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 entry. This comes amid interest from Nigerian tier-1 bank, Zenith, which is also planning to make a splash in the country.
Why the interest in Kenya? The country’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, get 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 buy into existing ones. This “open door” policy is especially attractive for foreign lenders 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 focusing 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 because of Basel III, but just because that’s what you can do when you want to drive consolidation, so hopefully we’ve got an opportunity there.”
The big picture: A FirstRand entry into Kenya will increase competition with rival Standard Chartered Bank, South Africa’s largest bank by assets, which already operates in the country.
