East Africa: Big leap in access to banking

Kenya dominates our regional Eastern African table in much the same way as South Africa and Nigeria lead the way in their own regions.

Kenya Commercial Bank is still the biggest bank in the region, with Tier 1 capital of $567m, up from $479m last year, followed by another six Kenyan banks.

The country has one of the most developed banking sectors in Africa but it is also one of the most competitive, with a very developed mobile banking sector as well as traditional, banks with a physical presence.

Kenya has 43 commercial banks, eight overseas bank and nine micro-finance banks. Diversity is an advantage as long as each of the banks is well capitalised

Diamond Trust chairman Abdul Samji said: “The biggest challenge now is that the banking industry is becoming very competitive, not only in Kenya, but within the East African market. There is a lot of push from various organs of government, for example, the central bank, to reduce our interest rates and as a result our margins are becoming thinner. We are finalising products which target the youth and women and we are sure to get customers from those sectors. This is because 75% of the population is made up of the youth.” 

Such fierce competition helps create better services for customers but has also encouraged Kenyan banks to look beyond their borders for investment opportunities.

While most of the big Kenyan banks have recorded a rise in capital since our 2013 survey, this trend is not replicated across the sector. Indeed, the threshold for entrance into our Eastern Africa regional top 25 has fallen from $66m to $60m over the past year.

While much remains to be done to tackle corruption in the country, the Kenyan economy remains very attractive to international investors and progress is being made on improving national infrastructure. The likely commencement of commercial oil and gas production could finally propel the country into the ranks of Africa’s fastest growing economies.

Kenyan banks had 282 branches outside of the country by the end of 2013, some of them in South Sudan since Juba became independent in 2011. However, the ongoing civil war is disrupting their operations and preventing economic development in the world’s newest country.
In addition, the Central Bank of Kenya has warned that the banks could be exposed by a United Nations’ pledge to impose sanctions on those involved in helping to fund the warring factions.

Kenya’s Equity Bank has been affected by slower growth by its subsidiaries in Uganda, South Sudan, Burundi and Tanzania, but the cross-border investment continues. Kenya Commercial Bank is weighing up expansion into Mozambique, Zambia and even Somalia.