The Kenya Bankers Association (KBA yesterday morning launched a report titled, ‘State of Banking Industry’.
The report’s key findings are underpinned by an assessment that covers the past 15 years of the banking industry in Kenya.
The report was presented by the Chief Executive Officer (CEO) of KBA Dr. Habil Olaka and Jared Ososro, the Director of Research and Policy, and the Director of the KBA Centre for Research on Financial Markets and Policy, at a workshop.
The below are some of the take-aways
The report seeks to contribute towards the understanding of the banking industry in a manner that is comprehensive enough. It covered and analysed various aspects of the market – be they policy in nature, regulatory, business environment, and stakeholder expectations.
Generally, the report paints a positive outlook of the banking sector in Kenya; such as the growth of the deposits taken in, which ideally shows confidence in the banking industry. The KBA further observed that the quantum of loans and advances has grown over time. However this has scaled down in recent years due to shrinking private sector credit growth.
Non-Perfoming Loans (NPLs) rise was occasioned by the limitations brought about by the Banking (Amendment) Act 2016 that introduced lending caps
However, the banking sector seems robust that there have been a rebound after market shocks of 2016.
‘As we report, the Kenyan Banking industry is on a solid footing’, said Mr. Olaka
On technological advancement, the report observed that the banking industry is at the frontier in embracing technology both as a way of enhancing intermediation efficiency and growth as well in regulatory compliance. However, there is also need to further interrogate how financial inclusion impacts households’ needs.
A stable banking system is is very critical for the development of Kenya’s economy. the banking industry is at the frontier in embracing technology both as a way of enhancing intermediation efficiency and growth as well in regulatory compliance.
The competition to become technologically advanced has brought efficiency in service delivery and the competition dynamics in the market fast evolve in a manner that is shaped by the market structure where banks are positioning themselves to increase their market shares.
There are signs of vibrancy and progress in the direction of further industry deepening. Banking industry will continue supporting Small and Medium Enterprises (SMEs), even as it champions the Inuka SME programme which continues to facilitate credit access through capacity building.
The law that capped interest rate was enacted in 2016, it meant that banks reduced credit to the private sector.
Dr. Olaka also stated that ‘removing the interest cap will enable the economy to accrue the benefits of a vibrant banking industry’. However, the report also recommends that the banking players must note that they work in a dynamic market and there’s need for a response in terms of regular change of the banking sector to suit it.
For more on risks and other aspects of the reports as aforementioned, please read the report here: State of the banking Industry Report