This month, the Kenya Banker’s Association (KBA), the umbrella and advocacy group for the banking industry is celebrating its 59th anniversary. One of its recent projects has been to document the history of banking in the country. This stretches back to 1896 when the National Bank of India, which later evolved into KCB, opened a branch at Mombasa.
The KBA’s Banking History website and documentary project has a timeline of different banking eras. Key moments over the last 125 years include the banking growth that followed the Uganda railway, developing local regulation after Kenya’s independence, the Africanisation and the indigenous banks push in the 1970s. Others are surviving bank collapses in the ’80s and ’90s, interest rate controls and recent banking responses to Covid-19.
Key throughout has been the embrace of technology from the late 1960s, on through computerization and on to the mobile phone era of the 2010s. Along with tracing banking trends like increasing financial inclusion and developing products for informal and small businesses, the KBA timeline also highlights how banks are anticipating, building skills and preparing for the next age of banking. This is expected to revolve around competition with global fintechs, digitization of all customer processes, and embracing financial sustainability principles.
Absa Bank Kenya has rolled out an asset management subsidiary following approval from Kenyan regulators to expand its century-old business of offering financial services in the country.
Following approval by both the Capital Markets Authority (CMA) and the Retirement Benefits Authority (RBA), Absa Asset Management will offer advice and products for customers to invest in listed shares, treasury bonds, corporate bonds, private equity, property, offshore and other investment classes.
Anthony Mwithiga, the CEO of the new Absa Asset Management unit, said they would offer fund and investment management for institutions, such as pension schemes, retail solutions for the mass market, and bespoke or personalized services for high-net-worth individuals.
The retail solution will offer investment opportunities through five different unit trusts being, a money market fund for Kenya shillings or US dollars, a bond one, a balanced fund, and an equities fund that people can subscribe to for as little as Kshs 1,000. All the classes will benefit from the data-driven insights, investment professional advice and risk management of Absa that is guided by three pillars of value growth, income generation and value preservation.
The CEO of the RBA Nzomo Mutuku said that that investment management, now with Kshs 1.4 trillion of assets under management, still has great potential to grow and that the performance of these investments is what drives pension benefits in Kenya, not pension contributions.
He said that being diverse had sustained growth even during Covid-19. While there has been a decline in interest for corporate bonds, private equity has gone up (from 0.07% to 0.12% as a share of portfolios) and good returns had also been got from ETF‘s that are about to get a boost from a new class for fixed income, and REIT‘s from new tax laws. He added that, when the shilling depreciates, offshore investments deliver good performance. Another new class is now infrastructure in which funds can invest 10% of assets and they are waiting to see which Public-private-partnership (PPP) projects come online.
In April 1923, the East African Standard, ran an anonymous blog-like column by a bank clerk in the Kenya Colony. He narrates how he wakes up slowly, is brought tea by his servant Juma (which means Friday), then is brought his bath, of which there are two types, before he goes to work.
“… and then on to the business of the day. Monotonous life? don’t you believe it! I doubt whether a bank clerk’s life is ever really monotonous as some make it.
In Kenya, it certainly is not as our customers are so varied. One minute, a newly-retired colonel of the Indian army, moustache and all. Next, a retired lieutenant commander from the Navy who perhaps goes one further and sports a beaver. Then one of the boys – Navy, Army or Air force for the duration, now farming. Then a lady farmer, charming, even wearing breeches. Government officials and visitors.
In they come, day after day. Monotonous? Never. All as different as chalk from cheese except in two respects; they are all jolly good sorts and they all want overdrafts.
It’s all very well to be light-hearted about it but I am afraid that we often miss the gleam of bitter sadness which lies behind it all. Kenya is a young colony and fortunes cannot be made in a day. There are as many who failed to grasp this. They come out here with family and little else. The wife is still here, the family perhaps has increased but an ominous overdraft and a mortgage form have taken the place of the little ones.”
The day ends with sundowner drinks and an early night, to be repeated all over again.
This month saw Family Bank open a branch in Eastleigh, its 92nd in the country. Family is one of the pioneers of paperless branches and had opened another branch in December near the large Wangige market to serve traders. Eastleigh is an important cog of Kenyan supply chains and is estimated to have the second-highest density of traders, second only to the Nairobi CBD. Despite advances in mobile transfers, small traders are still heavy users of cash for transactions.
