Deals by foreign lenders’ Kenya offices hit Sh511bn

Foreign banks’ representative offices in Kenya recorded 32 percent increase in the volume of business transacted in the country last year compared to 2018. FILE PHOTO | AFP

By CHARLES MWANIKI
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Summary

• Data from the Central Bank of Kenya’s annual banking sector report for 2019 shows that the offices transacted $4.67 billion (Sh511 billion) deals from $3.51 billion (Sh384.13 billion) in 2018.
• The increase was higher than that recorded between 2017 and 2018, when the value of the deals went up by 18.4 percent.
• There were nine such offices in Kenya as at the end of last year, carrying out research, marketing and liaison roles.

Foreign banks’ representative offices in Kenya recorded 32 percent increase in the volume of business transacted in the country last year compared to 2018, helped by trade finance and working capital deals.

Data from the Central Bank of Kenya’s annual banking sector report for 2019 shows that the offices transacted $4.67 billion (Sh511 billion) deals from $3.51 billion (Sh384.13 billion) in 2018.

The increase was higher than that recorded between 2017 and 2018, when the value of the deals went up by 18.4 percent.

There were nine such offices in Kenya as at the end of last year, carrying out research, marketing and liaison roles. They are barred from conducting commercial banking services unless they open a full-fledged subsidiary or branch.

“The value of business activities facilitated in 2019 increased by 31.89 percent when compared to 2018. The activities facilitated largely comprised trade finance, term loans, working capital, bilateral receivable discounting and syndicated finance,” said CBK in the report that was released last week.

In 2018, their activities consisted mainly of corporate finance, syndicated finance and correspondence banking.

Trade finance deals, which were the biggest line of transactions in the period, rose by Sh51.5 billion to hit Sh168.6 billion last year.

Corporate finance deals remained flat at Sh14.23 billion. Syndicated financing doubled to hit Sh93.1 billion, as did project financing which rose from Sh7.67 billion in 2018 to Sh15.33 billion last year.

Volumes from correspondence banking rose by Sh8.76 billion to Sh39.42 billion, reversing the decline of Sh13.1 billion that had been recorded in 2018 in the line of business.

Correspondence banking involves transactions originating from other overseas branches conducted through the Kenyan office where the local parties or partners are based.

Other deals—comprising term loans, borrowing base, working capital and bilateral receivable discounting— rose by Sh5.4 billion to Sh153.3 billion.

The most recent entrant among the nine representative offices is Bank Al-Habib Ltd of Pakistan, which was granted a CBK licence in April 2018.