Category Archives: CBK

5 Kenyan banking stories of 2022 and 2023

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.

edit in February 2023, Ecobank appointed Josephine Anan-Ankomah as the Managing Director, Ecobank Kenya, replacing Cheikh Travaly who retired at the end of 2022 after attaining the mandatory retirement age of 60 years while NBK appointed George Odhiambo as its substantive Managing Director.

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.

edit Jan 27, 2023.

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. 

Equity to absorb Spire Bank

Kenya’s smallest bank will wind up banking operations in a deal that transfers most of its business to Kenya’s second-largest bank, by market share.

A notice by Spire Bank states that all its depositors, except its main shareholder, will become customers of Equity Bank Kenya. Spire had 20,000 depositors, with about 3,700 loan customers and an equivalent of Kshs 1.32 billion of deposits will be transferred to Equity along with loans worth Kshs 945 million.

Equity term the transaction as “immaterial” to their group financial statements as it only adds 0.25% to their deposits now at Kshs 522.7 billion, but which will ensure that Spire customers enjoy uninterrupted banking services. Spire will pay Equity a cash amount, estimated at Kshs 468 million, to bridge the difference in the loans and the deposits transferred.

As per the agreement, Spire will cease offering bank services and deal with its creditors and staff. Spire’s parent, the Mwalimu National Sacco, has over Kshs 60 billion in assets but will walk away from the ill-advised venture into banking – that never made a profit from when it was acquired as Equatorial Commercial Bank – confident that the exit decision is in the best interests of its customers and stakeholders.

edit January 24, 2023: Through a notice by the Governor of the Central Bank (CBK), the Government has approved the deal in which Equity Bank Kenya is acquiring certain assets and liabilities of Spire Bank, effective on 31 January 2023.

edit February 1, 2023: Equity and Spire announced the completion of the deal transferring deposits and loans between the two banks and inviting customers of Spire to access their deposits at Equity.

  • Equity published a notice to guide the transfer of customers at 10 branches of Spire to specific branches of Equity.
  • On the same day, Spire issued redundancy notices to all its bank staff. Spire Bank will not continue its banking operations and is offering all its employees one month’s salary for every year worked as severance, payment for leave days not taken, and pension dues. The minimum payout will be Kshs 300,000. Employees will also get a 25% rebate on loans and the medical cover will run for another six months to June 30, 2023.

edit February 1 2023: The Competition Authority cleared the deal on the condition that Spire shall pay redundancy benefits to both unionized and non-unionized employees if it does a voluntary liquidation. Note Spire branches are now closed.


New rules for Kenya credit bureaus amid Covid-19

The Central Bank of Kenya (CBK) has proposed radical new measures relating to credit reference bureaus operating in the country. It barred digital / mobile-based lenders from submitting information to credit reference bureaus, following public complaints.

It also proposed that people should be able to obtain their first clearance credit certificates at no charge, a move to benefit youth and graduates seeking employment. Other measures were that the minimum amount for which one can be reported is Kshs 1,000 (~$10) and savings & credit societies (SACCO’s) are now included as authorized subscribes of credit reference data.

As part of the Government’s response to Coronavirus, the CBK also suspended new listings to credit reference bureaus for loans that become delinquent between April 1 and September 30 to shield borrowers at a time when incomes and economies are disrupted.

In addition, Kenya’s Parliament will soon debate new clauses of credit reference regulations that include:

  • A credit information provider shall not provide information relating to a customer to any bureau if the customer notifies the provider, by writing or verbally, that the information is inaccurate.
  • A bureau shall carry out due diligence and suitability assessment of the third-party credit information provider – to learn about their ownership, management, legality status and accuracy of their records.
  • Bureaus are only to share with the customer, the Central Bank, a requesting subscriber and a third party authorized by the banking act, Microfinance Act or Sacco Societies Act.
  • Where a customer disagrees with the resolution of some disputed information, the customer may request the bureau to attach a statement of 100 words to the customer’s credit report, setting out the customer’s claim.
  • The Central Bank shall be the owner of all information and data held by bureaus and regardless of how the information or data is processed. CBK shall retain the right of access to data even after revocation or expiry of any license issued.
  • Every bureau shall prominently display on its premises and on its website, an up-to-date list of all third-party credit information providers that have been approved by the CBK to submit credit information it.
  • Credit reference bureaus shall now have to conduct public education programs on how credit information sharing works, and how the public can access services that they can benefit from.

