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
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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
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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.
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• 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
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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
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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.
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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.
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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
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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.
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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.
.
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• 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
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• 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.
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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.
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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.
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