Kenya outruns rest of East Africa

Of the five countries that make up the East African Community (EAC) bloc, Kenya’s banks are still the trailblazers in the region, followed by Tanzania, Uganda, Rwanda and Burundi respectively. Report by Wanjohi Kabukuru.

Kenya remains the dominant banking market in the region, holding more than half of total banking assets with growth outpacing that of its regional peers, the East African Banking Sector 2013 report by Ernst & Young released this year says.

According to the report, Kenyan banks control 60% of the shares of bank assets followed by Tanzanian banks at 23% with Uganda and Rwanda following at 13 and 14% respectively. The Burundian banking sector is still small.

Rwanda’s Central Bank governor John Rwangombwa acknowledges that “big gaps” exist within the regional banking sector but integration is helping reduce the differences. Although Burundi does not feature much in the discussion on financial matters in East Africa, it is attracting major regional banks who are opening branches in its capital Bujumbura.

The E&Y report says that in 2013, Kenyan banks grew their assets by 16%. Tanzania followed with 14%, Uganda’s stood at 13% while Rwanda closed at 12%.

“Kenyan banks are growing at three times the rate of economic growth. This is the highest multiple in the region, and could be at least partly due to the influential role that mobile payment platforms have played incorporating growing numbers of adults into the banking network,” says the E&Y report.

The second similarity is the advantage enjoyed by large banks in the specific countries. They have diversified portfolios offering a wide range of products for different niche needs, and their reach too is well spread – giving them rewards associated with scale.

Though the region recorded some impressive growth in the sector in the 2013 and is expected to do the same till 2016, according to Moody’s, it is still trailing the North and Southern African banks.

However, according to audit firm PwC, with the prospects of oil and gas exploitation in Uganda, Tanzania, Kenya and Rwanda, the affluence of East African economies and banks seems assured. In less than a decade, the local lenders are likely to play bigger roles in the continental sector and break out of the current token challenge position they occupy.

Uganda: Low rates squeeze profits
The ‘pearl of Africa’s’ banks which had been expected to perform well in the past have been beset by low interests rates and the high ratio of non-performing loans to total gross loans.

The ratio rose from 4.2% in December 2012 to 5.6% in 2013. A blot on the financial sector in Uganda occurred on 1st September when BOU issued a public notice for the liquidation of the Global Trust Bank.

According to Emmanuel Tumusiime-Mutebile, the Governor of Bank of Uganda, Global Trust Bank’s losses had reached Ushs 60bn ($22.8m) and it suffered governance deficiencies including providing inaccurate information to the government.