Coronavirus in Kenya: Week One

The Outbreak: 

  • March 13: The Ministry of Health confirms the first case of coronavirus in Kenya on March 12 from a Kenyan citizen who returned to the country from the USA via London 
  • March 22: Kenya confirms 8 new cases, bringing the total number to 15. It is tracing 363 other people and institutes a mandatory shutdown of major social activities in the country. 

Banking Industry:

  • March 15: President Uhuru Kenyatta appealed to banks and mobile operators to reduce the costs of mobile transactions and calls on Kenyans to use credit cards, mobile money and other forms of cashless payments. 
  • March 16: Safaricom waived fees for M-Pesa payments below Kshs 1,000 (~$10) for 90 days and raises M-Pesa transactions limits to Kshs 150,000 and also increases daily transaction caps and maximum mobile money wallet sizes up to Kshs 300,000 ($3,000). Airtel and Telkom Kenya follow suit a day later. 
  • March 18: Bankers meet the President at State House where the Central Bank of Kenya (CBK) Governor announces that all commercial bank personal loans that were there in good standing on March 2, are eligible for extensions for up to one year while SME and corporate borrowers can approach their banks to be assessed for loan restructuring, with the cost borne by banks. Also, that banks would no longer charge fees for customers to check their bank balances.
  • Different banks announced their compliance with the new rules.   
  • March 19: The Kenya Bankers Association confirms that all banks will assist clients who come in to speak about how COVID-19 has affected their employment or business operations, and whose loan repayments were up to date as at 2 March 2020. They also ask all customers to observe 1-metre (or 3 feet) social distancing at branches
  • March 20: The CBK announces presents Kshs 7.4 billion ($74 million) to the Government to support the coronavirus fight efforts. This it says are the proceeds from the demonetization exercise that concluded in September 2019 and is the sum of (old) Kshs 1,000 notes that were not turned in and which the CBK had classified as being miscellaneous receipts. 

Famous People in Quarantine

  • March 18: Senator for Kericho County Aaron Cheruiyot announces on twitter that he is in self-quarantine. 
  • March 19: Members of Parliament and Parliamentary staff who arrived from London on March 9 are reported to be in self-quarantine. 
  • March 19: Ambassador Macharia Kamau Kenya’s Principal Secretary to the Ministry of Foreign Affairs announces on twitter that he is in self-quarantine after returning from New York. 
  • March 20: Jane Marriott, the British High Commissioner to Kenya announces on twitter that she is in self-quarantine, following her trip to the UK. 
  • March 22: Kenya’s Cabinet Secretary for Health announces that Gideon Saburi, the Deputy Governor of Kilifi County, has been apprehended and put in a mandatory 14-day quarantine after he failed to isolate himself after returning from a trip to Germany. Also that he will be charged in Court after his isolation period. 

Mandatory Quarantine in the Eastern Africa region 

  • March 18: Uganda announces immediate mandatory quarantine for arriving visitors, at their cost.  
  • March 21: Ethiopia announces mandatory for passengers arriving from March 23, at their cost. However, diplomats will be quarantined for 14 days at their embassies, while transiting passengers will be placed in isolation at the Ethiopian Skylight Hotel until they resume their connecting flights.
  •  March 22: Kenya has suspended all international flights other than cargo from March 25. Also, all arriving passengers will undergo mandatory quarantine at a government institution at their own cost. 

