Kenyan banks too strong for global crisis

June 22, 2012
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Dr Mwangi was confident the local banks would not only continue delivering strong results but even increase their ratings/FILE

, NAIROBI, Kenya, Jun 22 – Kenyan banks are poised to weather the global financial storm and continue on their strong run, a top business leader has said.

Equity Bank Chief Executive Officer James Mwangi said banks in Sub- Saharan Africa have proved resilient to the recent episodes of global financial stress that has seen 15 top global banks downgraded by credit ratings agency Moody’s.

Dr Mwangi was confident the local banks would not only continue delivering strong results but even increase their ratings.

“Equity’s ranking in November last year was enhanced by the global credit rating. African banks and specifically Kenyan banks were not holding the toxic assets that caused the crisis during the financial downturn,” he said.

According to an International Monetary Fund (IMF) report, African banks should not be significantly disrupted by the European crisis, primarily since most rely on relatively stable domestic retail funding.

On average, about 95 percent of liabilities in African banks are to domestic residents, mostly in the form of deposits.

Mwangi said domestic savings are crucial to the country’s growth and development going forward.

“It is essential that while we tap global markets for long term debts, funding for significant projects, to remember that fundamentally the long term sustainability of our development agenda is dependent on domestic savings,” he said.

The same IMF report showed that most of the region’s local banking systems are liquid with local-to-deposit ratios well below one, thus they are more robust to liquidity shocks.

Equity Bank is the largest bank by customer base in East and Central Africa and the largest African majority owned company in the region, with its customers growing 24 percent to7.15 million in 2011.

This is largely due to Equity Bank’s success in reaching the bottom of the pyramid, however Dr Mwangi said the bank is looking at diversifying into other parts of the market especially as the country’s middle class grows.

“As we see changes in society, and affordability we are now moving more to wealth creation, supporting SMEs. We started in rural areas and went to the suburbs. We are now more focused on the Central Business District,” he explained.

Equity recently opened a branch in Karen with plans to open in Lavington, Hurlingham and Muthaiga.

Dr Mwangi, who just received the prestigious 2012 Ernst & Young World Entrepreneur of the Year award, is known for transforming Equity from an insolvent mortgage lending company into a fast growing internationally recognized bank.

After joining Equity in 1994 as the Finance Director, Dr Mwangi has established a legacy at the bank that many hope will continue even after he exits the helm of the bank.

“I spent a lot of time creating structures, systems and leadership within the bank to ensure I’ll long be remembered for these aspects. That is what I’m focused on; creating a culture that hopefully will be sustained hundreds of years from now.”

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