The Central Bank of Kenya (CBK) is the primary regulator of the banking industry. The primary classification of banks in Kenya is by ownership. Some banks belong to local individuals/companies while others belong to foreign individuals or organizations. Another general classification of banks is by nature, that is, microfinance banks and commercial banks. The Central Bank of Kenya which governs banks further classifies commercial banks based on their assets. Tier 1 banks are large banks that have hundreds of billions in assets and are not likely to collapse financially. They are the top banks in Kenya. Tier 2 banks are medium-sized banks while tier 3 consists of small banks. Kenya has many banks. In 2017, this number stood at 42.
Currently there are 28 domestic and 14 foreign commercial banks with branches, agencies, and other outlets throughout the country; one mortgage finance company; eight representative offices of foreign banks; eleven licensed deposit taking microfinance institutions; 49 insurance companies; the Post Office Savings Bank with a large network of branches around the country; 79 foreign exchange (forex) bureaus; three licensed credit reference bureaus, 14 money remittance providers and about 200 deposit-taking licensed savings and credit cooperative organizations (SACCOs) with a membership of over 3 million Kenyans. However, the banking sector is essentially dominated by seven tier 1 commercial banks, namely Equity Bank, Kenya Commercial Bank, Barclays Bank of Kenya, Diamond Trust Bank, Cooperative Bank, Central Bank of Africa and Standard Chartered. In addition, smaller banks have emerged and experienced tremendous growth in recent years.
More than 10 Kenyan banks—including Kenya Commercial Bank, Commercial Bank of Africa, Equity Bank and Bank of Africa—have subsidiaries operating in the East Africa Community and South Sudan. Increasing access to finance has been abridged with the use of innovation such as agent banking, which allows commercial banks and Deposit-Taking Microfinance (DTM) institutions to engage the services of third party outlets to deliver specified financial services on their behalf.
With the advent of mobile money and integration with the formal banking systems, the number of Kenyans with access to electronic financial services has grown rapidly. Customers have also increased the use of bank platforms through a wide array of services. Mobile money platforms have been used to offer medical insurance, microloans, transfer money to a pre-paid credit card, and even to pay parking, electricity, and water bills. Short term loans are also provided on mobile money platforms with a minimum repayment period of thirty days.
Kenya’s capital markets have also continued to expand. While treasury bills and bonds dominate the market for short-term securities there is only light trading in commercial paper. However, the sector has seen increased activity via issuances of corporate bonds and the establishment of collective investment schemes (unit trust, investment clubs, mutual funds and employer share ownership plans), asset-backed securities and venture capital funds.
U.S. investors, who consider extending short term financing to Kenyan businesses, should exercise caution in evaluating repayment risk. Possession of an audited financial statement and an attractive credit rating does not necessarily mean that debt will be repaid.
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FAQs
Tier 1 banks are large banks that have hundreds of billions in assets and are not likely to collapse financially. They are the top banks in Kenya. Tier 2 banks are medium-sized banks while tier 3 consists of small banks. Kenya has many banks.
What are the challenges facing banking in Kenya today? ›
However, like many other developing countries' financial systems, the Kenyan banking system still faces wide-ranging challenges, such as high interest rate spreads and financial inclusion challenges. Content may be subject to copyright. high interest rate spreads and financial inclusion challenges.
What factors may have contributed to the failure of some financial institutions in Kenya? ›
The study concludes the major issues that contribute to the collapse of most of the banking institutions in Kenya could be related to: insider lending, weak corporate governance practices, weaknesses in regulatory and supervisory systems, poor risk management strategies, lack of internal controls, and conflict of ...
Are there any American banks in Kenya? ›
Citibank, N.A. Kenya Branch is a branch of Citibank, N.A., a federally chartered National Banking Association, organised and existing under the laws of the United States of America.
Which is the strongest bank in Kenya? ›
Equity Bank of Kenya again tops the table with the group holding Tier 1 capital of $1.5bn, assets of $11.7bn and profits of $364m. Second is the KCB group. Both banks are consolidated at group level, where their results include assets outside their principal country.
