Financial Sector Profile of Kenya

Financial Sector Profile of Kenya

Kenya has a stable and resilient financial sector comprised of the banking, capital markets, insurance, pensions, and savings credit cooperatives among other players. Other players include microfinance institutions, money remittances companies, foreign exchange bureaus and development finance institutions. The country currently has 42 commercial banks, 4 credit reference bureaus, 4 mobile money operators, 14 money remittance providers, 1 mortgage finance , 12 deposit taking microfinance banks , 109 licensed Foreign Exchange Bureaus, 49 Insurance Companies , 2 Re-Insurance companies and 199 registered savings and credit cooperatives (SACCO’s).

Contribution to GDP

INDUSTRY INDICATOR	2013		2014		2015
	KSh Mn	% of GDP	KSh Mn	% of GDP	KSh Mn	% of GDP
Nominal GDP	4,745,439	–	5,398,020	–	6,224,369	–
Banking Net Assets	2,703,394	56.97	3,199,396	59.27	3,492,643	56.11
Microfinance Assets	41,400	0.87	56,900	1.05	69,465	1.12
Pension Industry Assets	696,680	14.68	788,150	14.60	814,100	13.08
Insurance Assets	366,252	7.72	426,310	7.90	478,752	7.69
Saccos Industry Assets	257,368	5.42	301,537	5.59	328,244	5.27
TOTAL ASSETS	4,065,094	85.66	4,772,293	88.41	5,183,204	83.27
Equities Market Cap	1,920,718	40.48	2,300,054	42.61	2,049,539	32.93

Source: Compiled from sectoral data and KNBS

Licenses and supervises all the activities of capital market intermediaries, ensures proper conduct of all licensed persons and market institutions and regulates the issuance of the capital market products (bonds, shares etc.)

Societies Regulatory Authority (SASRA)

The functions of SASRA are as follows;

Licence Sacco societies to carry out deposit-taking business in accordance with this Act;
Regulate and supervise Sacco societies;
Hold, manage and apply the General Fund of the Authority in accordance with the provisions of this Act;
Levy contributions in accordance with this Act;
Do all such other things as may be lawfully directed by the Minister; and
Perform such other functions as are conferred on it by this Act or by any other written law.

Retirement Benefits Authority (RBA)

Regulates and supervises the establishment and management of pension schemes, protects the interest of members and sponsors of retirement benefits schemes and develops and promotes the retirement benefits sector.

The Banking Act (Chap 488)

This was an Act of Parliament to amend and consolidate the laws regulating the banking business of in Kenya and for connected purposes.

The Kenya Deposit Insurance Act, 2012

The Kenya Deposit Insurance Act was passed to provide for the establishment of a deposit insurance system and for the receivership and liquidation of deposit taking institutions, to provide for the establishment of the Kenya Deposit Insurance Corporation and for connected purposes.

Nairobi Stock Exchange

The Nairobi Stock Exchange (NSE) is the principal stock exchange of Kenya. It has continued to successfully enable idle money and savings to become productive by bringing together borrowers (issuers) and lenders (investors) of money at a low cost.

Reforms

The Financial Sector Authority (FSA) Bill proposes the merging of the following four regulatory agencies: the Capital Markets Authority (CMA), the Retirements Benefits Authority (RBA), the Insurance Regulatory Authority (IRA) and the SACCO Societies Regulatory Agency (SASRA). The bill is currently undergoing legal drafting before being submitted to Parliament for approval.
To kick-start the establishment of the Nairobi International Financial Centre to position Nairobi as an international financial hub, the Nairobi International Financial Centre Bill was approved by the Cabinet in December 2016 and submitted to Parliament for approval.
The Moveable Property Security Rights Bill which facilitates lenders to provide credit using moveable properties as collateral and also creates an online electronic collateral registry and is already before the Cabinet review and will be forwarded to the National Assembly for approval;
The Kenya Credit Guarantee Scheme Bill to further support access to credit by Small and Medium Enterprises will be finalised and forwarded to Cabinet and thereafter the National Assembly;
Other reforms to address the high cost of credit include reforms to facilitate leasing and factoring, further extending the credit reporting framework to include credit providers from outside the financial sector, digitization of land registries and other legal reforms to facilitate the expansion of mortgage finance;
Enhancing Kenya’s position as an Islamic Finance Hub by putting in place an Islamic Finance Regulatory Framework through the recently launched Islamic Finance Steering Committee (IFSC) chaired by the Cabinet Secretary/National Treasury and Islamic Finance Consultative Committee (IFCC);
Strengthening, by the Central Bank of Kenya, of the bank supervision legal and regulatory framework. This will include enhancing the macro- and micro-prudential Stress Testing Framework and cross border supervision framework;
Strengthening the independence and capacity of the Kenya Deposit Insurance Corporation (KDIC) to ensure it is able to expeditiously undertake bank resolution and protect the interests of depositors; and,
Launching the M-Akiba Government Bond which will be the world’s first purely mobile phone based Government security.

Financial Markets Infrastructure (FMI)

Payment systems in Kenya have grown rapidly overtime largely supported by faster growth in internet and mobile phones, e-commerce, technological developments and Near Field Communication (NFC). Cross-border payments can now be made in exactly the same way as national payments, allowing the most innovative payments firms to compete in the retail payments. Factors supporting these initiatives, include: innovative technology-enabled business products and services; broadening the range of payment instruments and services; Improved cost efficiency measured by operating, access and usage costs; Enhanced interoperability and resilience of banking, payment and securities infrastructures; Improved oversight and regulatory regimes for the national payment system; and Enhanced efficiency and stability of payment systems and service providers.

Mobile Phone Money Transfers

Mobile Phone Money Transfer services continued to grow in 2015, with the number of agents up by 16.4 per cent, mobile money transfer accounts up by 25.4 per cent, the volume of transactions up by 22.3 per cent and transactions value up by 18.7 per cent. These increases is attributed to adoption of mobile money transfer services by different institutions comprising of both financial and non-financial including banks, pensions, Saccos, merchants, like microfinance institutions (MFI), NGOs, insurance, government agencies, among others for cash disbursement and repayment of loans and salary payments as well as purchases of goods and services.

Mobile Phone Money Transfer services

Indicator	2010	2011	2012	2013	2014	2015
No. of Agents	39,449	50,471	76,912	113,130	123,703	143,946
Mobile Money Ac/s (mns)	16.4	19.2	21.1	25.3	25.2	31.6
No. of Transactions (mns)	311	433	575	733	911	1,114
Transaction Value (KSh bn)	732.2	1,169	1,538	1,902	2,372	2,816
Average Transaction Value (KSh)	2,354	2,700	2,672	2,594	2,604	2,528

Source: Central Bank of Kenya

Challenges in the Financial Sector

Instability in financial markets
Slow economic recovery in response to external shocks and structural challenges within the economy.
Rapid depreciation of local currency
Rising inflation
High interest rates
Dry up of capital markets
Steep rise in crude oil prices
Effects of drought and uncertainty in the economy

Factors driving growth of the sector

Technology that has been effective in cost reduction
Emergence of alternative channels of distribution
Increased financial inclusion levels
Stable regulatory environment

Information under the financial sector of Kenya is organised as follows