What are Credit Reference Bureaux

Such rating agencies try to establish or rate the likelihood of a loan being paid in the time agreed in the contract. They also help assess how much the loan interest should be charged. This process by the credit reference bureaux is referred to as loan pricing.

Plans are at an advanced stage for the credit reference bureaux to rate or profile small business Enterprises. This is scheduled to start in May 2012, in Kenya to determine their credit worthiness for banking in kenya.

Need for Credit Reference Bureaux rating SMEs

SMEs employ about 80% of the workers and had an 18% contribution to the Gross domestic Product (GDP) in 2011. This statistics make the growth of SMEs key to the government’s agenda especially considering  Vision 2030 for Kenya.

The credit reference bureau that will be profiling SMEs in Kenya is known as Metropol Corporation. The small business enterprises will use the profiles to get credit financing for growth.

Benefits of Credit Reference Bureaux rating SMEs

• One of the major benefits of credit reference bureaux profiling, is that, the loans will be cheaper for the better rated Small and Medium Enterprises.
• The profiling will be standard for all the firms without favouritism.
• The rating will mean that attracting loans will be easier for those SMEs that are perceived to be less risky. One of the components of measuring risk is the ability of the SME to repay the loan advanced to it.
• By rating an SME, any financier or potential financier is able to reduce the time it takes in the loans application and approval processing. Credit reference bureaux already has the necessary and required information, which would be readily available to the financing firm.

The credit reference bureaux are being supported by departments in the Government which deal with SMEs. The central Bank of Kenya and the Kenya Bankers Association have strongly supported Metropol corporation too.

Some Criteria used by Credit Reference Bureaux to rate SMEs

• Business must have been in operation for 2 years at least.
• Companies must submit profiles of their credit history. The credit history profiles will assist the credit reference bureaux to rate an SME. Some of the things that are considered in credit history is how the bank account has been operated for the last few years. Bureaus will also see if there is any history for unpaid cheques.

The above concept is the same concept that is used to rate countries all over the world. Countries are rated by credit reference bureaux like Standards and Poors, which last year downgraded United States of America. United States dropped from AAA to AA+.  Last year the rating for Kenya improved from previous years. The rating of SMEs by Credit Reference Bureaux will greatly improve SMEs access to financial loans.

Barclays bank financial results

Most banks in Kenya, both local and international announce their financial results for the previous year between February and 31^st March.

Barclays bank of Kenya was the first bank to announce the financial results for 2011. The bank had a steep drop in net profit. The reported net profit was kes 8 billion after tax down from kes 10.5 billion in 2010. The 23.8% fall in net profit fell short of market expectations.

The bank has defied these results and will give a higher return or dividends to its shareholders. The final divided to be given out will be kes 1.5 per share which includes 0.06 per share as special dividend. This payout is 10% higher than last year’s payout of kes 1.35 per share

Barclays Bank results explained in detail

The reason given by Barclays Bank for this reduced profit is due to marginal total income growth. This kind of growth translates to a kes 1.49 per share performance. This compares adversely to the performance in 2010 of 1.95 per share. Barclays did not expect this result which is way below the forecasted outcome.

In 2010, Barclays Bank had made 3.5 billion from sales of its custody business. In 2011, these sales were not forth coming.

Inflation in Kenya rose from 5% to more than triple and ended the year at more than 15%. Interest rates also more than double between 2010 and 2011. The loan book for Barclays consequently grew to 99 billion. This growth in loan book was not reflected in the interest income which only grew to kes 13.6 billion. This is a modest growth taking into account the large loan book.

Barclays Bank mitigation strategy

• Though the non interest fell by about kes 300 million to 10 billion, the prudent cost management measures employed by Barclays Bank saw the ratio drop from 54% to 52% the previous year.
• A retrenchment program involving middle level managers helped to save the day by making huge cost savings to the tune of kes 1 billion
• The roll out of ATMs has helped Barclays Bank Kenya in its ongoing cost saving plan. Together with ATMs Barclays Bank Kenya has also rolled out internet and mobile banking.
• Barclays Bank Kenya managed to cut the costs on funds in high inflation market like Kenya was phenomenon.
• Barclays Bank Kenya has been leading to stable corporate and will continue to do so in the coming years to escape the high default rate risk, as inflation continuous to bit and is unpredictable.
• Nonperforming loans also dropped by over 1billion due to aggressive debt recovery strategies.

