The State of Banking in Kenya: A Story of Numbers

By Soko Directory Team / Published April 5, 2016 | 9:40 am

Kenya has a total of 42 commercial banks, 12 microfinance banks, one mortgage finance company, eight representative offices of foreign banks, 86 foreign exchange bureaus, 14 money remittance providers as well as three credit reference bureau.

With all these financial institutions in Kenya, can we then comfortably say that Kenya is saturated with banks? Some financial experts say that Kenya is over-banked. With a population of 44 million and a total of 42 banks, the competition for customer base must be very high and this explains the disparity in terms of interest rates from one bank to the other.

The banking sector in Kenya has been expanding over the years. Banks in Kenya have widely grown in terms of:

Asset base
Customer base
Innovation
Product offering on the banking market and
Profits.

The year 2015 was extremely tough for most financial institutions Kenya. The interest rates moved out through the window, going as high as more than 27 percent. This made many potential borrowers to shun away from taking loans, something which greatly affected the performance of most banks. Many banks did not perform well in terms of maximizing their profits as a result of non-performing loans.

A nonperforming loan (NPL) is the sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default.

And high interest rates highly contributed to this.

According to a report released by Cytonn, the sheet aggregate for banks grew by 1.4 percent from 3.6 trillion shillings in June 2015 to 3.7 trillion shillings in September 2015. In terms of gross loans as well as advances, there was an increase from 2.2 trillion shillings to 2.3 trillion shillings within the same period this being a 6.9 percent growth as shown in the table below:

PRODUCT	JUNE	SEPTEMBER	CHANGE
Aggregate Sheet	3.6 Tr	3.7 Tr	1.4 %
Loans & Advances	2.2 Tr	2.3 Tr	6.9 %

What has made the banking sector to grow very fast in Kenya? There are various economic reasons as to why the banking sector in Kenya is scaling the heights of money markets.

Mobile and Agency banking has greatly played a major role in skyrocketing the banking sector. Many banks no longer subscribe to the services of the tellers as mobile phones are taking over almost everything. Customers are able to bank, withdraw, check balances, access loans and do any transactions via mobile phones.
There is massive growth of the retail segment in Kenya. According to financial analysts from Cytonn, as the middle-class grows rapidly in Kenya, faster than majority of the countries in the region, there is an inherent increase in consumption expenditure and an increase in the percentage of the population which will require banking services.
Devolution in Kenya has helped expand the banking sector in Kenya. Many banks that had not expanded their roots in other regions in Kenya did so with the coming of devolution. This was also driven by the fact that most people started moving from some major cities like Nairobi back to their respective counties either for employment or for business.

The table below shows some Kenyan Banks, the value of assets, profits for the year ended 2015, loses realized for year ended 2015 as well as the number of branches:

BANK	VALUE ASSETS	PROFITS	LOSS	BRANCHES
EQUITY	445.8 B	16.7 B		228
KCB	607.3 B	19.6 B		250
BARCLAYS	337.9 B	8.4 B		119
STANCHART	231.6 B	6.3 B		37
COOP	332.9 B	11.71 B		143
NBK	118.1 B	–	1.2 B	75
DTBK	255.5 B	9.56 B		110
I&M	187.7 B	10.2 B		33
NIC	155.6 B	6.39 B		25
CFC STANBIC	208.2 B	7.35 B		24

In the number of customer base, Equity Bank seems to be rocking the market with more than 9.2 million customers, Kenya Commercial Bank has 7 million, and Cooperative Bank has 5.4 million while Barclays Bank has over 800,000 customers.

The coming of the mobile has revolutionized the banking sector in the country. Almost all banks have partnered with mobile operators in enhancing their banking services with other like Equity Bank coming up with their own sim card (Equitel) that is taking over both the banking and the communication environment by storm. Equitel, according to Equity Bank, is a new revolutionary platform that helps the customers to manage their money and communicate with more freedom, Choice and Control.

Kenya Commercial Bank has a service called M-Banking that is in partnership with Safaricom M-PESA where customers can access their accounts, ask for loans, bank and withdraw. Recently, the bank started a KCB-MPESA accounts where customers with MPESA accounts can bank and borrow loans from KCB via MPESA.

Every bank has its own product that it offers on a mobile and what suites the needs and demands of the customers. The following is the list of banks that are listed at the Nairobi Security Exchange:

Barclays Bank
CFC Stanbic Bank
I&M Holdings
Diamond Trust Bank Kenya
Housing Finance
Kenya Commercial Bank
National Bank of Kenya
NIC Bank
Standard Chartered Bank
Equity Bank
Co-operative bank of Kenya

The banks that are not listed at the NSE include the following:

ABC Bank
Bank of Africa
Bank of Baroda
Bank of India
Chase Bank Kenya
Citibank
Commercial Bank of Africa
Consolidated Bank of Africa
Credit Bank
Ecobank Kenya
Equatorial Commercial Bank
Family Bank
Fidelity Bank
First Community Bank
Giro Commercial Bank
Guaranty Trust Bank Limited
Guardian Bank
Gulf African Bank
Habib Bank
Jamii Bora Bank
Middle East Bank Kenya
Oriental Commercial Bank
Prime Bank
Sidian Bank
Transnational Bank Kenya
United Bank of Africa and
Victoria Commercial Bank

This is the story of numbers in the banking sector in Kenya.

Article by Juma Fred.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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