Tuesday, June 25

Banking

Kenya's Bilateral loans
  • Kenya’s bilateral loans data show that the Asian giant is still a major lender to Kenya mainly for the development of roads rails and port infrastructure.
  • The country’s debt as of March 2024 comprised of $80.9 billion (Sh10.4trillion) comprising $40.5 billion (Sh5.2 trillion) domestic and same amount in external loans.
  • In the past three months the strong shilling has come in handy in helping the state reduce its debt.

Kenya owes China $7.2 billion (Sh920.52 billion) in loans making it the leading lender by country rankings, even as President William Ruto looks west for more financing and trade cooperation.

Official data shows the Asian giant is still a major lender to Kenya mainly for the development of roads rails and port infrastructure.

It is the second biggest majorl lender after the World Bank, whose credit line to Kenya is currently at an estimated $14 billion (Sh1.8 trillion)

The country’s debt …

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The World Bank.
  • The World Bank has approved a $2.25 billion loan for Nigeria to shore up revenue and support economic reforms.
  • $1.5 billion of the loan will help protect millions who have faced growing poverty since a year ago.
  • $750 million, the bank said, will support tax reforms and revenue and safeguard oil revenues threatened with limited production caused by chronic theft.

Nigerian President Tinubu’s economic reforms, including ending decades-long but costly fuel subsidies and unifying the multiple exchange rates have resulted in surging inflation that is at a 28-year high.

Under growing pressure from citizens and workers protesting the hardship, Tinubu’s government said that it was seeking the loan to support its long-term economic plans.

The government said it was also taking steps to boost foreign investment inflows which fell by 26.7 per cent from US$5.3 billion in 2022 to US$3.9 billion in 2023, according to the Nigerian Economic Summit Group

British International Investment
    • The transaction marks the successful outcome of BII and I&M’s equity partnership for over 7 years as AfricInvest takes over.
    • The institution said that the sale to a like-minded investor is one of the most significant transactions in East Africa in recent years and represents a vote of confidence in the region’s financial services sector.
    • It is listed on the Nairobi Securities Exchange, and the Rwandan subsidiary I&M Bank Rwanda PLC is listed on the Rwanda Stock Exchange.

    British International Investment (‘BII’)

  • British International Investment (‘BII’), the UK’s development finance institution and impact investor, has sold its 10.1 per cent stake in I&M Group PLC, the Eastern African banking group, to AfricInvest, a leading Pan-African Asset Management platform.

    The acquisition was made through East Africa Growth Holding, a special-purpose vehicle owned by AfricInvest.

  • I&M Group PLC is a leading banking group in Eastern Africa with a presence in Kenya,
KCB Group CEO
  • East Africa’s banking giant KCB Group reports heightened operational expenses, which surged to $627 million in 2023, up from $447.9 million in 2022.
  • The costs are associated with the consolidation of its subsidiary in the Democratic Republic of Congo, Trust Merchant Bank (TMB),
  • Additional expenditures were related to a voluntary retirement scheme as well as litigation fees.

KCB Group, one of East Africa’s banking giants, has reported a net profit decline to $282 million for the year ending December 2023, from $307 million in 2022.

The bank has attributed this decline to increased operational costs and higher provisions for bad loans as primary reasons for the downturn in profitability.

In a period marked by economic challenges and strategic expansions, KCB Group faced heightened operational expenses, which surged to $627 million in 2023, up from $447.9 million in 2022.

DRC-based Trust Merchant Bank consolidation costs

This increase was largely due to …

multi-banking in Kenya
  • In Kenya, the level of bank clients running two bank accounts stood at 53% in 2023 compared to 48.2% in the 2022 survey.
  • Industry survey ranks Cooperative Bank as the best overall lender in customer experience in the country followed by regional giant NCBA.
  • The results show that the respondents had an overwhelmingly positive view of their banks.

The competition within Kenya’s banking sector is driving an increasing number of customers to diversify their relationships, opting to hold accounts with multiple institutions, a practice commonly referred to as multi-banking, in order to tap into a range of benefits.

In a 2023 survey, the Kenya Bankers Association (KBA) says 53 per cent of bank customers maintain more than one bank, in a trend that highlights a growing desire for customized convenience in services and products among bank customers.

Growth of multi-banking in Kenya

According to the Banking Industry Customer Satisfaction Survey

Africa Finance Corporation
  • Emuwa brings to Africa Finance Corporation a wealth of experience over three decades.
  • He has been a part of AFC’s Board since 2015, previously serving as the Board Risk and Investment Committee Chairman.
  • AFC, with its partners, is the biggest investor in renewable energy in Africa

Africa Finance Corporation (AFC), the continent’s leading instrumental infrastructure solutions provider, has appointed Emeka Emuwa as Chairman of its Board of Directors.

Emuwa brings a wealth of experience spread over three decades, leading and transforming banking institutions across Africa.

After completing a 25-year career with Citibank, where he left as the Country Officer and Managing Director of Citibank in Nigeria, he went on to serve as the Group Managing Director and Chief Executive Officer of Union Bank of Nigeria.

In this role, he led the bank’s transformation. He worked successfully with the new shareholders to transform and restore one of

non-performing loans in kenya
  • Non-performing loans in Kenya surged to a 16-year high of 15 per cent in August 2023.
  • The Kenya Bankers Association had called for further monetary policy tightening by the CBK, terming it a cure to elevated non-performing loans.
  • According to the CBK data, forex pressure cut lending to the private sector to 8.3 per cent during the review period.

The banking sector regulator has said that Kenya’s private sector players resorted to alternative funding sources to avoid the high lending rates, leading to a drop in non-performing loans during the holiday season.

The continued surge in bank interest rates has hit individuals and businesses hard on the back of the Central Bank of Kenya’s (CBK) elevated benchmark interest rate. This has happened thrice since Governor Kamau Thugge took office, citing the need to support the country’s struggling shilling.

On Tuesday this week, the Central Bank of Kenya increased the benchmark …

the cost of borrowing in Kenya
  • The cost of borrowing in Kenya has been going up since October last year, when it was at 10.50 per cent, before two consecutive raises.
  • This means banks are likely to adjust their interest rates upwards, pushing the cost of borrowing beyond the reach of many.
  • The majority of bank rates are currently above 20 per cent, amid a high default rate as banks struggle with Non-Performing Loans (NPLs).

Higher interest rates to raise the cost of borrowing in Kenya

The cost of borrowing in Kenya is set for yet another rise if banks are to factor in the latest Central Bank of Kenya increase in the base-lending rate.

The Central Bank of Kenya (CBK) has raised borrowing costs to highs last seen nearly 12 years ago, as it moves to try and contain the country’s inflation, which has started to pick.

On Tuesday, the Monetary Policy Committee, CBK’s top …

High Interest Rates
  • The Central Bank of Kenya benchmark rate has gone up to 12.5 per cent from 10.5 per cent.
  • Developing economies including Kenya are paying dearly for geopolitical tensions.
  • The current US policy rate at 5.25 per cent -5.5 per cent is the highest in 22 years, exerting pressure on economies.

Borrowers in Kenya are facing the prospect of more expensive loans following the country’s central bank’s decision to raise its base lending rate to a near 11-year high of 12.50 per cent. This marks an increase from the 10.50 per cent rate that has been in place since June this year, when it rose from 9.50 per cent due to a rise in non-performing loans in the banking sector.

The hike in rates occurs as Kenya, along with other economies in the region, continues to grapple with the impact of global factors, including elevated interest rates in the United States. …

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