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Financial Lessons Learned From Covid-19 Pandemic



What started like normal flu eventually turned into a world pandemic, Covid19, which is still here with us surviving. From the pandemic effects, the financial situations for most people and companies have really been affected, where, some have uncertain futures, while others are being forced to replan on their initial lifestyles, normal operations, and working techniques.

However, the world is slowly regaining back its normalcy from these effects. Therefore, it’s the right time to review and learn some positive financial and investment lessons from the pandemic. This will put us in a good disaster preparedness position to overcome any future disasters with adverse effects like Covid-19.

Minimize Your Debt Load.

There’s a good chance you’re paying off a student loan. But you might also be paying down credit card debt, car loans, and a mortgage at the same time. With a good financial income or credit score, paying these loans has been manageable until the Covid-19 outbreak and post-pandemic effects.

Besides the loans, there is a daily expenditure that one cant do away with, maybe, only minimizing the amount.

A good lesson learned is to avoid getting yourself into that vulnerable position in the first place. Borrowing, whether for good reasons will still result in debts that will need to be serviced monthly. This will be a huge burden if the income has fluctuated and some jobs have been lost.

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Know Your Personal Cash Flow.

You’re probably aware of how much money goes into your bank account each month. But do you calculate how much you spend? 

Tracking your earnings and expenses will help you understand why your monthly cash flow is positive or negative. A personal cash flow that’s positive allows you to direct extra funds to pay down debt, boost savings, or increase investment contributions. This should be the spirit.

Always be prepared for the unexpected.

It is quite essential to save money in an emergency fund, to keep you prepared for unexpected certainties like job loss or long-term illness, both of which have been highly experienced during this pandemic period.

For instance, through a survey, APA Life Assurance found that this is a lesson many clients took to heart. In March 2021, 40 percent stated that they had an emergency fund in place. By September the same year, the figure had risen to 60per cent.

Diversify your investments

Do not put all your eggs in one basket, in case the basket falls down, all the eggs will break leading to a total loss. The same applies to investments and financial matters. The market drop in the wake of the COVID-19 pandemic has shown us the wisdom in diversifying our investments.

In recent months, some investments performed considerably worse than others. For example, travel-related companies such as airlines were struck harder than gold mining companies.

Some types of investments offer different characteristics such as income or dividends, and some types are by their nature less volatile than others, such as utilities (low) vs technology shares (high).

By putting a percentage of your funds into different types of investments, as you can through balanced mutual funds, for example, you minimize the chance that one economic event will harm all your investments equally. But if all you own are growth-oriented mutual funds or high-tech funds, depending on your situation, you may wish to expand your investments into different classes.

The retirement savings strategy

Generally, the retirement benefits savings plan should not be affected by fluctuations in the market. This is a lesson that people seem to have also learned over the pandemic period.

As of September 2021, the APA Life Assurance survey showed that a 61percent of clients stated that the pandemic had not changed their approach to their retirement savings schemes.

In reality, more clients added to their savings while mostly leaving their approach to retirement unchanged. Having investments to meet short-term goals means that investments to fund longer-term goals, such as retirement, can remain untouched and continue to grow.

Monitor your risk tolerance

The markets may have also played a role in raising your personal anxiety, so we should also talk about how you, the investor, may be reacting. Your level of worry has to do with how much risk you can manage, both in your investment plan and as a human with your money on the line.

Every investment carries some level of risk. While Guaranteed Income Certificates (GICs) carry less risk, they may not be enough to achieve the investment goal you want. On the other end of the scale, shares of junior resource companies can conceivably bring stunning returns but are hazardous as many fail to become profitable. Most investors should have a balance of investments to mitigate risk and align to their tolerances.

So, if you were comfortable with your investments during the recent market weakness, you may not need any changes to your investments. If you are still biting your fingernails, perhaps it’s time to settle on what investments make you feel comfortable through both good and bad times.