Barclays Bank  may have set the tune for the results to be released by other banks, and it may be an indication that banks in Kenya will not make supper profits as has been the case in previous years.

Meaning of liability shift

Liability shift is a way for card associations to reduce card fraud. The associations (Visa and MasterCard) insist on card companies issue cards that are chip cards. Chip cards are also referred to as smart cards. The information for the card account is held in the chip with a default for magnetic stripe.

With liability shift, associations like visa and MasterCard have insisted that card manufactures, card issuers and card acquirers get certified for EMV. All card participants must get on board and different regions all have different dates by which they have to have been certified. Banking in Kenya has also been affected by these developments in liability shift.

EMV certification is a very technical and expensive exercise. Most countries in Africa have missed the deadlines or will miss the deadline due to lack of capital resources to have EMV certification.

How liability shift works

Liability shift is a tool that is being used by the associations to ensure that the card industry is EMV certified which will reduce card fraud. The liability for fraud on a card is being shifted from the merchant to the issuer and acquirer. Where an issuer has give cards that are EMV or chip, these cards use Personal identification number (PIN) to verify card transactions.  Where a chip card has to default to magnetic stripe because the merchant POS or ATM is not EMV certified, the card transaction is verified using signature on a paper receipt.

Signature is less secure than PIN because the signature is not verified at the cardholders account level on the card management system. Pin verification means that the PIN keyed on the POS or ATM is verified by the card management system. Where the PIN is wrong, the transaction will not be authorised. Charge backs for EMV cards will be allowed for most reasons where the merchant is not ENV certified.

How liability shift affects you

As a individual cardholder, the liability shift does not affect you. If you have a corporate card, the liability shift migration does not affect you either. As a card issuer, if your cards are not Chip, you will have a problem of having merchants that accept your cards because merchants will not want to accept card transactions from non-EMV cards. As merchants and Acquirers, liability shift is very important because if the POS and ATMs are not EMV certified, charge backs on transactions become the responsibility of the Merchant or acquirer.

Issuers, acquirers and card processors must ensure that they comply with the associations to become EMV compliant within the given time frames. Failure to comply will mean losses as the liability shift for charge backs will act as income leakages leading to failed, bankrupt and closed card companies.

However this doesn’t mean they should simply just put up a quick banking website just to be present online. Banking websites must have appealing web designs with essential elements that capture and retain their users’ attention.

In this article I will discuss three important things web designers in Kenya should consider when developing a banking website.

1. Who Is the Banking Website Targeting as Their Customers?

It is important to understand who the target audience of the banking website is. Who they are, why they will be visiting the website and what they intend to do on the website. A majority of the consumers will visit the banking website with a specific objective.

While some will visit the banking website to find out information on a banking product others will visit to access online banking. Therefore you need to understand that every user will definitely want their area of interest to be given priority.

This can be achieved by grouping information on a banking website targeting a specific group separate from information targeting another group.

As seen in the example above taken from the Commercial Bank of Africa website, they have separated information in 3 sections: Personal Banking, Corporate Banking and Investment Banking to target the 3 types of customers who may visit their website.

2. Visual Appeal and Brand Consistency Of The Banking Website

The look and feel of a banking website is very important to the users. It needs to appeal to them and achieve a balanced look and feel of the bank’s corporate identity.

This can be achieved by having a consistent design layout, good contrast for easy readability and use of visual imagery used in other media e.g. magazines, Television, Billboard so as to give the site an instant and familiar appeal with customers.

As seen on the above example taken from NIC Bank website, the bank has worked hard to achieve visual and brand consistency by using their corporate color (blue) and using video that they have been using on their T.V commercials. This immediately gives visitors to their site an instant appeal of familiarity when they land on the site.

3. Online Banking Should Be Easy To Find and Feel Secure on a Banking Website

Some of the users visiting the banking website will do so just to access their online banking. Therefore it is important to make this as simple as possible for the users. This can be done by making the option visible and easy to find throughout the website.