Internal country shutdowns

  • March 14: Rwanda closes schools, places of worship, large gatherings, and asks people to work from home. 
  • March 15: Kenya’s President announced the Government has closed all schools, suspended official foreign travel, and will encourage all employees to work from home. 
  • March 18: Uganda closes schools, universities and bars, and bans weddings and religious services for a month. 
  • March 21: Rwanda closes its borders to movement of people and cancels international flights, other than cargo ones. It also suspended tourism and research in 3 national parks where gorillas are found.
  • March 21: Nigeria shuts its airports to international flights as coronavirus cases reach 22.  
  • March 21: South Africa closes its airspace to foreign travelers.
  • March 22: Kenya orders a suspension of religious services at all places of worship, closure of bars and bans gatherings including weddings, and birthday parties. Restaurants are to remain open for delivery services and funeral events are restricted to a maximum of 15 mourners.

Flight cancellations/ Airlines reschedulings:

  • March 17: Kenya Airways updates its schedule, reducing London flights to five times a week, Dubai & Johannesburg to once daily, and Johannesburg to two daily. It also suspends flights to Bangkok, Khartoum, Djibouti & Mogadishu. 
  • March 18: Rwanda announces a halt to all commercial passenger flights into/out of the country on March 20 including operations of Rwanda Air for 30 days. 
  • March 19: Kenya Airways suspends flights to Antananarivo, Bamako, Bangui, Blantyre, Brazzaville, Kigali, Kilimanjaro, Luanda, Yaounde/Douala, and Zanzibar. 
  • March 20: Ethiopian Airlines announces 30 routes closures. The list is not revealed till the next day – and the listed countries include Egypt, Lebanon, Somalia, Djibouti, Namibia, Equatorial Guinea, Cameroon, Chad, Madagascar, Angola, Congo, Mali, Senegal, Rwanda, South Africa, Canada, Spain, Belgium, Switzerland, Indonesia, Israel and all US ones. 
  • March 20: South African Airways immediately suspends all operations until the end of May following a government notice prohibiting the embarkation/disembarkation of non-SA crew and passengers. The only flights that will remain will be domestic service between Johannesburg and Cape Town.
  • March 22: Emirates announces cancellation of all passenger flights from March 25 .. but .. 
https://twitter.com/AlexInAir/status/1241759364068904961
  • March 22: Turkish Airlines to suspend most of its flights – leaving just a handful of flights to New York, Washington, Addis Ababa, Moscow & Hong Kong (via AlexinAir).
  • March 22: Kenya Airways suspends all international flights. Cargo flights remain, as will passenger services to Mombasa and Kisumu. 

Corporate Restructuring’s: 

  • March 13: Trading was suspended at the Nairobi Securities Exchange. This came following news of the discovery of the first coronavirus case in Kenya and the main share index dropped by over 5%. Past instances when circuit-et breakers have been tripped include in the period of post-election violence in 2008, and in September 2017, on the day that Kenya’s Supreme Court nullified the results of the August 8 presidential election. 
  • March 13: Kenya’s insurance regulator, IRA, communicates that insurance companies will continue to provide their services to policy holders affected or infected with the virus .. but insurance companies say their re-insurers do not cover pandemics such as Coronavirus. 
  • March 16: Ethiopian Airlines restructuring plans include scaling up cost-saving programmes and asking service providers for temporary relief, discounts and waivers. They have also started to renegotiate all contracts, including aircraft leases as well as scaling down offices and reducing staff.
  • March 16: Java adjusts seating and promotes delivery as do other restaurants. But many other restaurants closed. 
  • March 18: It was revealed that The Standard Group plans to lay off 170 workers. 
  • March 18: Churches to restrict attendance numbers.
  • March 18: The African Development Bank cancels all travels and requires staff to work from home. The Bank’s Board of Directors is reviewing the configuration and design of the Bank’s statutory Annual Meetings originally scheduled for May 26-29, 2020 in Abidjan. 
  • March 18: Kenyan listed companies and licensed investment schemes that were to host annual general meetings (AGM’s) in March, April and May 2020 have been asked to defer them to later dates.
  • March 20: Kenya Airways CEO sends a memo to staff following COVID-19 and writes that in the last 24 hours, nine countries in our Africa network, the UAE and India have announced travel restrictions. So far, we have reduced approximately 65% of our flights, and this is changing by the hour. He announces that instead of layoffs they will ask staff to take salary reduction and paid & unpaid leave. The leadership team and he will take 75% and 80% respectively, while that for other staff will be 25% or 50% depending on the pay grade.
  • To facilitate supermarket shopping home deliveries, Tuskys has partnered with Sendy and Naivas has partnered with Glovo.

