Kenyan banks rank poorly among peers in region, says IMF

Kenya ranks in the bottom half among the middle-income countries in sub-Saharan Africa (SSA) in terms of penetration of the commercial banking sector.

Data from the International Monetary Fund (IMF) shows that Kenyan banking sector penetration — as measured using total assets — stands at 64.2 per cent of the gross domestic product (GDP), placing it position seven among the 12 countries classified as middle-income in SSA.

Kenya’s position is also below the average penetration of 99.2 per cent of the GDP for the same region.

Even though the country is not high up in commercial banking, the report notes that its strength lies in the usage of mobile phones to access financial services.

“In some countries, such as Kenya, mobile-based money has overtaken access to traditional bank accounts, thereby contributing to reducing inequality in access to finance between income groups,” says the IMF latest report on SSA economies.

The Central Bank of Kenya (CBK) says that by the end of September, the local banking sector had total assets of S.65 trillion, up from S.2 trillion at the end of last December and Sh2.7 billion in the previous year. This indicates that the industry’s assets have grown by Sh1 trillion in 21 months.

Mauritius — which is considered a financial hub with a tax haven status — comes top among the middle-income countries with its commercial banks assets at 352.9 per cent of the GDP, meaning that the sector is three-and-a-half times the size of the economy. It is followed by Cape Verde at 137.3 per cent and South Africa at 113.3 per cent.

Kenya’s neighbours including Uganda, Tanzania and Burundi are ranked among the low-income countries with the penetration at 29.5, 29.5 and 29.4 per cent respectively. Rwanda was not ranked.

The penetration for the entire SSA region has actually been rising, the IMF says. In 2009, the region had a penetration of 51.8 per cent while in the period between 2004 and 2008 it had an average of 40.3 per cent. Despite the improvements, the IMF says the penetration seems to have a gender bias.

“Financial inclusion has generally improved. The percentage of the population with an account at a financial institution has increased in recent years, but more so for men than for women,” said the IMF.

It notes that in Kenya the extent of the gender gap in access to mobile money is bigger than that in relation to traditional bank accounts, but it adds that this is similar to other countries in the SSA region.

A past survey by the Financial Sector Deepening Trust (FSD Kenya) shows that at least 75 per cent of Kenyans have financial access, when you take into account the mobile money registration and the informal sector.

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But the same FSD survey, like the IMF’s, showed that gender gaps are still prevalent.

“Men still have better access to formal services and inasmuch as we see a substantial shift in formal inclusion for women, more can still be done in enabling women access services such as banks and saccos as part of their financial portfolio,” says FSD Kenya survey.