1. Kenya’s Experience in Export of Banking
Services
Jared Osoro, Kenya Bankers Association
June 5, 2013; World Bank Conference on
“Trade and Regulation of Services in Africa”

2. Outline
• An Overview of Kenya’s Banking Industry.
• Expansion of Kenyan Banks to the EAC and
Beyond: Experiences.
• Emerging Opportunities

3. Overview of the Kenyan Banking Industry
Market Share (Based on a Composite Index of Assets, Deposits, Capital Size,
and number of Deposit Accounts And Loan Accounts) – Dec 2012
Market
Share
Number of
Banks
Net Assets
(US$ B)
Customer
Deposits
(US$ B)
Capital &
Reserves
(US$ B)
Large 53.7% 6 1.2 10.4 2.4
Medium 36.8% 15 17.1 7.7 1.5
Small 9.5% 22 9.2 2.0 0.4
Total 100% 43 27.4 20.1 4.3
The financial system is
dominated by
commercial banks
The industry has 43
banks and one housing
finance institution
Even with the large number of banks, the industry is very
concentrated

4. Overview of the Kenyan Banking Industry
Ownership and Asset Base – Dec 2012
Ownership Number % Total Net Assets (US$ B) %
Local Public
Commercial Banks
3 7.0% 1.2 4.2%
Local Private
Commercial Banks
27 62.8% 17.1 62.4%
Foreign Commercial
Banks
13 30.2% 9.2 33.4%
43 100.0% 27.4 100.0%
The ownership of the Kenyan banks is largely by local private sector.

5. The ‘Foray’ Into the Region
There are 11 Kenyan banks with subsidiaries in the EAC
and beyond; A total of 282 branches – some banks having
as many as 61 Branches across the region:
• Out of the 11 banks, 3 are in the large category, 6 are in the
medium category, and 2 are in the small category.
Opportunities arising from the integration process provide
a clear incentive for banks to cross-borders ; but banks are
looking beyond the EAC:
• 31 of the 282 braches are in South Sudan (a non-EAC
Member), more than they are in Burundi (an EAC Member);
• Two medium banks have acquired stakes in banks in Malawi
(11.4% - First Merchant Bank) and Mauritius (50% - Bank
One); some Banks are giving Somalia serious consideration.

6. The ‘Foray’ into the region - Experiences
• The local banks have demonstrated leadership; foreign
banks have contributed towards enhanced efficiency and
market competition that has allowed local banks exhibit
maturity to venture regionally;
• The incentive of the banks venturing out are clear; but
the host considerations have to be taken on board:
– Governance structure that allows to ‘stand alone’ versus the
subsidiaries being organized as ‘business lines’; e.g. a matrix
governance structure where the treasurer and risk manager
reports to the parent bank head rather than the local CEO,
consequently undermining accountability of subsidiary officials.

7. The ‘Foray’ into the region - Experiences
• The ownership structure of the subsidiary is
important; having some stake held by the host
country shareholders helps inculcate local
acceptability – some of the banks going regional have
cross-listed their shares; and their branch expansion
have ben supported by resources raised in the capital
market.
• It matters whether entry into a new market is via an
acquisition of an existing bank or the setting up shop
from scratch; there is quicker success of the
acquisition culminates in an IPO.

8. The ‘Foray’ into the region – Regulatory Aspects
• There is explicit recognition by the EAC’s MAC that full integration
of financial system is important if the integration of the market is to
be further deepened;
• There are endeavors to regulatory standardization:
– there is already harmonized minimum capital requirement;
– There is a draft convergence criteria for the harmonization of central
banks’ legal and prudential supervisory rules and practices
• The promotion of an integrated financial system will benefit from:
– Sorting out the payment systems at the national level to pave way for a
regional payment system (without this it will, for instance, to implement
the proposal of integrating the RTGS systems that have been
implemented at the national level in Kenya, Tanzania, Uganda and
Rwanda;
– Putting in place a mechanism of promoting credit information sharing at a
regional level.;
– Putting in place a framework for trade finance facilitation – e.g. s system
that is based in local/regional confirmation.
– Cheque standardization and truncation (as has been done in Kenya) across
the region.

9. Emerging Opportunities – (a) Mobile Money
0.3%
2.0%
3.8%
5.2%
7.8%
9.5%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2007 2008 2009 2010 2011 2012
Value of Mobile Money Transaction (% of GDP)
Source: Central Bank of Kenya; IMF

10. Emerging Opportunities – (a) Mobile Money
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
2007 2008 2009 2010 2011 2012
Deposit Accounts and Mobile Phone Subscribers
Deposit Account Holders Mobile Phone Subscribers
Source: Communication Commission of Kenya; Central Bank of Kenya

12. Emerging Opportunities – (b) Impetus from potential
new entrants
• HFDC Bank, India (2008);
• Nedbank, South Africa (2010);
• HSBC (2011);
• First Rand Bank, South Africa
(since November 2011);
• Bank of China, China (2012)
• Central Bank of India Ltd, India
(2013)
• Bank of Kigali, Rwanda (2013)**
• JP Morgan Chase NA of the USA
(2013)
• Potential for increased
competition that
makes the seeking of
regional opportunities
almost inevitable;
• Cross border
opportunities in
regional projects.

13. Thank you