Kenya Banking Industry

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KENYA BANKING INDUSTRY EXPERIENCE

Presentation by Felix O. Okatch at a Seminar on Trade in services and investments – 14 slides

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Kenya Banking Industry

  1. 1. SEMINAR ON TRADE IN SERVICES AND INVESTMENT KENYA BANKING INDUSTRY EXPERIENCE ON TUESDAY 17/02/2009 AT SOUTHERN SUN HOTEL DAR-ES SALAAM TANZANIA By Felix O. Okatch Multilateral Trade Expert Tel: 254-721-735489 E-MAIL: felixokatch@yahoo.com Published by AFRIKASOURCES – Business intelligence solution for africa
  2. 2. ORGANISATION OF THE PRESENTATION • Overall Structure of Banking Sector in Kenya. • Central Bank of Kenya Cap 491 • Banking Act Cap 488 • Micro-Finance Act 2006 • Expectations out of EPA • Industry view on Banking Services Published by AFRIKASOURCES – Business intelligence solution for africa
  3. 3. Overall Banking Sector in Kenya • This is made up of 45 licensed institutions to carry out the business of financial intermediation. • They are guided by prudential guidelines issued by the Central Bank of Kenya. • Of the 45, 2 are mortgage finance companies and one is non-bank financial institution. • Out of the 45 institutions 35 are locally owned and 10 are foreign owned. • 3 locally owned banks have significant government shareholding. Published by AFRIKASOURCES – Business intelligence solution for africa
  4. 4. • STRUCTURE OF THE BANKING SECTOR Central Bank of Kenya Public Financial Institutions Private Financial Institutions Consolidated Bank of Kenya (77.8%) Local Foreign Development Bank of Kenya (100%) National Bank of Kenya (70.6%) Commercial Banks – 29 Commercial Banks - 10 Mortgage Finance Institution –2 Non-Bank Financial Institution -1 Published by AFRIKASOURCES – Business intelligence solution for africa
  5. 5. REGIONAL DISTRIBUTION OF BRANCH NETWORK Province 2007 2006 Net Change Central 78 80 -2 Coast 93 75 18 Eastern 61 36 25 Nairobi 293 239 54 North Eastern 6 4 2 Nyanza 52 41 11 Rift valley 128 82 46 Western 29 18 11 Total 740 575 165 Published by AFRIKASOURCES – Business intelligence solution for africa
  6. 6. CENTRAL BANK OF KENYA • This is established by an Act of parliament, Central Bank of Kenya Act Cap 491. • The principal object of the Bank is to formulate and implement monetary policy directed to achieving and maintaining stability in general level of prices in Kenya. • The second principal objective is to foster liquidity, solvency and proper functioning of stable market-based financial system. Published by AFRIKASOURCES – Business intelligence solution for africa
  7. 7. Central Bank of Kenya (CBK) Other secondary objectives of CBK are: • To formulate and implement foreign exchange policy. • To hold and manage Kenya's foreign exchange reserves. • Licenses and supervise authorized dealers in money market. • Promote the smooth operation of payments, clearing and settlement systems. • Act as a banker and advisor to, as fiscal agent to the government of Kenya • Issue currency notes and coins. Published by AFRIKASOURCES – Business intelligence solution for africa
  8. 8. Banking Act Cap 488 Laws of Kenya • This is an Act of Parliament to regulate the business of banking in Kenya. • Banks in Kenya are licensed under this act Published by AFRIKASOURCES – Business intelligence solution for africa
  9. 9. Requirements to be met by licensed banks under this Act include; • Regulations on reserve funds and dividends • Quarterly reporting and annual audits to the depositing public. • Inspection and control of commercial banks • Deposit protection fund • Making decisions on miscellaneous provisions like bank charges, bank holidays, disqualification for officers who are not “fit and proper” etc. Published by AFRIKASOURCES – Business intelligence solution for africa
  10. 10. MICRO-FINANCE • An Act of parliament Micro-finance Act 2006 is in place to make provisions for the licensing, regulation and supervision of microfinance business and connected purposes. • Licensing provisions include consideration of applications, renewal, revocation and regional restriction. • CBK also has powers within the Act to categorize the banks and inspect their operations regularly. . Published by AFRIKASOURCES – Business intelligence solution for africa
  11. 11. • OPERATION AND SUPERVISION • Minimum capital requirements • Minimum liquid assets. • Place of business • Prohibited activities • Declaration of dividends • Application for loan or credit facility • Limit on loan and credit facilities • Insider lending • Disqualification of directors • Disqualification of officers • Audited financial reports Published by AFRIKASOURCES – Business intelligence solution for africa
  12. 12. • PROTECTION OF DEPOSITS • Periodic inspection by CBK • CBK has powers to intervene in management of the licensed banks and also in their liquidation if depositors funds are deemed to be unsafe. • Liquidation of the institution if they do not conform to the regulations of the Act. Published by AFRIKASOURCES – Business intelligence solution for africa
  13. 13. EXPECTATIONS FROM EPA • Expansion of regional financial integration • More commercial banks create better competition and good corporate governance • Wider market for 100m people in EAC • Expansion of branch network and regional competition can be achieved as a result of EPA. • Kenya is negotiating on schedule of services which leads to WTO/GATS compatibility. • On the whole, EPA negotiations has opened banking in the region and also with EU. Published by AFRIKASOURCES – Business intelligence solution for africa
  14. 14. INDUSTRY VIEW, CHALLENGES AND OUTLOOK • Banking regulation by respective EAC countries like Burundi, Kenya, Rwanda, Tanzania and Uganda need to be harmonized. • Payments Systems by Commercial banks need to be carried across borders. • Microfinance and Saccos have expanded aspects of financial intermediation in EAC • Capacity building in globalization of man power training and examinations etc across the EPA trading region. • Financial integration is way for future under EPA. Published by AFRIKASOURCES – Business intelligence solution for africa
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