Njoroge: No more ‘business as usual’ in Kenya banking

Patrick Ngugi Njoroge is the economist trying to beat Kenya's banking sector into shape.


Patrick Ngugi Njoroge, the recently appointed governor of Central Bank of Kenya (CBK), takes no prisoners. Since his appointment in June 2015, Njoroge has placed three of Kenya’s banks – Dubai Bank, Imperial Bank and Chase Bank – under receivership and instigated a purge of their top management, citing violations of banking laws and regulation as the reason behind the moves.

However, in an interview with African Banker the governor was quick to downplay the spread of malpractices in the country’s banking industry.

“The problems in Imperial Bank, Chase Bank and Dubai Bank were specific to the three institutions and not a reflection of the operations in the wider banking sector, which remain sound,” says Njoroge.

“The three institutions were not systemically significant in the Kenyan banking sector,” he says. As if to prove the point, in December 2014 CBK ranked Chase Bank as the 12th largest bank in terms of market share with 2.98%. Imperial Bank was ranked at number 17 with 1.76% market share, while Dubai Bank was sitting at the bottom with just 0.10% market share.

Nevertheless, the governor is keen to implement regulations to ensure that problems such as these do not contaminate the banking sector in general. “An extensive review and enhancement of our bank surveillance processes and procedures, especially the Bank Supervision Directorate, is under way. I have also asked banks to strengthen their business and governance models,” he says.

Banks have followed his guidance, for instance, by increasing their provisions for bad loans in 2015, with Standard Chartered, Chase Bank and National Bank of Kenya more than doubling their provisions for non-performing loans.

His strong stance on banking has hit others in the sector. Family Bank, one of the fast-growing commercial banks in Kenya, was forced to pay a KSh1m ($100,000) fine for funds siphoned from one of the country’s state institutions, the National Youth Service, in December 2015.

Making his mark

Previously unknown, and seemingly plucked from obscurity by Kenya’s President Uhuru Kenyatta on 2nd July 2015, the soft-spoken economist – Njoroge has a PhD from Yale University in the US and 20 years’ experience at the IMF – is firmly making his mark on Kenya’s banking sector.

For some, Njoroge is doing all the right things – so far. As X.N. Iraki, a senior lecturer at the University of Nairobi, says, this is due to Njoroge’s background: “Though associated with the IMF, he is an ‘outsider’ to CBK, which makes it easy to institute
reforms,” he says. 

“Closing the three banks has left no doubt that it is not business as usual in Kenya’s banking sector,” he says.

Some, however, are less bullish about the central bank governor than others. There has been a stinging criticism of the governor by the ruling coalition’s parliamentary majority leader Aden Duale following Njoroge’s decision that anyone transacting over $5,000, effective 1st January 2016, must provide additional information, as part of a fight against money laundering in Kenya.

Then there is a fresh bid by legislators to cap interest rates at 4% above the CBK rate through the Banking (Amendment) Bill 2016, which Njoroge opposes.

“It will encourage an informal system where banks will abandon risky loans and loan sharks will emerge and prey on the weakest. Banks could start rationing credit, which will deny the small and medium enterprises crucial funds to spur economic growth,” says the governor.

This is a stance supported by Henry Rotich, Kenya’s cabinet secretary for the National Treasury: “We have advised that capping interest rates is not a solution. If you fix [interest rates], banks will check and look for people with high credit scores and lock out those with poor credit records. Banks will lend only to blue chip companies.”

Under the spotlight

Not only are his policies under scrutiny, so are his political and personal choices. Following his appointment as governor, Njoroge shocked a country used to an elite living a life of extreme largesse by declining the state-sanctioned trappings associated with his office. These included an expensive home in Nairobi – where neighbours would have included Kenya’s former President Mwai Kibaki, the US ambassador and British high commissioner – top-of-the-range cars, a high-end smartphone and security.

Since his appointment, Njoroge has been shoved under the spotlight, with members of Parliament grilling him not only on monetary policy, but also on his love life. Legislators have been wondering why the governor is still single at 54. “I am single by choice and I am comfortable that way. There is nothing sinister with that and I am sure this committee has done its due diligence on what sort of a person I am,” he replied.

Another point that quickly came up was the lack of investment Njoroge has in Kenya. Was he reluctant to invest in Kenya or was he simply poor?

“I don’t have a single asset here in Kenya. This is where I am at this point in time but it doesn’t mean that this is how it will be forever. I subscribe to being very deliberate about that. [For now] this is my economic model and perhaps, years after retirement, I would want to invest in other things,” says Njoroge.

“That should not mean I have any financial inabilities,” he says.

Justus Ondari

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