factors that can be solved through partnerships with the government and other local entrepreneurs and SMEs.
The Governments of Kenya and DRC in collaboration with Equity Group organized the Kenya-DRC Trade Mission which saw over 300 local entrepreneurs and businesses participate and travel to the DRC for a 15-day trade mission. The Mission’s intention was to help these businesses identify business opportunities and establish market linkages and partnerships with the aim of promoting regional investment and expansion.
This is a welcome move because it has provided a platform and an avenue for local businesses to enter the DRC and learn more about how the market operates and what opportunities they can seize. The Trade Mission brought together over 7,000 businesses people from both Kenya and DRC creating a huge network for the entrepreneurs who were able to match-make and pursue their business objectives.
For instance, through the Trade Mission, Optiven Real Estate a local Kenyan SME signed a partnership deal with Groupe Resolution, from DRC and together, they will offer affordable housing and land value-addition. The partnership is to be executed in two phases and the value of the investment is USD 15 million. This new partnership is an indication of how Trade Missions such as these promote cross-border trade between investors and this is key in implementing the African Continental Free Trade Area aspiration of growing intra Africa cross boder trade from 15 percent to the 60 percent intra EU and intra USMCA trade.
As a business enthusiast, I would urge Kenyan entreprenuers and MSMEs to take advantage of organized Trade Missions to experience markets they have interests in and to assess for themselves the opportunities and business niches they can explore and actualize.
The over 350 delegates from Kenya experienced DRC for 15-days and got front row experiences on the anticipated challenges, the quick wins they can reap and what they need to kick-start and sustain their operations in the Central African nation.
The DRC they now know has turned out to be quite different from what they thought they knew and they now have a chance to contribute to the elevation of DRC’s economy with an expected ripple effect on Kenya’s export value and quantities, money transfer transaction volumes and quantity and human resource transfer. An indication that a win for local entrepreneurs, investors and SMEs is a win for both the Kenyan and DRC economies in the end.
This article first appeared on THE EAST AFRICAN, on 22nd January 2022.
The Author is the President of the DRC Kenya Chamber of Commerce an organization that provides a platform and bridges the gap for investors interested in exploring new opportunities in the DRC.
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]]>The post OPINION: Embedding ESG practices in organisational compliance frameworks appeared first on Biz Post Daily.
]]>Needless to say, the propelled importance of ESG is gaining significant momentum. Across the globe, legal, commercial, operational, and reputational risks are increasing for entities lacking a robust and integrated ESG focus. This has been brought about by actions taken by governments, courts, and regulators in responding to community calls and international commitments.
This places strong pressure on organisations to build Consider a coal-powered electricity generation project with the basic ingredients of a successful project – prime location, financial backing, technical capabilities, and government approvals. It is going to be the first coal-powered generation plant in Kenya. It relies on the provision of cheap reliable power as its key selling point.
In comes, the Environmental, Social and Governance (ESG) metric, and the proverbial walls come tumbling down. Following a landmark decision, the courts halt construction on ESG grounds. The court in its ruling nullifies the environmental impact and social assessment licence that had been issued by the regulator.
It is found that climate change and adverse environmental and social effects of the project had not been exhaustively considered. In addition, public participation had not been effectively conducted. After the ruling, the project financier pulls out and the government cancels the project.
What lesson can organisations take from the above case?
ESG principles which were previously viewed as non-technical risks are now essential components that must be adequately and ethically considered. The responsibility goes beyond procuring or issuing permits and approvals. It demands high levels of scrutiny and embedding of ESG best practices into organisations’ strategies and cultures.
On the legal front, we are seeing the emergence of new laws and standards, an increased focus on enforcement of existing ESG regulations and a shift in stakeholder expectations. Growing commercial pressures derived from sustainable and impact investment requirements including ESG governance structures, policies, disclosures, risk assessments and reporting as a condition to financing abound for organisations.
ESG now transcends traditional compliance. Organisations are therefore looking to international guidelines, in addition to local laws, when configuring their ESG management systems.
Furthermore, as financiers world-over channel their capital to economic activities and projects that deliver sustainable outcomes, organisations are expected to demonstrate compliance with not just local sectoral policies but other best-practice standards such as the International Finance Corporation (IFC) Performance Standards, the World Bank Environmental Health and Safety Guidelines and the Equator Principles.
Closer to home, as part of efforts to address climate-related financial risks in the Kenya financial sector, the Central Bank of Kenya (CBK) issued the ‘Guidance on Climate-Related Risk Management’ in October 2021. This Guidance is based on the Paris Agreement of the United Nations Framework Convention on Climate Change, under which countries are committed to submit nationally determined contributions and communicate actions they will take to reduce their greenhouse gas emissions.
Consequently, the Guidance aims to require banks to embed the consideration of financial risks from climate change in their governance arrangements and make disclosures of climate-related information. We expect climate-resilient projects will therefore be top targets for funding by Kenyan banks.
Separately, responsible corporates are also leveraging good ESG practices to demonstrate social legitimacy and generational equity. ESG is being utilised as a value creation proposition that can improve financial performance by tapping the sustainability-conscious market share.
The above observations suggest that organisations must shift their focus from profit maximisation to a more holistic assessment of their performance. This partly involves the development of a clear ESG strategy supported by functional compliance and governance frameworks.