Which is the safest bank in Kenya? ›
KCB Ranked 667 Globally, Top Bank in East Africa and Safest Bank in Kenya. Lender Climbs up 40 places in The Banker's Top 1000 World Banks ranking for 2020 as Global Finance Annual World's Safest Banks Rankings put it among top14 African safest banks.
Which banks recently collapsed in Kenya? ›
The most recent lenders to be placed under receivership are Chase Bank (which has since reopened), Imperial Bank that is still under KDIC management and Dubai Bank. Dubai Bank is currently under liquidation.
What are the weaknesses of the financial system in Kenya? ›
- WEAKNESS OF KENYA FINANCE ECONOMY.
- Weaknesses in Kenya's finance and real estate sectors have been exploited to contribute to South Sudan's conflict. ...
- Kenya faces severe money laundering risks. ...
- Kenya's AML/CFT framework requires improvement.
The average banking sector's average funding costs rose marginally to 3.1 percent in 2022 from 2.9 percent, a trend reflected across all bank categories, driven by tightening monetary conditions in the economy. In terms of profitability, the total pre-tax profits rose by 23.0 percent to KES.
Why banks collapse in Kenya? ›
Many Financial institutions that collapsed in Kenya since 1986 failed due to non performing loans. This study investigated the causes of non performing loans, the actions that bank mangers have taken to mitigate that problem and the level of success of such actions.
Opportunities for fraud were present due to relaxed internal controls and accounting systems, inadequate supervision of subordinates, disregard for customer due diligence requirements and poor personnel policies.
What happens when a bank collapses in Kenya? ›
As long as your bank is insured by the Kenya Deposit Insurance Corporation (KDIC) and your deposits fall within the specified limit, your funds are secure in case of a bank failure.
Can a US citizen open a bank account in Kenya? ›
Eligible non-residents are permitted to establish bank accounts in Kenya. However, there are specific requirements for eligibility. You must have proof of residency (such as a valid address number, etc.). This is usually a minimum requirement for most Kenyan banks.
Can you transfer money from Kenya to USA? ›
RemitFinder compared 2 money transfer operators to get you the best remittance rates to send money from Kenya to United States. The best rate to send US Dollar from Kenyan Shilling to your loved ones in United States is currently offered by Skrill Money Transfer; their 1 KES to USD exchange rate today is 0.0074.
Can you use American money in Kenya? ›
The US Dollar is also widely accepted and easily exchanged into Kenyan Shillings. US Dollars are only accepted if they are not torn and are not more than 10 years old. Smaller denominations are difficult to use or exchange. It is best to bring 50 or 100 dollar bills that are issued after 2005.
What is the difference between Tier 1 Tier 2 and Tier 3? ›
Suppliers can be broken down into three tiers: Tier 1 Suppliers are your direct suppliers. Tier 2 suppliers are your suppliers' suppliers or companies that subcontract to your direct suppliers. Tier 3 suppliers are the suppliers or subcontractors of your tier 2 suppliers.
What is Tier 1 Tier 2 and Tier 3 in it? ›
Tier-1 team is responsible for SLA compliance. Tier 2: Tech support team has the knowledge and skills to resolve complicated (as compared to Tier 1) tickets and will often use remote control tools. Tier 3: Tech support team carries maximum experience & generally comprises of product developers & engineers.
What is Tier 1 Tier 2 and Tier 3? ›
• Tier 1 – Partners that you directly conduct business with. • Tier 2 – Where your Tier 1 suppliers get their materials. • Tier 3 – One step further removed from a final product and typically work in raw materials.
What is Tier 1 and Tier 2 in banking? ›
Tier 1 capital is the primary funding source of the bank and consists of shareholders' equity and retained earnings. Tier 2 capital includes revaluation reserves, hybrid capital instruments and subordinated term debt, general loan-loss reserves, and undisclosed reserves.
