AgriBank – statistics

Kenya

• Population - 33.47m (2004)
• Average lending interest rate - 12.9% (2005)
• Agriculture, forestry & fishing sector as % of total GDP - 24.2% (2005)

Kenya's banking system weakened in the 1990s, burdened by state control and bad debts, but is recovering under a series of ongoing financial sector reforms initiated by the Kibaki government, following its election in December 2002, and backed by the IMF. As of August 2006, the banking system comprised 42 commercial banks (down from 44 in 2001, as a result of a liquidation and a conversion), one non-bank financial institution, two mortgage finance companies, two building societies and 95 foreign-exchange bureaux. Of the four main banks, Barclays and Standard Chartered are subsidiaries of foreign banks and are by far the most profitable, while Kenya Commercial Bank (KCB) and the National Bank of Kenya (NBK) are mainly state-owned. After years of heavy losses as a result of unsafe lending, especially to parastatal enterprises, the two state banks have been restructured. The KCB has been partly privatised and returned to profitability, while the NBK is earmarked for privatisation in the 2006/07 financial year, following restructuring, although final plans have not yet been revealed.

Financial services growth was muted in 2003 and 2004, rising by 1.5% and 1.4% respectively in real terms, although growth surged to 8.1% in 2005 on the back of rising activity in the economy, accompanied by strong growth in credit extension, especially to the private sector. The stock of private-sector credit climbed by 13.5% year on year in September 2006 to KSh400m (led by manufacturing, trade and private households), amounting to almost three-quarters of total credit extended to the economy. Nevertheless, intermediation margins remain high, and banks remain risk-averse, which has served to restrain credit growth. So too have the high levels of non-performing loans (NPLs), especially in state-dominated banks. However, asset quality is improving, and NPLs declined from 24.5% of total loans in May 2004 to 15.8% in August 2006, largely because of improvement at the KCB.

Source: The Economist Intelligence Unit