A KCB banking Hall in Juba, South Sudan. Leading local banks have opened
multiple branches in Uganda, Tanzania, Rwanda and South Sudan. File
Nation Media Group
By CHARLES MWANIKI
In Summary
The large Kenyan banks are best positioned to benefit from growth opportunities, the report says.
Well-funded Kenyan banks are set to lead regional
lenders in business expansion over the next two years owing to larger
capital bases and investment in mobile technology, a new report by
consultancy Moody’s says. Moody’s says it expects the East Africa
Community banking sector to have balance sheet growth of between 15 and
20 per cent in each of the next two years.
The growth will be driven primarily by robust GDP growth —
forecast by IMF at between 6.6 per cent this year and 6.7 per cent in
2015 — the ongoing regional integration, and the mobile money revolution
which is helping increase banking penetration.
“The large Kenyan banks are best positioned to
benefit from growth opportunities, given their dominant, cross-border
networks and advanced mobile technology capabilities.
‘‘The integration process is creating new business
opportunities for the region’s banks, mainly in trade finance (letters
of credit, letters of guarantee), infrastructure project lending,
foreign exchange services, as well as credit growth,” said Constantinos
Kypreos, Moody’s vice-president and senior credit officer, without
giving a breakdown of growth projections for the countries.
EAC’s 2013 banking sector assets totalled about
Sh4.8 trillion ($54 billion), with those of Kenyan banks alone currently
standing at Sh2.97 trillion. Local banks have been more aggressive than
their regional counterparts in tapping the EAC market for additional
business.
Leading lenders, including Kenya Commercial Bank, Equity Bank and Cooperative Bank, have opened multiple branches in Uganda, Tanzania, Rwanda and South Sudan.
“In instances where (Kenyan) banks are faced with
financing demands such as those of infrastructure projects that are
beyond the capacity of a single lender, there is room to syndicate the
loans among different banks,” the report titled East African Community:
Credit Issues for Banks says.
Kenyan lenders have also led in integration of
mobile money services with their banking systems, taking advantage of
the accessibility of services such as M-Pesa to reach clients without an
expensive brick-and-mortar branch network and with low transaction
costs. The M-Shwari product developed by Safaricom
and Commercial Bank of Africa, for instance, saw the bank increase its
loan accounts to 897,000 last year up from 89,000 in 2012.
KCB and Safaricom have recently launched a suite of
mobile services targeting SMEs, including bank account opening, website
domains as well as talk-time and text message services.
Equity Bank is also set to launch its virtual
mobile network (MVNO) which will give the bank a bigger opportunity in
the money transfer business currently dominated by Safaricom’s M-Pesa.
“Regional uptake of mobile money, for example in
Rwanda, has been high but it has been from a low base,” said Standard
Investment Bank head of research Francis Mwangi.
Profitability
In spite of the increase in balance sheet size, the
banks are not expected to see a corresponding rise in profitability, as
increased revenues are offset by declining interest margins, rising
operating costs and high loan-loss provisions.
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