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Osoro 2b
 

Osoro 2b

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Osoro 2b Osoro 2b Presentation Transcript

  • Kenya’s Experience in Export of BankingServicesJared Osoro, Kenya Bankers AssociationJune 5, 2013; World Bank Conference on“Trade and Regulation of Services in Africa”
  • Outline• An Overview of Kenya’s Banking Industry.• Expansion of Kenyan Banks to the EAC andBeyond: Experiences.• Emerging Opportunities
  • Overview of the Kenyan Banking IndustryMarket Share (Based on a Composite Index of Assets, Deposits, Capital Size,and number of Deposit Accounts And Loan Accounts) – Dec 2012MarketShareNumber ofBanksNet Assets(US$ B)CustomerDeposits(US$ B)Capital &Reserves(US$ B)Large 53.7% 6 1.2 10.4 2.4Medium 36.8% 15 17.1 7.7 1.5Small 9.5% 22 9.2 2.0 0.4Total 100% 43 27.4 20.1 4.3The financial system isdominated bycommercial banksThe industry has 43banks and one housingfinance institutionEven with the large number of banks, the industry is veryconcentrated
  • Overview of the Kenyan Banking IndustryOwnership and Asset Base – Dec 2012Ownership Number % Total Net Assets (US$ B) %Local PublicCommercial Banks3 7.0% 1.2 4.2%Local PrivateCommercial Banks27 62.8% 17.1 62.4%Foreign CommercialBanks13 30.2% 9.2 33.4%43 100.0% 27.4 100.0%The ownership of the Kenyan banks is largely by local private sector.
  • The ‘Foray’ Into the RegionThere are 11 Kenyan banks with subsidiaries in the EACand beyond; A total of 282 branches – some banks havingas many as 61 Branches across the region:• Out of the 11 banks, 3 are in the large category, 6 are in themedium category, and 2 are in the small category.Opportunities arising from the integration process providea clear incentive for banks to cross-borders ; but banks arelooking beyond the EAC:• 31 of the 282 braches are in South Sudan (a non-EACMember), more than they are in Burundi (an EAC Member);• Two medium banks have acquired stakes in banks in Malawi(11.4% - First Merchant Bank) and Mauritius (50% - BankOne); some Banks are giving Somalia serious consideration.
  • The ‘Foray’ into the region - Experiences• The local banks have demonstrated leadership; foreignbanks have contributed towards enhanced efficiency andmarket competition that has allowed local banks exhibitmaturity to venture regionally;• The incentive of the banks venturing out are clear; butthe host considerations have to be taken on board:– Governance structure that allows to ‘stand alone’ versus thesubsidiaries being organized as ‘business lines’; e.g. a matrixgovernance structure where the treasurer and risk managerreports to the parent bank head rather than the local CEO,consequently undermining accountability of subsidiary officials.
  • The ‘Foray’ into the region - Experiences• The ownership structure of the subsidiary isimportant; having some stake held by the hostcountry shareholders helps inculcate localacceptability – some of the banks going regional havecross-listed their shares; and their branch expansionhave ben supported by resources raised in the capitalmarket.• It matters whether entry into a new market is via anacquisition of an existing bank or the setting up shopfrom scratch; there is quicker success of theacquisition culminates in an IPO.
  • The ‘Foray’ into the region – Regulatory Aspects• There is explicit recognition by the EAC’s MAC that full integrationof financial system is important if the integration of the market is tobe further deepened;• There are endeavors to regulatory standardization:– there is already harmonized minimum capital requirement;– There is a draft convergence criteria for the harmonization of centralbanks’ legal and prudential supervisory rules and practices• The promotion of an integrated financial system will benefit from:– Sorting out the payment systems at the national level to pave way for aregional payment system (without this it will, for instance, to implementthe proposal of integrating the RTGS systems that have beenimplemented at the national level in Kenya, Tanzania, Uganda andRwanda;– Putting in place a mechanism of promoting credit information sharing at aregional level.;– Putting in place a framework for trade finance facilitation – e.g. s systemthat is based in local/regional confirmation.– Cheque standardization and truncation (as has been done in Kenya) acrossthe region.
  • Emerging Opportunities – (a) Mobile Money0.3%2.0%3.8%5.2%7.8%9.5%0%1%2%3%4%5%6%7%8%9%10%2007 2008 2009 2010 2011 2012Value of Mobile Money Transaction (% of GDP)Source: Central Bank of Kenya; IMF
  • Emerging Opportunities – (a) Mobile Money-5,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,0002007 2008 2009 2010 2011 2012Deposit Accounts and Mobile Phone SubscribersDeposit Account Holders Mobile Phone SubscribersSource: Communication Commission of Kenya; Central Bank of Kenya
  • Emerging Opportunities – (b) Impetus from potentialnew entrants• HFDC Bank, India (2008);• Nedbank, South Africa (2010);• HSBC (2011);• First Rand Bank, South Africa(since November 2011);• Bank of China, China (2012)• Central Bank of India Ltd, India(2013)• Bank of Kigali, Rwanda (2013)**• JP Morgan Chase NA of the USA(2013)• Potential for increasedcompetition thatmakes the seeking ofregional opportunitiesalmost inevitable;• Cross borderopportunities inregional projects.
  • Thank you