NAIROBI, Kenya, May 10 – The local banking sector has continued to demonstrate its resilience in the midst of financial challenges, according to a report by the Central Bank of Kenya (CBK).
The Bank Supervision Annual Report for 2009 shows that the industry’s asset base increased from Sh1.18 trillion in December 2008 to Sh1.35 trillion in December 2009 while pre-tax profit also rose by 13 percent to stand at Sh48.9 billion in 2009.
“This performance was registered in the midst of global and local shocks. On the global scene, the after effects of the global financial crisis that escalated in 2008 washed up on the Kenyan shore. On the domestic arena, a crippling drought and power rationing in the second half of the year dampened the growth prospects for the Kenyan economy,” said CBK Governor Prof Njuguna Ndung’u.
The Governor however credits CBK and the government for putting in place the enabling legal and regulatory environment that supported the performance as well as the robust risk management frameworks adopted by banks.
The report highlights developments in the legal and regulatory framework such as the operationalisation of the Credit Reference Bureau Regulations, enactment of the Proceeds of Crime and Money Laundering Act and the introduction of agent banking through the Finance Act of 2009 that were made during the year
“The Credit Reference Bureau regulations will facilitate the creation of information capital for more Kenyans to access affordable credit. Conversely, the Anti Money Laundering Act will reduce the vulnerability of Kenya’s financial sector to potential abuse,” it pointed out.
As at 31st December 2009, the banking sector was composed of 46 institutions, 44 of which were commercial banks and 2 mortgage finance companies. In addition, there was one licensed deposit taking microfinance institution and 130 foreign exchange bureaus.
Of these 19 banks have a total asset base of above Sh15billion with Kenya Commercial Bank Group leading the pack with Sh172.3 billion followed closely by Barclays and Standard Chartered banks with Sh165.1 billion and Sh123.9billion respectively.
Going by the 2009 performance, the sector’s outlook for 2010 looks bright, asserted Prof Ndung’u pointing to the recovering economy which is likely to open up new opportunities for the sector.
The coming into force of the East African Common Market Protocol in July is further expected to bring good tidings for the banks as it will facilitate their expansion into the region.
While competition is expected to continue being stiff locally as international brands set up shop in Kenya, banks are expected to source for additional capital to tap these regional opportunities.
“These market dynamics could see a move towards mergers and strategic alliances. The Central Bank remains committed to working with the government and market players to create an enabling environment for the banking sector to play its’ mandate of financing the country’s development aspirations,” assured Prof Ndung’u.
As the financial results continue to look good so are the numbers of those with access to formal services. A total of 40.5 percent of the population are now formally served, representing approximately 7.6 million of an estimated adult population of 18.7 million in Kenya in 2009.
The dependence on only informal financial services is on the decline from 32.7 percent in 2006 to 26.8 percent in 2009 largely due to the growth of innovative products and services such as the money transfer services.
For instance, Safaricom’s MPESA had over 9 million registered users by December 2009 with over 16,000 Agents. The review of the current guidelines and regulatory framework is also expected to further boost this growth.