As seen on the above example taken from Diamond Trust Bank, they have made it very easy for people interested in online banking by placing the Login to DTB Online Banking on the sidebar of every page making it visible and easy to find when a user is on any page.

A Banking website must also remind the online banking users of how secure the site is. This is very important especially for the less-regular web users. They should also ensure that new users find information about the service and how they can register.

As seen on the above example taken from Diamond Trust Bank, they have achieved this by having a Learn more button at the top so that new customers can find information about the online banking service. They also make a great effort of assuring and advising users of their security before login to their online bank account.

Of course there are many other factors to consider when designing a banking website but the three highlighted on this post should never be ignored by banks in Kenya to ensure they have a solid online presence.

Definition of Debt Management Programs

Debt management programs are unique strategies or plans that are designed by the debtor to help in debt management. The plans are developed and implemented by an organization or a company on behalf of the debtor. These debt management programs are prepared for the debtor because of their lack of knowledge or because they have great debt.

How to Select the Best Debt Management Programs

Debt management programs also known as debt management plans may be able to help you work out a payment schedule that satisfies both you and your creditors.

1. Confidentiality of debt management programs

One of the most important aspects of the best debt management programs is to have strong commitment to your confidentiality. There is need for privacy of the client who visits a debt management program because they do not want other people to realize their financial problems.

The information presented during a credit counseling session is very sensitive. You may give credit card numbers or your bank information; with the raise of identity theft there is a need for you to be able to fully trust your debt management program with your financial information.

2. Certification of the debt management program

You must make sure that the program you chose has national accreditation. The credit counselors you work with should be certified. This helps ensure that you work with someone who has extensive training and has taken and passed all necessary exams to broaden their knowledge. The counselor who handles your money should be a professional with experience in dealing with debt management plans.
3. Online Debt Management Program

The online debt management programs’ greatest advantage is that it saves time. They work like the other programs but are conducted by counselors you do not come face to face with; they lower your monthly payments with your creditors helping you manage your debt. Certification and confidentiality must also be maintained

4. Non Profit Work

One good feature that the best debt management programs possess is non profit work. The programs always have your best interests in mind. Their goal is to assist you with your current financial problems. Their charges are mainly to pay off for the equipment and resources

Types of Debt Management Programs

There are many types of debt management programs such as, unsecured and secured debt management programs. Some of the most common varieties of debt management programs available include debt settlement programs, debt counseling programs and debt consolidation programs.

• Debt Settlement Programs

Debt settlement programs also known as debt elimination programs, allow you to payoff your debt within a period of one or two years. The debt settlement companies will negotiate with the creditors for a reduced debt amount; this also reduces the interest rate charges.

•  Debt Counseling Programs

Debt counseling programs teach you all you need to know about managing debt. The counselor tells you exactly which debt management program is appropriate for your personal debt situation. There are many agencies that provide credit counseling for free.

•  Debt Consolidation Programs

Debt consolidation programs are the most widely used debt management programs.  In this program your creditors are contacted to reduce your interest rates. Then the company combines all your monthly payments into one affordable amount.

This helps you to manage payments as you can pay one low monthly payment instead of several high payments.

Best debt management programs have assisted many in clearing debt and managing their finances.

What is debt Management?

 Debt management is the art of balancing the amounts owed against the amounts repaid. Information on personal debt management is key to debt provision companies to access the borrower. Debt management companies use credit reference bureau companies.

The information shared among lending companies helps in monitoring customer credit score.  The debt rate in the world has reached unmanageable proportions and different ways of managing debt have been devised.

Different Ways of Managing Debt

Acquiring a loan is easy but paying it back can be hectic for -many individuals. People use different ways to manage debts differently.

Prepare a Budget to manage debt

Preparation of a budget is important. When paying off your debt it is advisable to follow and maintain the prepared budget. The amount of money which is to be paid should be kept separately and try to save until you have enough money to clear the whole debt..

For easy debt management you should monitor what you spend and how much you spend each day. Saving money helps you to pay your debt quickly.

