Strathmore University School of Accountancy (SOA) Alumni Chapter hosted a public lecture by Ronald Marambii the Managing Director, Bank of Africa Kenya. The topic of the lecture was The State of the Banking Industry in Kenya. This was fueled by the current situation the banking industry is experiencing with the aim of giving a deeper insight on what is really happening.
The lecture kicked off with a brief introduction of Bank of Africa followed by a quick overview of the history of the banking industry in Kenya. In the past, three waves of turbulence have been experienced that were caused by: no regulation, failure of ‘political banks’, inefficiency, no financial inclusion and liberalization of the banking Industry in Kenya. However, the Banking Act and Regulations have over time been considerably strengthened.
An analysis of the economic environment indicates that the overall economic growth realized over the last 5 years ranges between 3-6% which is largely below the Government target range of 6-8%. Based on the exchange rate developments, the shilling performance against the US$ is fairly in line with developments in the international markets attributed to CBK’s active participation in the market to stem volatilities.
Mr. Marambii noted that second –tier banks continue to wrestle out large banks in the control of market shares, with the share of deposits increasing particularly for medium banks and declining for large banks. Overall, there has been immense strategic shifts in the banking industry with: niche banks offering more options to consumers, increase in the number of banks to 41, 75% of the Kenyan population being served by various aspects of the financial sector, over 77% of Kenyans within 5kms of a service point, an increase of Agency Banking with over 35000 agents countrywide and an explosive growth of mobile money. In regional comparison, Kenya is only beaten by Mauritius and South Africa in the African Continent.It is also estimated that over 1 billion transactions per year are carried out via Mobile Money.
In the Regulatory Environment, the three pillars of the financial sector development are stability, efficiency and access.
Some of the concerns raised in regards to the banking industry include: segmentation risk with flight to size which undermines competitiveness of the industry, declining credit to the private sector and increasing level of non-performing debts.Under Corporate Governance, Ronald analyzed through CBK Prudential Guideline number 2 that is used as the basis for Board/management composition. and CBK Prudential Guideline number 7 that covers prohibited business. The CBK is continuously looking at reviewing prudential guidelines based on its prior experiences.
Last but not least what keeps Ronald up at night? The fact that Kenyans are not seeing and thinking about taking up opportunities arising in Africa.
The lecture was very informative and encouraging especially due to the discouraging occurrences that have hit our banking industry.
Ronald Marambii is a Strathmore University School of Accountancy (SOA) Alumni.