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Small banks continue to fight for survival as six major ones control 56 per cent of the market

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By Ben Kinyanjui

The six largest commercial banks in Kenya continued to dominate the industry despite efforts by the Central Bank of Kenya to increase competition in the multi-billion shilling industry.

Cooperative Bank is one of the biggest banks in the countryCooperative Bank is one of the biggest banks in the country

The banks, Kenya Commercial Banks (13 per cent), Barclays bank (10), Equity Bank (9.5), Cooperative bank (8.7), Standard Chartered bank (7.8) and CIC Stanbic Bank (5.3 per cent) controlled 56.1 per cent of the market last year.


The 15 banks classified by CBK as medium controlled 34.5 per cent while the 23 small banks controlled a meager 9.5 per cent of the market. This is equivalent to the market share enjoyed by Equity Bank alone.


However, CBK says the banking sector remained stable and registered enhanced performance with total assets increasing by 24.4 percent from Sh1.35 trillion in December 2009 to Sh1.68 trillion in December 2010.

The bank says in its annual banking supervision report that the growth was supported by the increase in loans and advances where  Customer deposits grew by 22.8 percent from Sh1.01 trillion in December 2009 to Sh1.24 trillion in December 2010.

“The growth was attributed to increased deposit mobilization by banks as they expanded their outreach and opened new branches to tap new customers,” says Mr Fredrick Pere, head banking supervision at CBK.

“The pre-tax profit for the sector grew by 51.9 percent from Sh48.9 billion in December 2009 to Sh74.3 billion in December 2010.”

He says the growth was largely attributed to income generated by increased loans and advances. With gross loans increasing by 20.7 percent from Sh757.9 billion in December 2009 to Sh 914.9 billion in December 2010.

Pere says the growth in loans is attributed to improved domestic economic performance, which opened opportunities to banks to extend credit.

However, CBK Governor Prof Njuguna Ndung’u says reforms in the sector will continue in order to maintain stability in the industry.

“During the CBK pursued financial reforms geared towards enhancing financial access, efficiency and stability of the banking sector,” he says.

“These reforms comprised introduction of agent banking, roll-out of credit information sharing and licensing of deposit taking microfinance institutions.”

He said the regulator in collaboration with the Government and market players will continue to initiate measures to scale up access to financial services by most people.

“This drive will be underpinned by the continued strengthening of the legal and regulatory framework to catalyse provision of safe, efficient and accessible financial services and products,” he says.

However, CBK is facing an uphill task to convince the banks to reduce the interest rates margins paid to deposits as opposed to interests on loans.

While lending rates have remained on double digit level over the last decade, interest paid to deposits hardly exceeds six per cent.

According to the report, the number of loan accounts increased from 1.67 million in December 2009 to 1.74 million in December 2010.

During the same period, the number of deposit accounts increased from 8.7 million in December 2009 to 12.8 million in December 2010.

“This growth demonstrates increased access to financial services by the populace,” says Opere.

“The sector’s growth momentum was underpinned by the recovery of both the global and domestic economy.”

The Kenyan economy expanded by 5.6 percent in 2010 from a suppressed growth of 2.6 percent in 2009 while the favorable weather conditions, low inflationary pressure and government policies impacted positively on various sectors of the domestic economy.


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