Kenya’s banking sector is attracting interest from the west and the south. It must be doing something right—but what is it?
On August 13, Bloomberg reported that FirstRand Bank, South Africa’s second-largest commercial bank with R2.3 trillion ($131.32 billion) in assets, is eyeing a Kenyan enattempt. This comes amid interest from Nigerian tier-1 bank, Zenith, which is also planning to build a splash in the counattempt.
Why the interest in Kenya? The counattempt’s banking sector is undergoing a recapitalisation exercise. In February, the Central Bank of Kenya (CBK) raised minimum bank capital tenfold to KES 10 billion ($77 million). Only 14 of 39 banks are expected to meet the new threshold, according to the CBK, leaving the rest to merge, obtain acquired, or face licence downgrades.
Foreign banks have sniffed this opportunity. On July 1, Kenya lifted a ten-year moratorium on new banking licences, allowing foreign banks to set up brand new operations—not just purchase into existing ones. This “open door” policy is especially attractive for foreign lconcludeers eyeing SME and retail banking, a contrast to Nigeria’s recapitalising sector, where large indigenous players dominate and new foreign entrants face stringent capital requirements.
In Nigeria, most foreign interest is limited to acquiring stakes; Citibank Nigeria and Standard Chartered are the only foreign banks with commercial banking licences, with Citibank focutilizing on servicing corporates, multinationals, governments, and institutional clients.
Here’s FirstRand’s CEO, Mary Vilakazi: “We’d like to go to Kenya. They have increased capital requirements significantly, and not even becautilize of Basel III, but just becautilize that’s what you can do when you want to drive consolidation, so hopefully we’ve obtained an opportunity there.”
The huge picture: A FirstRand enattempt into Kenya will increase competition with rival Standard Chartered Bank, South Africa’s largest bank by assets, which already operates in the counattempt.
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