ESG compliance strategy is three-fold:
Environmental compliance is the first pillar. It includes conducting ethical and meaningful environment and social impact assessments, climate change disclosures and resources efficiency commitments such as good waste management and energy consumption efficiency and monitoring.
Social impact is the next pillar. It covers active community engagement, fair labour and supplier management standards, physical and mental health protection, equality, and anti-discrimination.
Governance is the last pillar. It covers ethical and strategic leadership, regulatory compliance, policies and procedures, stakeholder communication, accountability, transparency, and disclosure.
Organisations can create leading ESG compliance frameworks by first coming up with broad ESG commitments, which set the overall cultural tone. The vision should be embedded into bespoke ESG policies, governance structures and contractual language to promote purpose-driven operations when dealing with the market, employees, advisors, contractors, and suppliers.
When it comes to measuring framework effectiveness, timely ESG assessments, legal compliance and governance audits conducted by independent and qualified professionals should be used as an assessment tool, identifying gaps and giving recommendations for improvement.
Voluntary ESG integrated reporting should be adopted to aid transparency in the absence of mandatory requirements. This helps build trust with stakeholders and regulators. Disclosures should be based on qualitative and quantitative data with a focus on broad ESG contributors, for instance, fiscal contributions and community impact.
This article was first published by The Standard, Pg 20, 1st Feb. 2022.
Job Kabochi is a Partner & Head of Indirect Tax at PwC Africa. Caroline Kipkulei is Manager Legal & Regulatory Compliance Advisory, PwC Kenya.
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]]>The post More Can be Done to Open Kenya’s Northern Frontier to the World appeared first on Biz Post Daily.
]]>For over 50 years, the broader Northern Kenya has remained marginalized with low economic activity, high illiteracy levels and lack of key catalysts of growth like healthcare and infrastructure. With frequent harsh weather conditions, the region for a long time relied on stop-gap measures like distribution of relief food for survival.
But a lot has changed and for the better over the last decade. The village self-sufficiency and isolation, which characterise these local economies, are disappearing.
Today, the Northern corridor is abuzz with various activities. Hitherto sleepy towns of Lodwar, Marsabit, Moyale, Wajir, Mandera and Kakuma are humming with business activities, road construction is ongoing, real-estate is heating up and a thriving culinary scene is evident.
The region is bustling and taking advantage of devolution to not only open the northern frontier but also to enable the locals to secure jobs and other economic opportunities.
In under a decade, devolution has offered a real opportunity for the region that has been crippled with hunger and cattle rustling to witness development. And true to the expectations, the economic outlook of the region has turned brighter.
But more can still be done to open Northern Kenya to the world. I believe, by strengthening their economies through a commitment to financial inclusion we can provide a better quality of life, and build on local assets that though plenty, remains largely under-tapped.
Through a combination of public-private partnership and smart growth strategies, we can unlock the potential of these rural communities to enable them to achieve their growth and development goals whilst maintaining the distinctive rural character that makes them unique.
If we are going to transform this region and other rural economies from relying on the vagaries of nature and commodity markets for survival; to a modern economy that has industrialization as its hallmark, the financial sector must play a critical part to enable this transformation.
Ideally, we should not leave rural areas and other small towns out of the new global economy, placemaking, and community development aspirations. For us to attain inclusive growth, no individual, region, sex, colour or religion should be left behind.
In essence, we must bolster individual and community well-being through investments that embed equity into the development process. This does not just align with the UN Sustainable Development Goals on taking explicit actions to end extreme poverty, curb inequalities, confront discrimination, and fast track progress for the furthest behind; but also speaks to our national aspirations as envisioned in our Vision 2030 and the dreams we espouse for a better Kenya.
And it all begins with financial inclusion. People living in these far-flung areas need access to financial services for a range of productive – asset building and working capital— and protective— mitigating risk exposure— including health issues— purposes. And also, to purchase stock, agricultural inputs, to make and receive payments, and to manage peak season incomes to cover expenses in the low season.
Financial inclusion, therefore, is an indispensable driver of sustainable development for the rural economy with the potential to lift households and communities out of poverty. Banks being at the center of the economy, have the unique opportunity to ensure these places are financially included by establishing a physical network, while also leveraging tech-enabled services to offer solutions to unlock the considerable economic potential of rural areas, and benefit the communities by increasing household income and decent work.
In the face of the current pandemic, the fallout driven by the impact of the containment measures has led to a contraction in the economy; but this is an opportunity to rebuild better by furthering financial inclusion and closing any gaps. This can be done by addressing any structural impediment to socioeconomic empowerment across the country.
Based on our market experience these customers tend to prefer a physical bank branch and specialised offers, especially in the business segment. Within this context, the role played by the branches network is twofold: they allow the banking sector to specialised offers in economic sectors critical to large parts of the region, such as agriculture and small enterprises, whilst also maintaining a commitment to financial inclusion.
Having a strong presence in these communities enables financial institutions to better assess and customise solutions for local start-ups and small businesses; whilst expanding banking service levels for households.
This is the only way that we can enable the Northern frontier and other rural economies to participate in capital formation on a large scale to provide the broad masses of our people with a decent and dignified standard of living.
The Writer is the KCB Group PLC Chief Executive Officer and Managing Director
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