, NAIROBI, Kenya, Apr 13 – Treasury Cabinet Secretary Henry Rotich now says Kenya is overbanked citing that consolidation is vital going forward.
Speaking to Capital FM Business Rotich says banks need to merge rather than to compete for small markets.
He says he has planned to reintroduce the rejected proposal by the National Assembly to increase the minimum core capital for banks to Sh5 billion from the current Sh1 billion by December 2018.
“We need banks that are a big enough to finance the many projects that we are envisaging in the country and also leverage on the sharing of the knowledge of how institutions run. We will take more time to engage parliament to communicate the advantages of having consolidation in our system,” he explained.
The national assembly in August 2015 rejected the proposal by the finance ministry to increase the minimum core capital for banks to Sh5 billion saying it would stifle the sector’s growth.
“I will continue to bring this to the house as it is an important element of reform in the banking sector,” said Rotich.
Kenya has a total of 42 commercial banks, 1 mortgage finance company, 12 microfinance banks, 8 representative offices of foreign banks, 86 foreign exchange bureaus, 14 money remittance providers and 3 credit reference bureaus.
“The move is not something new. In Nigeria, they raised minimum capital to about a billion dollars and the number of banks has reduced to 22 banks. This has seen Nigeria banks expand in the continent very strongly because they are now big enough, this is what we want to achieve,” he explained.
He says Kenya per capita bank per person is about a million compared to the global benchmark of three million customers per bank.
The comments come after Chase Bank, Imperial bank and Dubai Bank have been placed under receivership within the last few months due to unsound transactions causing bank customers to panic over stability of their banks.
Central bank of Kenya (CBK) Governor Patrick Njoroge has warned Kenyans against rushing to transfer their deposits from ‘small’ to ‘big’ banks out of fear they may collapse.