Banking
From The Report: Kenya 2018
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As the full-year results for 2017 began to emerge, the effects of a new cap on lending interest rates become apparent, with most banks reporting reduced margins and profitability. A tighter lending environment, however, has encouraged banks to find alternative routes to revenue. Technological innovation, in particular, has received a fresh impetus as lenders reach out to prospective customers through new channels, such as mobile banking. However, despite the challenges of 2017, solid fundamentals point to continued positive performance in 2018. Increases in net assets and deposits, consolidation and the continued streamlining and digitisation of bank services have contributed to sector resilience. This chapter contains interviews with Patrick Ngugi Njoroge, Governor, Central Bank of Kenya; Joshua Oigara, CEO and Managing Director, KCB Group; Jeremy Awori, CEO, Barclays Kenya; and Kenneth Kaniu, CEO, Britam Asset Managers.

Articles from this Chapter

Overview

Shifting focus: Despite some challenges, fundamentals remain strong as banks embrace consolidation and digitalisation
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The past year has been a challenging one for Kenya’s banks. As the full-year results for 2017 began to emerge, the effects of a new cap on lending interest rates become apparent, with most banks reporting reduced margins and profitability. A tighter lending environment, however, has encouraged banks to find alternative routes to revenue. Technological innovation, in particular, has received a fresh impetus as lenders reach out to prospective customers through new channels. Despite challenges posed…

Interview

A coordinated approach: Patrick Ngugi Njoroge, Governor, Central Bank of Kenya (CBK), on ensuring consolidation and advancing the Big Four agenda
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Interview :Patrick Ngugi Njoroge How can the banking sector help to support the goals of the Big Four agenda? PATRICK NGUGI NJOROGE: Banks are well positioned to fund the agenda’s priorities through credit extension, targeted products and incentives. In housing, banks can boost supply and demand by providing syndicated loans to contractors, as well as mortgage and asset financing options. Concerning food security, banks can join in the flagship irrigation schemes of public-private partnerships…

Analysis

Strategy rethink: The government looks to keep interest rates in line and promote lending without stifling growth
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The government has a long history of intervening in Kenya’s banking industry. Before the financial sector was fully liberalised in the 1990s, state actors maintained a firm grip on credit allocation to various areas of the economy, only granting a greater share of funds to sectors it deemed to be strategically important. This approach, however, took little account of the ability of these industries to repay their credit facilities. According to the Central Bank of Kenya (CBK), the government’s…

Interview

Innovative regulation: Joshua Oigara, CEO and Managing Director, KCB Group, on how banks and regulators should adapt to changes in the sector
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Interview : Joshua Oigara What is the outlook for Kenya’s banking sector, and how should it look to finance key industries? JOSHUA OIGARA: The sector is committed to funding key infrastructure projects, and we are using annuity financing as part of the public-private partnership (PPP) model to do this. In agriculture, one of the main challenges is to expand the use of aggregator models for producers. Although these exist for products such as tea and coconut, it should expand into other areas…

Interview

Financial solutions: Jeremy Awori, CEO, Barclays Kenya, on the consolidation of the banking system and the adoption of technological tools
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Interview :Jeremy Awori What are the challenges of shifting to the ninth International Financial Reporting Standard (IFRS 9)? JEREMY AWORI: The shift to IFRS 9 will have a very broad impact on regulations. This is a global accounting standard, and compliance is not optional. Building models on expected credit losses has been relevant, and international banks have taken the lead on that front. IFRS 9 is not only an accounting change, but also a set of regulations specifying the amount of capital…

Overview

Fintech revolution: Tech solutions are driving the evolution of the sector landscape – Kenya
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Once reserved for ambitious start-ups and industry-leading tech operators, financial technology ( fintech) has more recently caught the attention of major private sector firms and government planners alike, becoming a regular feature in budget speeches and strategic development plans. As fintech progressively plays a larger part in the lives of consumers, investors have quickly come to recognise its potential as a growth industry. The tech-focused Janus Henderson Global Technology Fund, for example, has expanded by more than 160% since February 2013, growing by 30% in 2017. While the concept was pioneered in developed countries, the fluidity of…

Interview

Increased engagement: Kenneth Kaniu, CEO, Britam Asset Managers, on creating the right financing structure and funding model for projects
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Interview :Kenneth Kaniu How can retail investor participation in Kenya’s equity and fixed-income markets be encouraged? KENNETH KANIU: We already have a good level of awareness as far as the equity markets are concerned. If we look at the initial public offerings (IPOs) since 2003-08, we can see very strong and positive retail participation. Also, we have seen the number of Central Depository and Settlement System accounts increase. The challenge, however, is that a lot of investors have…