Doing Business In Kenya

The Present Banking Environment

Kenya's banking environment consists of a Central Bank -- The Central Bank of Kenya -- 51 commercial banks, 8 non-bank financial institutions, 4 building societies and 2 mortgage finance companies. There are also 48 operational foreign exchange bureaus. The Central Bank's principle objectives are: to formulate and implement monetary policy directed to achieving and maintaining stability in the general level of prices; to foster the liquidity solvency and proper functioning of a stable market based financial system. One of its secondary objectives is to license and supervise authorised dealers in the money market. In this regard, The Central Bank has on a few occasions put certain commercial banks under statutory management and some have resulted in closure. During such times, Citibank, considered to be a stable bank, experiences a lot of inflow of funds. Some of the smaller banks have started to merge in a bid for survival as they are faced with an increase in commercial banks minimum paid up capital and high operational costs.

In the recent years, the Kenyan banking industry has become increasingly competitive due to the following core factors. Firstly, the conversion of several non-bank institutions into fully fledged banks increasing the total number of banks in the country. Secondly, the relative stability of the Kenyan Shilling after the last general election resulted in smaller FX spreads forcing banks to rely on core business activities to generate revenues. The key avenues that all banks are focusing on are: cash management, customer service, expanding branch network and investment in technology.