2022 in Review
1. Credit reference shake-up: A failure of banks to carry out proper credit education and to convey the benefits of good repayment to customers, through lower interest rates, caught up with them. This was combined with a tendency to blacklist defaulters at the earliest instance to punish them – and became an issue at political campaigns ahead of the August 2022 election.
The new government set in motion a plan to clear over 4 million borrowers from credit reference bureau blacklists This was in part a 50% waiver on their debt and a window of six months for borrowers to pay the balance of the amount. At the Absa Q3 results briefing, management of the bank explained that there would be no immediate impact as these were loans of people who got stuck in 2020 (during the Covid-19 disruption) that had already been fully provided for
2. CEO suite changes: At Absa Bank Kenya, MD Jeremy Awori left after nine years. He later joined Ecobank Transnational Incorporated, the parent of the Ecobank Group, as the Group CEO replacing Ade Ayeyemi, who retired after attaining the age of 60. Absa Kenya then picked its Chief Financial Officer Yusuf Omari to take over as interim CEO as Moses Muthui was made the interim CFO.
At KCB Joshua Oigara left after nine years and later in the year joined the Standard Bank group as the CEO of Stanbic Kenya and South Sudan, after Charles Mudiwa retired after two decades. KCB appointed Paul Russo, who was MD of their National Bank subsidiary as the new KCB Group Chief Executive Officer. Following that, KCB now has Anastacia Kimtai as the acting KCB Kenya MD and Peter Kioko as the acting MD of National Bank of Kenya
At the I&M Group, the CEO of I&M Bank Kenya Kihara Maina moved on to be the group’s regional CEO, taking over from Chris Low, and the new Kenya MD is Gul Khan who joined from Airtel Money Africa.
Cooperative and Diamond Trust and Equity banks still retain their long-serving leadership though, at Equity, Polycarp Igathe stepped down as Chief Commercial Officer to contest for the Nairobi Governor seat in the August 2022 elections. edit And from Mwango Capital, we learn of more leadership changes at banks with Sam Muturi joining as Consolidated Bank’s new CEO and Anuj Mediratta as CEO of Gulf African Bank with Helen Chepkwony as the acting CEO of the Kenya Deposit Insurance Corporation (KDIC). Also, Shelter Afrique had another executive change with Thierno-Habib Hann stepping in as the new MD/CEO, replacing Kingsley Muwowo, the CFO, who had been the interim boss. Another change saw Rose Kagucia become the Acting CEO/Managing Director at Dubai Islamic Bank, replacing Peter Makau.
3. Capital raising and arranged marriages: Banks set out to raise new capital in different ways. Larger banks with foreign links like Absa can attract Tier II funding at low rates (of about 3%) which is lower than the cost of deposits or the bond markets (about 9%). Smaller banks arranged sales like Spire to Equity and Sidian to Access while deposit-taking microfinance banks found fintech partners. Key Microfinance is now LOLC Kenya, UMBA, a Delaware fintech bought 66% of Daraja Microfinance Bank, Century Microfinance became Branch Microfinance Bank and Uwezo Microfinance is now Salaam Microfinance Bank.
4. Green finance is in: Banks report on it and the Kenya Bankers Association published sustainable finance guidelines and principles for banks to align their processes and products (including loans) and the Central Bank has guidelines on climate risk management. Banks are now attracting “green finance” and touting their green credentials joining new green alliances and measuring their activities such as tree planting and reducing their carbon footprints.
5. Resurgence of the bank branch” Co-Op, Diamond Trust, Family, and NCBA bucked the branch closure trend to show that digital growth needs a physical presence to support it.
Outlook for 2023
1. Go Big in Ethiopia: Following Safaricom’s big entry into Ethiopia, will banks now follow into the next big African market African after DRC that has delivered big for Equity? Kenyan bank support new partners of the telco that can lead to other businesses in the country that need to unlock financing – and take on the local giant Commercial Bank of Ethiopia (27th largest in Africa), which is not growing its assets now with currency restrictions and a prolonged war. The entry path for foreign banks is now set and KCB, Equity and Stanbic are among the dozen foreign bank that have had representative offices in the country for a few years.
2. Will digital bank customers stick around? January 1 sees a return of several bank charges that were waived in March 2020 at the start of the Covid-19 wave to enable bank customers to make digital and contactless payments. Many tried out digital services offered by their banks for the first time as they were now free of charge. Non-funded income is key for bank profits, but it will be seen how the return of bank and mobile payments/transfer charges will be received by customers are different banks. In this economy, customers are more cost-conscious than ever, especially with the government tax on every bank transaction going up to 20% in 2023.
3. New savings and investment products that target diaspora, retail and unbanked customers. While lending to the “hustler” economy is well-documented, digital wealth creation and preservation products are still lagging.
Ahead of the much-anticipated IPO’s to come to the Nairobi Securities Exchange, EFG Hermes has invested in a platform for retail investors and this week Acorn got approval for Vuka, a platform for retail investors to into REIT’s.
4. African banks get serious about Nairobi: Access (17th largest in Africa) Ecobank (18) and UBA (25) have all had relatively small footprints in Kenya but now have a chance to grow. Across Africa, there are changes in the banking hierarchy with the largest bank group by asset size for decades, Standard Bank of South Africa with a sluggish home economy about to be passed by the National Bank of Egypt 166 billion, as Egypt Bank Misr has also passed SA’s Absa group to be number six on the continent. You can also expect a resurgence in West Africa, into East, perhaps by buying more banks, as Access is with its second bank deal (for Sidian) to leap up the Kenya asset ranks which are led by Equity (37th in Africa) and KCB (40). edit. However, in January 2023, Centum Investments cancelled the agreement to sell its 83.4% stake in Sidian Bank to Access Bank.
5. The year is expected to usher in a new regime at the Central Bank of Kenya with a new Governor, Deputy (2 positions) and Chairman by June 2023. The current cabinet Secretary of the National Treasury (i.e. the Finance Minister) is himself a former CBK governor.