Business highlights May 29 2017 – Interest rate capping law bleeding small banks dry

Business highlights May 29 2017 – Interest rate capping law bleeding small banks dry

Global tea prices set to increase as Kenya, India output declines

Global tea prices are expected to continue rising owing to the recent drought which lowered production in major tea exporting countries, including India and Kenya.

Hazardous floods that have recently hit Sri Lanka also pose a major problem as they could disrupt shipments from the country which is also a key exporter of the commodity.

Yields of the cash crop in Kenya dropped by over a third from a year ago in the first quarter after drought hit most parts of the country.

During the same period in India, the world’s biggest black tea producer, production declined by over 16%.

The maximum price of the highest grade of Kenyan tea rose to US$3.92 (Ksh405.33) per kg at auction last week, up 22.5% from a year ago.

 READ ALSO: Kenya to source new tea markets, stabilize prices

Interest rate capping law bleeding small banks

As Kenyan banks continue to bear the brunt of the loan rate capping law that’s stifling the industry, small banks seem to be the worst hit.

In the six months, banks have suffered significant losses thanks to the legislation, the recent drought notwithstanding.

Small banks are worst affected as they are more reliant on higher-risk/higher-return loans and sectors, and some are finding that their niche business models are no longer viable.

The law which was passed in September 2016 caps loan rates at 4% above the central bank’s benchmark rate (CBR – currently 10%), and placed a floor of 70% of the CBR on deposit rates, leading to falling interest income from loans and rising funding costs.

READ ALSO: Interest rate capping law may be ineffective, detrimental, IMF warns

Lenovo anchors hope on turn-around strategy

Struggling smartphone manufacturer, Lenovo Group Ltd, now has its eyes on ‘mature markets’ as it focuses on a strategy to revive their ailing productivity.

Lenovo has fallen from its spot as the world’s third largest mobile phone manufacturer since its acquisition of Motorolla from Google, three years ago.

The smartphone maker’s woes started when the integration of Motorolla assets failed. Stiff competition from home base manufacturers such as Oppo and Xiaomi further increased their woes.

Marketing of new products also increased the losses.

Lenovo has now introduced a strategy which will focus on revamping their mobile branding and creating pricier models for the mature market.

READ ALSO: Tecno targeting youthful ‘selfie’ lovers with the new Camon CX smartphone





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