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Three Global Firms Signed By Nairobi Financial Hub On Its Launch




Three companies were signed by Nairobi’s international financial centre on the day of its launch. The three include Prudential plc, ARC Ride Kenya and AirCarbon Exchange (ACX).

The Nairobi International Financial Centre (NIFC) is a special economic zone for financial firms.

Prudential, one of the world’s biggest insurers and asset managers, became the first firm to formally join the NIFC.

Singapore-based global carbon exchange ACX came along with Prudential. It seeks to set up a carbon exchange in Kenya.

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NIFC has also admitted ARC Ride Kenya. It is a new start-up that is going to establish an electric vehicle assembly plant in Nairobi. The plant will produce two and three-wheeled electric bikes and scooters.

Also, the Financial Centre is determined to bolster the manufacturing sector in the country. It has signed an MoU with the Kenya Association of Manufacturers (KAM), to help increase financing and investment in the sector.

NIFC authority has hinted at being in discussion with other participants seeking to join it and will give official news soon.

“Last year Prudential Plc, one of the world’s biggest insurers and asset managers, made a commitment to relocating their Africa headquarters from London to Nairobi and join the Centre. Today we are proud to announce that Prudential becomes the first firm to formally join the Nairobi International Financial Centre,” Vincent Rague, Chairman NIFC Authority.

After many years of waiting, the hub will eye large foreign firms, boosting capital flows to Kenya and the region.

The authority has singled-out four sectors that it will prioritise for growth: financial technology, green finance, investment funds, and becoming a hub for regional multinationals.

The NIFC general regulations have been enacted, as the initial set of tax incentive proposals have been passed.

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Certification from the NIFC Authority must be applied by Firms considering conducting business through the NIFC.

A 15% corporate tax will benefit firms operating a carbon market exchange or emission trading system under the NIFC. The 15% advantage will happen for the first 10 years of operation.

Companies certified by the NIFC Authority and have invested a minimum of Sh5 billion will benefit from the certainty that, the Capital Gains Tax applicable at the time they make their investments will remain unchanged during the lifetime of the investments.

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Hackers Make Tactical Change, Now Targeting Small Businesses




Traditionally, cybercriminals have been targeting big companies with aim of demanding ransoms running into millions. Nonetheless, the trend no longer holds, as new studies have shown the shift in hackers’ interest from big companies to small and medium ones.

Studies have shown that hackers are shifting their focus to small online businesses which they believe are more vulnerable.

Experts have warned that these SMEs and payment portals, especially those relying on mobile payment solutions, are now facing high risks of cyber attacks coordinated by these hackers.

Speaking during the inaugural Africa Cybersecurity Congress held in Nairobi, Hadi Maeleb, Agora Group co-founder and CEO said the threats to online businesses were growing at a high rate.

Further, he stated that more than 90% of business owners are unaware that their enterprises are at risk, despite the high growth rate of the attacks.

“Cybercriminals are now targeting small businesses more as they have realized that these enterprises do believe they would be exposed due to their comparatively low turnovers until they lose their data and payments are compromised,” said Mr Maeleb.

With the adoption of e-commerce platforms, State agencies, financial institutions, healthcare, energy and utilities have persistently faced cyber-attacks in the recent past.

According to CAK- Communications Authority of Kenya’s first-quarter data (between January to March 2022), a total of 79.2 million cyber-attacks were reported. This has prompted the government to issue 28,848 advisories in an attempt to fight the rising attacks.

Invest in Cybersecurity

Mr Maeleb noted that business owners should invest in cybersecurity tools as there is no magical solution to cybercrime.

“This ‘democratization’ of cyberattacks is expected to push losses due to business interruption, financial theft, personal data breaches and even ransom payments over the Sh4 trillion mark by end of 2022,” he said.

At the peak of the pandemic, several states adopted tough lockdown measures such as social distancing, working from home, and online learning.

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Hackers shifting focus to small businesses.

This adoption of digital solutions such as e-commerce, remote working and banking went up as Kenyans turned to online platforms to curb the spread of the coronavirus.

