Kenya’s Banking Sector Still an Attractive Investment

Kenya’s audit firm, RSM Ashvir, says one of the youngest finance houses, Equity Bank, registered best returns on deployed assets.  According to media reports, Equity’s returns were higher at eight per cent compared to other industry actors such as KCB that was at 5.7 percent, Standard Chartered at 6.4 percent and Co-operative Bank at five percent.

“The banking sector in Kenya is attractive but this depends on the size of the bank one is running,” Ashif Kassam, executive chairman of RSM Ashvir Group advised.  An estimated 51 percent of the population is utilizing banking service, an extremely low percentage if compared to developed economies where a 100 percent margin is recorded.

Kassam added, “There is a very big unbanked population in Kenya especially if one looks at the total deposit as a percentage to the gross domestic product, it is about 51 per cent.”  Equity Bank’s loans were at 98 percent of deposits, the highest ratio in the industry.  Certain media reports noted that, most of the small banks recorded a below three per cent ratio with Ecobank and UBA Bank posting negative returns owing to their loss-making positions.

Equity attributed the asset utilization to their fast uptake of the agency model which they say has helped to mobilize cheap funds from the public that are convertible to loans.  According to reports released by the bank upon release of the quarter results, Equity Bank had returned to its traditional growth path by recording a 21 per cent growth in its first quarter amidst a challenging operating environment.

The primary focus areas for the financial house on small to medium enterprises are on innovative delivery channels such as agency and mobile banking; merchant acquiring business and payment processing; diaspora banking and remittance processing, regional expansion and diversification into other financial services.

Source: CNBC Africa