Bankers want core capital up to Sh9bn

Kenya Bankers Association chairman Joshua Oigara (left) said the amount of funds banks must hold in reserve against deposits should be increased from Sh1 billion to Sh8.7 billion to encourage mergers. PHOTO | SALATON NJAU | NATION 

In Summary

• The bankers’ association chairman said the current core capital was insufficient for the scale of the development projects being launched by the Jubilee administration.
• At the release of the KCB’s 2014 half-year financial results, Mr Oigara said lenders in the country lacked the capacity to finance mega projects, limiting their contribution to economic development.

By RAMENYA GIBENDI
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Bankers say the minimum core capital requirement for each bank should be increased eight-fold to enable the sector to play a bigger role in the economy.

 

Kenya Bankers Association chairman Joshua Oigara said the amount of funds banks must hold in reserve against deposits should be increased from Sh1 billion to Sh8.7 billion to encourage mergers.

He was speaking in an interview during the US-Africa Leaders’ Summit in Washington, DC, on Tuesday.

“In Kenya, 70 per cent of the banking business is done by eight companies and the fragmentation of the industry is hindering the scale needed by banks to offer more complex services,” Mr Oigara was quoted by Bloomberg News, as saying. Mr Oigara is the chief executive of the Kenya Commercial Bank, the largest bank in Kenya in assets base.

At the release of the KCB’s 2014 half-year financial results, Mr Oigara said lenders in the country lacked the capacity to finance mega projects, limiting their contribution to economic development.

“We are a country of many small banks, which ultimately limits our participation in financing major projects in the economy,” he said.

JUBILEE DEVELOPMENT PROJECTS

The bankers’ association chairman said the current core capital was insufficient for the scale of the development projects being launched by the Jubilee administration.

In 2008-2009, Nigerian banks consolidated which is credited with producing strong lenders.

Currently, the minimum core capital reserve in the West African nation is Sh13.4 billion.

According to the Central Bank of Kenya, there are some 43 commercial banks, nine microfinance institutions and eight representatives of foreign banks as well as a mortgage finance institutions in Kenya.

South Africa, on the other hand, with an economy that is nine times bigger than Kenya’s, has 31 banks, including the branches of some big foreign banks.