Assess How You manage Debt

It is important to assess and analyze how you pay your debt in order make proper repayment calculations regarding your debts. Prepare a list which includes all the items and monies that you have to use. This will help you to calculate the total amount of money you have. Deduct money for the debts from your total.

Manage debt by paying debts in a predetermined order

If you have a lot of debt, first decide to pay off the one with the highest increasing rates of interest then the rest can follow. You can also pay your debt according to the one you acquired first. These options may help you reduce your debt gradually.

Talk to your creditors to manage

Tell your creditors about what you can afford to repay and how much will be repaid at specified times. It is important to ensure all creditors agree to the terms and conditions of the repayment plan

Deal With Your Mortgage Payments as A Way of Managing Debt

If you have a mortgage loan you should improvise on paying them off slowly since their interest rates are relatively low compared to others, such as education loans. The value of a house appreciates with time, while the rate of interest may remain constant or may change in the future (on few occasions)

It is advisable that you try and repay the other debts first. Loans on secured assets can be repaid slowly, depending on their rate of interest.

Get guidance or help on managing debt

To get rid of your debts quickly you require help from a debt counselor. The counselor helps you to overcome your debts in a short period and gives you guidance on various ways of paying debt easily.

Smart spending is usually a result of counseling in managing debt.

Debt consolidation is handled by bankers or debt consolidation companies. Their objective is to enable you solve your debt problems by making timely repayments and managing your debts

This is a great option since the debtor saves on the amounts paid back to the bank. They are also able to better plan how much they need to repay for all their debts without having to remember many debts. There is comfort knowing that there is an expert who cares about your finances.

How can credit debt consolidation help you?

If You have debts that are devastating and tough to manage, then credit debt consolidation is the solution to the problem.  Instead of looking for where you are going to get the money for the countless monthly payments and delayed fees, debt consolidation enables you to obtain a loan to pay off all your debts and then you will basically have one debt payment per month.

When you decide to choose debt consolidation, you will not have to be anxious about getting in touch with many debtors. This has been a most frustrating element of owing debts. It may be that debt collectors are calling you while at work and also at home which can be very annoying.  For this reason credit debt consolidation becomes a popular alternative.

Credit debt consolidation loans also helps

Despite countless bills you owe or how far behind your repayments have fallen,  debt credit consolidation loans can help you. If you are being pursued by insensitive debt collectors and creditors

There are various curriculum available all planned to take your numerous, high-interest debts and cumulate them together for easy payment. This is certain to help lessen the stress and burden linked with accumulated debt, high interest rates and delayed charges. Debt consolidation loans have been used by many debtors to reduce and manage their debts in the past.

Credit debt consolidation loans are  properly considered to be alternatives to bankruptcy. You can decide to lower your general bills, stay away from additional damage to your credit ranking or credit rating. It is possible to get back control of your monies by t making the decision to act now.

Credit debt consolidation considerations

You may possibly want to get a consolidation that permits you to pay an amount every month that you can easily afford. If the sum for your credit debt consolidation is higher than what you were look forward to pay, then you might need to look at bargaining the terms to a more reasonable and affordable terms.  You should also consider the repayment period or schedules. It should be comfortable to you.

Other consideration for debt consolidation includes the ability of the company taking over to handle your loan. The debt consolidation company may not be able to take over the full amount of your loan, and such companies should be rejected.

The idea for debt consolidation is a brilliant idea, which must be taken up by people with little to non-financial discipline.

managing your finances

As soon as Christmas is over, the savers realise that they have spent more than they had anticipated. They have to save a bit more or reschedule the goals they had set to meet.

To manage unplanned spending during the Christmas season, follow the tips below and avoid regrets after the holidays

Dos to managing your finances

1. Determine the amount of money that will be needed to purchase the gifts. When this amount has been decided, move on to the next step
2. Determine the amount to be saved per month, to reach to the desired amount. Always give yourself enough time to achieve the desired amount.
3. Have a list of all the people you want to give gifts to. These lists are very important as it determines the number of gifts that will be purchases.
4. Start shopping for non perishable gifts early. Last minute shopping may mean that you spend more funds than budgeted.
5. When possible, purchase gifts when they are on sale. This may reduce the amounts used and the savings can be used for emergencies during christmas

Don’ts of managing your finances

1. Do not spend money you do not have
2. Do not borrow money from your credit cards or bill payment.
3. Do not buy unplanned items or items not on your shopping list
4. Do not go shopping with friends who may influence you to spend more than planned
5. Do not take a lot of time to shop when you know what you require. Go in and out of the shop without looking through he aisles
6. Do not window shop while carrying extra money in your wallet or credit cards
7. Do not purchase perishable presents before they are required because they will spoil. For example do not purchase fruits more than a week before they are required because they ripen and spoil before they are given as gifts

The above tips are a way to assist consumers during the Christmas  to help in managing your finances.

