HuJuma MasterCard: An analysis by a peasant
There are three types of plastic cards currently being used worldwide to purchase goods and services from the Points of Sale (POS) instead of cash. These are Debit card, Credit card and Prepaid card (also known as Reloaded card).
Let me begin with the definitions of the cards so that we all understand what they are
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Debit card is one whose value of transaction is debited directly to the holder’s account immediately a transaction is completed at the POS. In which case the holder must have funds in his/her current or savings account to use the card.
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Credit card gives the holder opportunity to spend, using the card, and pay at a later date, thus enjoying credit facility.
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Prepaid card is one in which the holder initially loads the card account with funds which are used until exhausted, then reloads once again for future use.
Prepaid card holder does not need to have an account with the issuing bank, other than the card account.
From the above definitions, one should now understand why the Kenyan govt. has chosen the Prepaid card and not the other two. The government wants all it’s citizens and all foreigners resident in Kenya to be issued with Huduma MasterCard so as to access various services and for purchase of goods from various outlets.
The government has enlisted the services of four banks that will be issuing prepaid cards to everyone placed on Huduma Number platform. The banks are DTB, Equity, KCB and CBA. Why these banks?
DTB is one of the fastest growing indeginous banks in the country with branches in all urban centers in Kenya.
Equity bank has branches all over the country and also found in villages in some parts of the country.
KCB is found anywhere in Kenya and with their intended acquisition of National Bank of Kenya will be formidable.
CBA is set to “swallow” NIC bank by 30th June 2019 and will have grown it’s tentacles far and beyond. All the four banks are Incorporated in Kenya, with branches and subsidiaries beyond the borders.
Once the banks issue prepaid cards to all those on Huduma Number platform, they will have large deposits of money in their possession acquired from the card holders. In observation of the Monetary Policy, the banks will be directed to invest the funds in government securities, namely, treasury bills and treasury bonds. Thus the government will be borrowing funds which it has helped the banks to acquire.
Please note that the interest rate capping is not going away very soon . With the government control of interest rates through CBK, it will be able to borrow very cheaply from the local banks, possibly as low as 4% on treasury bills. The government will do away with all foreign borrowings and the Euro-bonds.
In the process, Kenya will be a cashless society.
Remember the “long” buses from South Africa are coming and public transport will be cashless.
I rest my case.