Coast counties plan to push for banking licence

Mombasa governor Hassan Joho says an alliance of Coast counties will forge ahead with plans to set up a bank despite the industry regulator suspending the licensing of new lenders.

Mr Joho said the counties including Kilifi, Kwale, Lamu, Mombasa, Taita Taveta and Tana River would still apply to the Central Bank of Kenya for a banking licence.

He said plans to set up the proposed Coast Development Bank “was at an aanced stage” and that each of the six counties is contributing equally towards the Sh1 billion capital.

“Nothing is going to stop the process. We will go on and engage CBK,” said Mr Joho in an interview.

The governor disclosed that the Coast grouping — dubbed Jumuiya ya Kaunti za Pwani — was still waiting for a letter of no objection from CBK.

CBK governor Patrick Njoroge last week shocked the industry when he slapped a freeze on licensing new lenders, throwing into disarray the planned entry of new players and conversion of credit unions into banks.

“The Central Bank of Kenya has, with immediate effect, placed a moratorium on the licensing of new commercial banks until further notice,” said Dr Njoroge.

READ: CBK suspends licensing of commercial banks

Gulf-based Dubai Islamic Bank had received an approval “in principle” while awaiting the full licence.

Unaitas Sacco had already hired Faida Investment Bank and RSM Ashvir as transaction aisers in its plan to convert into a commercial bank within three years.

“The moratorium follows recent developments in the banking sector — liquidation of Dubai Bank Ltd and the placement of Imperial Bank Ltd under receivership — which have highlighted the urgency of enhancing bank supervision,” said CBK.

Coast-based counties are banking on the proposed lender as a vehicle to mobilise long-term and cheaper cash to fund projects in the devolved units.

The proposed Coast Development Bank will also be used as the treasury bank for the devolved units where the national government would channel the region’s share of revenue. It will process salaries for all county employees in the Coast economic bloc and allow individuals and corporates to open accounts.

The coastal region despite being a tourist, mineral wealth and agricultural hotspot and hosting the sea port, has a gross domestic product of $3,257 (S33,000) — which is marginally lower than Nairobi’s GPD per capital of $3,392 (S45,000), according to fresh data from the World Bank.

Kwale, which is ranked a marginalised county by the Commission for Revenue Allocation, is ranked Kenya’s fifth richest unit with a GDP per capita of $1,406 (Sh144,000)— backed by tourism, minerals (titanium and rare earth) and agriculture (sugarcane).