Introduction to virtual credit card

A virtual credit card is a credit card that every-time when one wants to make an online purchase on enters the actual credit card information and a new number is generated to facilitate the online purchase. This virtual credit card number generated will be temporary and expires immediately the online purchase is successful.

 Advantages of virtual credit card.

• One of the advantages of the virtual credit card is that the number generated is only valid for the one time online purchase and transaction. Once the online transaction and purchase are successful the it expires.
• Another advantage of virtual credit card is that one can set a limit for the particular online purchase and transaction they want to make. This advantage of the virtual credit card ensures that the merchant does not charge more for the online purchase and transaction. Therefore virtual credit cards help the one take control of their finances by ensuring that they stay within their financial budget.
• Virtual credit card has another advantage in that they are widely recognized and can be used by anyone online to make any online transactions and online purchases. Most merchants accept the virtual credit card giving the online shopper freedom. Therefore virtual credit card allows for online purchase from all over the world.
• Data safety and security is another advantage of virtual credit card in that the actual account number of the credit card is not visible to the merchant or on the online payment system. Therefore this information cannot be used by fraudster to make any other fraudulent online purchases and transactions. This makes online transactions and online purchases using the virtual credit card safe and a great advantage.
• Another advantage of the virtual credit card is that it gives the online purchaser freedom as they are not worries that their actual credit card information would be used fraudulently.
• Another advantage of using virtual credit card is that there is flexibility in the use of this virtual credit card as it can only be used when there is a need to make online purchases. Since the number generated for the virtual credit card is temporary then the online purchaser uses it only when they are ready to make any online purchases.

 Disadvantages of virtual credit card.

•  One of the disadvantages of the virtual credit card is that the transfer of funds from the online purchasers account to the merchant account takes time and at times the goods are delivered before the actual payment to the merchant is made.

• Another disadvantage of the virtual credit card is that even though the virtual credit card is widely accepted, some merchants are still skeptical and have not fully accepted the virtual credit card.

What is a Virtual Credit Card

Over the years this has been hampered by hackers who have used the system to fraud the online purchasers using the information they have obtained from the credit cards hence the introduction of the virtual credit card. A virtual credit card is a card which is a replica of the actual credit card and which a user can generate it online. This virtual credit card generated will only be used to make online purchase and not any other purchases. Like any other credit card the person must apply for this virtual credit card. All credit and lending elements will be taken into consideration by the company offering the virtual credit card.

The main characteristics of the virtual credit card which differentiate it from the physical credit card are as follows:

1. Virtual credit cards are only used for online purchases; one cannot make any other purchases using this card.
2. Virtual credit card may be a temporary card which can only be used to make this online purchase once and will not be used again as it will have expired once the transaction is successful.
3. Every-time one wants to make online purchases, then they have to enter the actual credit card information and a new number is generated for the virtual credit card which can then be used.
4. The virtual credit card does not reveal the actual account number and the account details of the actual credit card. These details are only visible to the account holder and the actual credit card provider.
5. The virtual credit card number which is generated and which can be seen is temporary and also useless and cannot be used to access the actual credit card account.
6. The virtual credit card since it generates a temporary number for a particular online purchase therefore there is no information and details of the actual credit card account. This ensures that the actual credit card is not used for fraud.

 Conclusion on virtual credit card

Since the world has become a global village, the introduction of the virtual credit card has brought a great revolution to online purchases. Curbing of fraud which had really been on the increase has also been enhanced by ensuring good data security systems while also giving the freedom to purchase online. Virtual credit card has revolutionised the concept of cards and their usage in this age.