Kenya’s commercial banks have experienced an 11.58% rise in profits, totaling $1.22 billion in early 2024, despite facing challenges like rising loan defaults and reduced borrowing. The Central Bank of Kenya projects a 6% growth for the sector, while strategic moves such as Network International’s POS rollout and JPMorgan Chase’s new office underscore a robust financial landscape. WhatsApp banking is gaining traction among banks to improve customer interactions.
Kenya’s commercial banks have reported an 11.58% increase in pre-tax profits totaling $1.22 billion for the first eight months of 2024, despite facing issues like rising loan defaults and low borrowing demand. According to the Central Bank of Kenya (CBK), profits grew from $1.09 billion during the same timeframe last year, demonstrating the banking sector’s resilience.
CBK Governor Kamau Thugge noted that March was the peak month, with pre-tax profits of $184 million, while August saw the lowest earnings at $119 million. This minor dip did not hinder the sector’s overall growth, as it remains a vital part of Kenya’s economy, notwithstanding upheavals experienced elsewhere.
In 2024, Kenya contended with adverse conditions, including intense rains, political unrest, and liquidity issues. Despite these challenges impacting various sectors, the banking industry has shown its strength, with the finance and insurance sector growing by 7% in Q1 but slowing to 5.1% in Q2. The CBK anticipates a 6% growth for banks this year, marking the slowest rate since 2020 during the pandemic.
The national economic forecast for growth has been revised downward to 5.1%, correlating with a decrease in the banking sector’s loan book, which fell to $27.2 billion, down $1 billion from 2023. The private sector credit growth is also suffering, slowing to just 1.3% – the lowest pace in over five years, while non-performing loans shot up to 16.7%, the highest in 18 years.
In addressing these economic challenges, the CBK has reduced the benchmark lending rate to 12% to stimulate borrowing and aid economic activity. This decision was influenced by the notable slowdown in private sector credit and economic growth, as stated by the CBK.
Meanwhile, Network International is enhancing its presence in Kenya with new point-of-sale (POS) solutions, aiming to fill the digital payment infrastructure gap for businesses. By providing these systems for free, Network International promotes broader acceptance of mobile wallets and card payments, while ensuring robust cybersecurity measures against rising cyber threats in the region.
JPMorgan Chase is also advancing its position in the African market by establishing an office in Nairobi, granted an operating license by the CBK. The bank’s Country Manager, Sailepu Montet, will lead operations as JPMorgan focuses on investment and commercial banking, eyeing the growing fintech landscape in Kenya.
Additionally, Kenyan banks are increasingly utilizing WhatsApp banking to streamline transactions and enhance customer engagement. Since 2019, banks like HF Group and KCB have deployed solutions allowing secure chat sessions for banking services, emphasizing security in response to emerging concerns over digital transaction safety. M-Pesa, widely used across Kenya, further integrates WhatsApp functionalities to provide assistance to customers.
The Kenyan banking sector is undergoing transformative changes, facing a dynamic economic environment marked by challenges such as political unrest and natural disasters. Despite these hurdles, banks have shown significant profitability, indicating robust management and adaptation strategies. The introduction of digital solutions and the expansion of established banks illustrate a shift towards modern financial operations, catering to a tech-savvy population while upholding security amidst increasing cyber threats.
In summary, Kenyan banks are navigating a challenging economic landscape with notable profitability increases despite declines in lending. The aggressive adoption of digital banking, particularly through platforms like WhatsApp, reflects a commitment to convenience and customer engagement. Meanwhile, international banks recognize Kenya’s potential, leading to expansion efforts, enhancing the country’s financial ecosystem.
Original Source: www.zawya.com
