The Banking industry in Kenya is governed by the Companies Act, the Banking
Act, the Central Bank of Kenya Act and the various prudential guidelines issued
by the Central Bank of Kenya (CBK). The banking sector was liberalised in 1995
and exchange controls lifted.
The CBK, which falls under the Minister for Finance’s docket, is responsible
for formulating and implementing monetary policy and fostering the liquidity,
solvency and proper functioning of the financial system. The CBK publishes information
on Kenya’s commercial banks and non-banking financial institutions, interest
rates and other publications and guidelines.
The banks have come together under the Kenya Bankers Association (KBA), which
serves as a lobby for the banks’ interests and also addresses issues affecting
its members.
There are forty-six bank and non-bank financial institutions, fifteen micro
finance institutions and forty-eight foreign exchange bureaus. Thirty-five of
the banks, most of which are small to medium sized, are locally-owned. The industry
is dominated by a few large banks most of which are foreign-owned, though some
are partially locally-owned. Six of the major banks are listed on the Nairobi
Stock Exchange.
The banks have come together under the Kenya Bankers Association (KBA) which
serves as a lobby for the banks’ interests and also addresses issues affecting
member institutions.
The commercial banks and non-banking financial institutions offer corporate
and retail banking services but a small number, mainly comprising the larger
banks, offer other services including investment banking.
Key issues affecting the banking industry in Kenya are:
- changes in the regulatory framework, where liberalisation exists but the
market still continues to be restrictive;
- declining interest margins due to customer pressure, leading to mergers
and reorganisations;
- increased demand for non-traditional services including the automation of
a large number of services and a move towards emphasis on the customer rather
than the product; and
- introduction of non-traditional players, who now offer financial services
products.
The banking sector is poised for significant product and market development
that should result in further consolidation of the banking sector.
PricewaterhouseCoopers is involved with the CBK and a number of the major players.
We have also advised both the Nairobi Stock Exchange and Capital Markets Authority
on various projects including drafting a disclosure framework and listing rules,
and the introduction of the Central Depository Scheme.
