NEW BABY ON WORLD OF ACTUARIAL PROFESSIONAL QUALIFICATIONS

Most of Kenyan actuarial scientist students have fear of the possibility of not doing professional papers (for actuarial science) because of high cost and many other challenges that are associated with actuarial professional papers. I want to dedicate todays writing to the issue of actuarial professional papers to any new student on this field or anyone interested e.g.  guardians, parents or employers.

My opinion is that there is great advantages of doing qualifications from Institute and Faculty of Actuaries I won’t  talk about it now, I want to focus now to the new qualifications which was recently introduced by  Institute and Faculty of Actuaries  the Certified Actuarial Analyst(CAA). First the cost associated with other professional qualification for actuarial science is usually costly and take times for someone to go through them. Am not saying that Certified Actuarial Analyst (CAA) is cheap and short but am trying to compare it with other choices we have in our disposal at this moment in time.

What is Certified Actuarial Analyst(CAA) qualification? I would love to answer your question  using exact words used by Institute and Faculty of Actuaries(IFoA) , It is a new membership qualification from the Instituteand Faculty of Actuaries (IFoA), designed to give those working in actuarial support roles and the broader financial services sector a path to acquire sound technical skills. It has been developed in response to employer and employee demand, and following consultation with users of actuarial services around the world.It bears all the hallmarks you would expect from the IFoA: a high quality qualification, robust regulatory framework and attractive membership package.

The advantages of doing this membership qualification are immerse , I may not adequately cover them on this post but I will try first to bring the arguments by(IFoA). According to them it will provide membership of a prestigious professional body and the associated benefits of being part of the global IFoA community, including support from the IFoA throughout their careers. It will open the door to a wide range of career options. This is was trying to say I cannot adequately cover in one post because we can go pages and pages talking about it.

What does the qualification consist of? I have personally gone through most of the syllabus and I must tell you it looks what Kenyans universities offer for undergraduate degree in actuarial science meaning once one is through a degree in Kenyan university can easily go through this course. The qualification consists of an entry test (Module 0) which candidates have to take before taking the further five exam modules (Modules 1-5). These further modules focus mainly on calculations and bookwork. Module 0 can be sat by non-members. All other modules can only be taken once candidates pass Module 0 and meet the IFoA’s entry criteria to become Student Actuarial Analysts of the Institute and Faculty of Actuaries. Modules 0-4 are assessed by Computer Based Testing. Module 5 is a practical exam, delivered online. Modules 1-4 cover Finance and Financial Mathematics, Statistics and Models, Long Term Actuarial Mathematics and Short Term Actuarial Mathematics. Module 5 covers Models and Audit Trails. There is also a work-based skills requirement. It is anticipated that it will take a minimum of two years part time study to qualify.

You can visit the official website of  Institute and Faculty of Actuaries(IFoA) and check out the new qualification. Remember that this year is the first time this qualification will be started  this year.

CURRENT LENDING RATE BY BANKS IN KENYA

We have heard more than several  times the deputy president  Samuel Ruto talk about high lending rates which Kenyan banks offer . This have led me to do a little research on this matter, I wont promise much now  all I will ask you to join me on this journey and at end of it you should be able to make your decision.

My main concern is whether  interest  rates influence the demand for credit by the poor , small and medium scale enterprise in Kenya and also whether relationship exist between interest rates and loan repayment  by the poor and SMES.

The banking system and the financial system more generally, is a key pillar in any economy, bearing in mind its basic function, which is to reallocate funds from agents with a surplus to those with a deficit. By solving the problem of asymmetric information among agents and by diversifying risks, banks manage to decrease the costs of the exchange of financial funds and enable their efficient allocation within the economy. Consequently, the price of financing through bank loans (i.e. lending rates) and the efficiency of the banking system (as measured by interest rate spreads) are essential for the possibility of allocation additional financial potential in the economy, and thus for the acceleration or sustainability of economic growth. These among many other concerns are making our deputy president alert about the current lending rates in Kenya

We should also consider factors that lead to poor loan recovery by banking/non-banking institution includes high interest rates, poor appraisal, weak monitoring, late disbursements of loans and negative attitude towards loans.

To focus on relationship between interest rate and demand for credit on one  hand and interest rate and loan repayment  on the other hand we must consider two hypothesis. One is the Mckinnon-Shaw hypothesis shows a low real interest rate is a disincentive to savings thereby reducing the availability of credit. The main policy prescription of Mckinnon-Shaw hypothesis is that the financial sector should be liberalized for interest rate to be determined by interplay of demand and supply in process interest rate will increase saving mobilization.   The other hypothesis we are going to consider is by Stilglitz-Weiss who are view that interest rate cannot function as an allocator of credit because borrowers with higher risk may be considered rather than those with potential good because of market failure brought information asymmetry. In other word it states that higher interest rates bring about adverse selection and moral hazard.

Looking at the current debate , I would say our deputy president is supporting Stilglitz-Weiss  hypothesis(higher interest bring moral hazard), I remember him asking how averagely Kenyan banks a lending out loans on interest rate of 20% and yet the deposits in customers account earn interest rate of 2%.  This looks totally unfair!! On next post I will link todays theory to what is happening on the ground.

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WELCOME TO BIMAJOLT

It's my pleasure to welcome you to my  blog bimajolt , you maybe wondering why I choose the name BIMAJOLT . I choose bima to stand for insurance , am doing actuarial science and we do a lot about insurance in our course. Secondly am going to share alot in this blog about insurance and other forms to handle and manage risk. Jolt is verb which means to shock someone so that they suddenly change what they are doing or thinking.(Macmillan English Dictionary for Advanced Learners CD-ROM 2nd Edition. CD-ROM © Macmillan Publishers Limited 2007. Text © A&C Black Publishers Ltd 2007) So I will be trying to change people thinking and understanding  about insurance and other methods to handle risk investment.

Since I started my course I have been wondering how I can share my knowledge on certain issues which may be not be clear to the general public. Insurance remains to be unknown or to be more precise misconceived by Kenyans. Many times you will hear Kenyans claiming that there have been duped by insurance companies , but in many cases you will find that there failed to read the  contract and understand it.

I would love also to encourage people to invest, I would share a lot on different investment instruments and risks involved.It would be a perfect opportunity to my readers to interact  with me on this issues

My name is Gabriel Mutua, fourth year student Meru university taking actuarial science. I come from Makueni county , Kibwezi district.