Kenya Banking Industry

SEMINAR ON TRADE IN SERVICES AND INVESTMENT

KENYA BANKING INDUSTRY EXPERIENCE

ON TUESDAY 17/02/2009

AT SOUTHERN SUN HOTEL

DAR-ES SALAAM TANZANIABy

Felix O. OkatchMultilateral Trade Expert

Tel: 254-721-735489E-MAIL: [email protected]

Published by AFRIKASOURCES – Business intelligence solution for africa

ORGANISATION OF THE PRESENTATION

• Overall Structure of Banking Sector in Kenya.• Central Bank of Kenya Cap 491• Banking Act Cap 488• Micro-Finance Act 2006• Expectations out of EPA• Industry view on Banking Services


Overall Banking Sector in Kenya• This is made up of 45 licensed institutions to

carry out the business of financial intermediation.

• They are guided by prudential guidelines issued by the Central Bank of Kenya.

• Of the 45, 2 are mortgage finance companies and one is non-bank financial institution.

• Out of the 45 institutions 35 are locally owned and 10 are foreign owned.

• 3 locally owned banks have significant government shareholding.


• STRUCTURE OF THE BANKING SECTOR

Public Financial Institutions

Consolidated Bank of Kenya (77.8%)

Development Bank of Kenya (100%)

National Bank of Kenya (70.6%)

Central Bank of Kenya

Private Financial Institutions

Local Foreign

Commercial Banks – 29

Mortgage Finance Institution – 2

Non-Bank Financial Institution -1

Commercial Banks -10


165575740Total

111829Western

4682128Rift valley

114152Nyanza

246North Eastern

54239293Nairobi

253661Eastern

187593Coast

-28078Central

Net Change20062007Province

REGIONAL DISTRIBUTION OF BRANCH NETWORK


CENTRAL BANK OF KENYA• This is established by an Act of parliament,

Central Bank of Kenya Act Cap 491.• The principal object of the Bank is to

formulate and implement monetary policy directed to achieving and maintaining stability in general level of prices in Kenya.

• The second principal objective is to foster liquidity, solvency and proper functioning of stable market-based financial system.


Central Bank of Kenya (CBK)Other secondary objectives of CBK are:• To formulate and implement foreign exchange

policy.• To hold and manage Kenya's foreign exchange

reserves.• Licenses and supervise authorized dealers in

money market.• Promote the smooth operation of payments,

clearing and settlement systems.• Act as a banker and advisor to, as fiscal agent to

the government of Kenya • Issue currency notes and coins.


Banking Act Cap 488 Laws of Kenya• This is an Act of Parliament to regulate the

business of banking in Kenya.• Banks in Kenya are licensed under this act


Requirements to be met by licensed banksunder this Act include;• Regulations on reserve funds and dividends • Quarterly reporting and annual audits to the

depositing public.• Inspection and control of commercial banks • Deposit protection fund• Making decisions on miscellaneous

provisions like bank charges, bank holidays, disqualification for officers who are not “fit and proper” etc.


MICRO-FINANCE

• An Act of parliament Micro-finance Act 2006 is in place to make provisions for the licensing, regulation and supervision of microfinance business and connected purposes.

• Licensing provisions include consideration of applications, renewal, revocation and regional restriction.

• CBK also has powers within the Act to categorize the banks and inspect their operations regularly.

.


• OPERATION AND SUPERVISION• Minimum capital requirements• Minimum liquid assets.• Place of business• Prohibited activities• Declaration of dividends• Application for loan or credit facility• Limit on loan and credit facilities• Insider lending• Disqualification of directors• Disqualification of officers• Audited financial reports


• PROTECTION OF DEPOSITS

• Periodic inspection by CBK• CBK has powers to intervene in management

of the licensed banks and also in their liquidation if depositors funds are deemed to be unsafe.

• Liquidation of the institution if they do not conform to the regulations of the Act.


EXPECTATIONS FROM EPA• Expansion of regional financial integration • More commercial banks create better

competition and good corporate governance • Wider market for 100m people in EAC • Expansion of branch network and regional

competition can be achieved as a result of EPA.

• Kenya is negotiating on schedule of services which leads to WTO/GATS compatibility.

• On the whole, EPA negotiations has opened banking in the region and also with EU.


INDUSTRY VIEW, CHALLENGES ANDOUTLOOK• Banking regulation by respective EAC countries like

Burundi, Kenya, Rwanda, Tanzania and Uganda need to be harmonized.

• Payments Systems by Commercial banks need to be carried across borders.

• Microfinance and Saccos have expanded aspects of financial intermediation in EAC

• Capacity building in globalization of man power training and examinations etc across the EPA trading region.

• Financial integration is way for future under EPA.Published by AFRIKASOURCES – Business intelligence solution for africa

Economy & Finance

Kenya Banking Industry