The Central Bank of Kenya has made two significant changes in the country’s banking sector. The first is to lift a decade-long moratorium on licensing new banks. Second is to raise capital requirements, the amount of money banks are required to keep readily available compared with the value of other assets they have. Bank capital is what shareholders have invested in the banking business. It’s a buffer against insolvency. Higher capital makes a bank stronger by reassuring depositors that their money is “safe” in case of a financial crisis. Economics professor XN Iraki answers some questions about Kenya’s banking sector and the importance of the two latest policy changes.
What is the state of Kenya’s banking sector?
Kenya has 39 licensed banks. Of these, 17 are classified as foreign-owned with 50% or more shareholding held by foreign interests. All the top commercial banks are listed on the Nairobi Stock Exchange. Three are majority government-owned while the rest are privately owned.