Then today Diamond Trust announced the consolidation of six branches that are adjacent to each other: Oval and 9 West (both to Westgate), Eastleigh to Madina Mall, Garden City to TRM mall, Jamhuri Street (to Malindi) and Kago Street (to Eldoret). The bank asked customers to continue using alternative channels while staff will be redeployed to other branches and business units.
We can probably expect to see more branch consolidations or closures as two groups KCB-NBK and NCBA (CBA & NIC) continue to refine their new operating structures. CBA and NIC did some closures last year.
When KCB announced their third-quarter 2020 results, they shared some interesting details about branches and the march to digital.KCB branches did 2% of transactions in Q3 2020 compared to 5% the previous year. Also, there was a 16% decline in transactions done per day by branch tellers from 60 to 50, while customers did 43% fewer transactions (5.8 million compared to 10.2 million) than in the previous year. KCB customers did 77% of their financial transactions on mobile phones, 17% at agents / internet / point of sale (cards), and 4% at ATM’s. More ATM’s now accept cheque deposits, not just cash, and also act as 24-hour M-Pesa agents.
The Central Bank of Kenya’s Supervision Report for 2019 shows KCB with 203 branches, followed by Equity with 171 (and 12 sub-branches), Co-op Bank 152, Absa 107, Family had 92 in 2019, NBK 78, and Diamond Trust 70. Between 2018 and 2019 there was a drop of 16 branches from 1,505 to 1,490 with 7 of them in Nairobi that ended 2019 with 593. NCBA has 37 branches but serves the largest number of bank customers in Kenya by far, 31 million thanks to M-Shwari, its partnership with Safaricom.
Outside the country, there is growth as Kenyan banks operate 316 branches in the region, up from 207. They are led by Equity that has 44 in DRC and 39 in Uganda, Equity has a total of 116, followed by Diamond Trust with 68 (36 in Uganda, 28 in Tanzania, 4 in Burundi) and KCB with 60.
During Covid-19, foot traffic has reduced at malls, offices shopping centres and bank branches. This has also been due to the growth of online shopping that has taken off exponentially, and many facilities now have dedicated desk and parking spaces for motorcycle delivery riders.
No sign yet of banks moving to share branch spaces with each other but there is less need for banks to be on the ground floor of buildings, which is usually more costly. Also, shopping malls tend to have a banking floor (top of Garden City mall) or ATM corner where several bank services are grouped.
Absa Bank Kenya celebrated its one-year anniversary at its newly-redesigned Queensway Branch in downtown Nairobi today. It has been a strange first year for Absa which completed the transformation from the Barclays brand in February 2020, three weeks days before Kenya was enveloped by Covid-19 and underwent a shutdown that, while it has progressively reduced, still affected thousands of business, jobs, and customers, as well as the bank itself.
Speaking at the event, Absa Kenya Managing Director Jeremy Awori said the bank had a great strategy to grow and expand, then Covid-19 hit and the year turned to be one of the challenges for the bank, industry, local and global economy. Absa also began to see opportunities for impact and to demonstrate its humanity and innovations to enable the bank to serve customers as they worked to rebuild their livelihoods. They adjusted to have half their staff work from home and instituted a shift arrangement for front-line workers and these enabled 100% of branches to remain open, while the digital platforms had 99% uptime.
Absa offered financial relief to help customers navigate the pandemic after many lost jobs and businesses. They restructured Kshs 62 billion worth of loan repayments, extending relief to over 59,000 customers. They also continue to lend a sizeable amount to SME’s to stay afloat and provide employment, and also committed to paying small suppliers of the bank within seven days to boost their cash flow.
He added that the bank was cautiously optimistic that 2021 will be a better year, with news of vaccines giving confidence to business and governments to relax containment measures and turn to boost economies. Absa Kenya will invest Shs 1.6 billion in 60 technology projects to enhance customer experiences. One will be to automate loan top-ups, allowing people to get loans on top of existing loans, and another will be a new online business-banking platform.
Absa Kenya Chairman Charles Muchene said the bank contributed Shs 50 million to the Kenya Covid Fund, invested Shs 30 million in initiatives led by partners, and donated 210,000 masks for medical workers, with another 20,000 to boda-boda operators. The bank is now asking Kenyans to join and to help underprivileged. They launched a “Wall of possibilities” for people to write suggestions or ideas on the bank’s social media pages or at the Queensway branch on ways that the bank can assist communities to benefit. Absa may fund each idea with up to Shs 2.5 million.