Kenya is overbanked! This point cannot be emphasized enough, but to bring it into perspective it is only fitting we provide grounds for comparison. Nigeria, Africa’s biggest economy with an annual GDP of USD 560 billion and a population of 200 million is served by 20 banks, in a ratio of 1:20 million people.

In South Africa, there are 18 licensed banks, serving an estimated 55 million people hence a ratio of 1:3. In Kenya, however, with 42 commercially licensed banks, the ratio of bank vis-a-vis population stands at an estimated 1:1 million. One would easily draw the conclusion that “the more the merrier” with an assumption that the heterogeneity of players in the industry would provide diverse products and services to the benefit of the populace. However, an overview of the banking sector would reveal that this assumption
has only been partially fulfilled.

Role of a bank

A bank is an instrument or vessel that is used to stimulate economic growth in a country. It ensures that there is adequate capital by mobilization of scattered savings and redirecting them into purposeful investments. This is the primary role of a bank in the society, and
economic vibrancy is parallel to the banking fraternity fulfilling this function with efficacy.

Of Kenyan banks and the tremendous permeation

The financial sector goal in vision 2030 formulated in 2002 aims to create a vibrant and globally competitive financial sector that will optimally finance Kenya’s investment needs. Aligned with this vision were some banking sector initiatives for Vision 2030 which include;
• Transforming towards larger scale banks
• Credit information sharing
• Increased penetration
• Formalize and expand the reach of microfinance
institutions.

The banking and financial sector in general has since then made significant strides towards developing a stable market-based financial system and banking services have permeated almost every section of the country.

To read the rest of this article from B&M Issue 3, please download the FREE pdf or view it as a flipbook here.

Business & Money Magazine Issue 3 Cover

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