“Unfortunately for them, the business of cybercrime has evolved to a point where attacks like ransomware are now sold as a service,” he added.

Even though these measures triggered the adoption of digital platforms, they also increased vulnerability such as ransom, data breaches, harassment, cyberbullying, and data breaches.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

Kenya’s ICT Policy which came into effect in 2006, is credited for creating an enabling environment for the growth and usage of technology.

To achieve Kenya’s Vision 2030 goal of a regional ICT hub, the tech sector was expected to contribute directly and indirectly to an additional 1.5% of Kenya’s GDP by 2017/2018.

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Why Buyers Are Now Running Away From Popular Used Toyota Cars




As it has been noted that Kenyans are now running away from the popular used Toyota car models, contrary to what has been a tradition in the country. The rise in their costs has seen even dealers cut down on imports of these vehicles due to decreased demand.

Traditionally, popular models such as Toyota Premio and RAV4 have been synonymous with middle-income earners over the years. However, this is no longer the trend.

Car dealers say more Kenyans are now going for vehicles such as Nissan Sylphy and Mazda, which cost less compared with popular Toyota models.

Toyota Vs Nisaan and Mazda models

According to Charles Munyori, the secretary-general of Kenya Auto Bazaar Association, Nissan Sylphy and Mazda’s CX5 and Axela, are quickly gaining popularity among Kenyans.

Mr Munyori said the price of a Toyota RAV4 has short up to Sh3 million currently from Sh2.8 million in February while a Premio is going for Sh2.2 million from Sh2 million four months ago.

On the contrary, Mazda Axela is now selling for Sh1.6 million with Nissan Sylphy (Blue Bird) going for at least Sh1.5 million.

Currently, consumers find these brands to be the best alternatives to their preferred models, as they are relatively cheaper and good.

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With the rising household costs, these car prices are making them affordable to most Kenyans as they struggle to balance the high cost of living.

“We are seeing a shift where Kenyans are now moving from the popular brands such as Toyota Premio and RAV4 to other models. This shift has been occasioned by the high cost that these cars are now fetching at the market,” said Mr Munyori.

“In fact, most of the car dealers are hardly bringing in Premio and RAV4 models because they are not moving and they will tie up money that they would need for importation of more vehicles,” he said.

Ex-Japanese vehicles

Ex-Japan vehicles dominate the Kenyan second-hand sector with a more than 80% market share.

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The buyers in the sector prefer these cars as their spare parts are easier to obtain locally compared to other brands. Additionally, buyers believe that the resale value of Toyota vehicles are higher than that of other brands like mazda or Nissan.

Reasons for risisng vehicle cost

The rising cost of vehicles in the country has been linked to the unavailability of dollars locally, a shortage of electronic chips in Japan, and a weakening shilling against the dollar.

The country is currently experiencing extreme dollar shortage, that one has to wait for at least three days to get $20,000 or $25,000 from the banks.

“We have to wait for like nine days in order to accumulate $80,000, and this has seen car dealers delay in making their orders. We are really feeling the impact of the dollar shortage in the market,” Mr Munyori said.

banks have imposed regulations on dollar purchase. This has forced traders to face difficulty in meeting their obligations.

Industrialists are forced to start seeking dollars in advance. The shortage puts a strain on supplier relations and the ability to negotiate favourable prices in gap markets.

On the other hand, Semiconductors are used in making electronic devices. Their shortage has forced the vehicle manufacturers to scale down the production. The quantity and quality cannot be maintained with decrease in one of the crucial raw material.

Finally, the shilling has persistently remained weak against the dollar. this has made it costly for importers shipping in goods.

The shilling has hit a record low trading at of Sh 117.06 against the dollar. This predicts a continued rise in imported goods, and signifies a further dollar shortage crisis.

The continuous depreciation in shilling stability is attributed to increased demand for dollars from importers. This highly arises on importaion of crude oil and merchandised goods.

It should be noted that most external debt is repaid in the dollar. Therefore, a weakened shilling increases prices of imported goods, and puts pressure on the country’s debt repayment.

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