Government Adjustments 

  • March 16: The Ministry of Lands closes all land registries for 28 days from March 17. 
  • March 16: Kenya’s Sports & Culture Ministry closes all museums, archives, stadiums, public libraries, and cinemas for 30 days.
  • March 18: Kenya’s National Assembly and Senate both go on a month-long recess. 
  • March 18: Kenyan courts embraced digital filings and rulings of cases. 
  • March 19: Public health campaign to stop the spread is launched. 

Uplifting News

  • March 21: A thread to help those losing jobs their jobs this week and to help match their skills with part-time or remote-work opportunities. 
  • March 22: The first shipment of medical relief equipment offered by the Jack Ma Foundation arrives in Africa for distribution to different countries. The total will be 500,000 test kits and one million masks had been pledged on March 13.
  • EDIT: March 2 2022: Two years after Corona’s outbreak, the Kenya Government has almost completely rolled back its restrictions and health measures – and tests will no longer be required for fully vaccinated travellers (but may be set by airlines and destination countries), masks are no longer mandatory in open spaces (but at crowded meetings & in palens), contact tracing has been stopped, and people can return to office work, while churches, public transportation and sports can resume at full capacity. THIS WAS FAKE NEWS

EDIT COVID RESTRICTIONS LIFTED

  • March 11 2022: With 17.8 million vaccines having been administered in Kenya, and a positivity rate of 1%, the Government announced a rollback of measures including facemasks will no longer be mandatory in open spaces, but people are encouraged to wear them at indoor venues, passenger transport can resume at full capacity, all quarantine is halted, sports spectators can resume attendance, churches and meeting can resume as long as people are vaccinated and the practice of taking temperatures at public entrances is halted. Also, all international travellers into the country will load data onto a Ministry of Health app, all unvaccinated travellers into the country must have a recent covid test result and will be tested at their own cost, while vaccinated truck drivers from East Africa will not require Covid tests. The measures were announced exactly two years since the onset of Covid in Kenya.

    • Co-Op Bank to acquire Jamii Bora

    Kenya’s third-largest bank group Co-operative (Co-Op), which is listed on the Nairobi Securities Exchange, has entered discussions to acquire 100% of Jamii Bora bank.

    Co-op Bank has an asset base of Kshs 450 billion (~$4.5 billion) and 15 million customers while Jamii Bora has assets of Kshs 12.5 billion (~$125 million).

    Kitale branch

    Jamii Bora’s assets have been on the decline and it is ranked number 36 by asset size with about Kshs 5 billion of deposits and Kshs 8 billion of loans at last reporting. Three years ago it was to raise $12 million from Equator Capital Partners and Progression Capital Africa, and early last year Jamii Bora was linked to being acquired by CBA, but that appears to have been shelved after CBA merged with NIC.

    It is owned by Asterisk Holdings, Equator Capital Partners, Jamii Bora Scandinavia, Catalyst JBB Holdings, Nordic Micro Cap Investments (PUBL-AB), has 650 other shareholders and the CEO owns 1% as the largest individual shareholder of the bank.

    Jamii Bora had made a few unfortunate forays in the corporate space, and became the largest shareholder of a restructured Uchumi, with about 15% ownership. It also got swept into the Kenya Airways debt for equity swap.

    Jamii Bora has about 350,000 customers and with 17 branches. It has a strategic niche with micro, small, and medium enterprises offering LPO financing, lease finance and trade finance services as well as training and meeting space to business owners at its headquarters in Kilimani.

    EDIT Aug 7: The Central Bank of Kenya approved the takeover of 90% of the capital of Jamii Bora Bank by Co-operative Bank of Kenya, effective August 21, 2020.

    EDIT Aug 25: Co-operative Bank announced the completion of its takeover of Jamii Bora which will now operate as Kingdom Bank. The Kshs 1 billion deal approved by the CMA and Competition Authority involved the transfer of 224.1 million Class A shares of Co-Op Bank to acquire 90% of Jamii.