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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
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
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
• 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
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
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
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
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
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
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
•   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
• 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
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
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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Kenya Banking Industry

  • 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. 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. 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. • 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. 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. 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. 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. 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. 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. 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. 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. • 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. 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. 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