This archive report was first published on 4 October 2019.
Published on October 4, 2019, the Kenya Financial Sector Stability Report for the January to December 2018 period highlighted the sector's ability to withstand global economic headwinds.
Regional and local economies experienced stable growth, driven by good weather and a stable macro-economic environment. This stability enabled Kenya's financial sector to navigate vulnerabilities stemming from trade tensions, tight global financial conditions, operational risks, and weak demand from advanced economies.
The banking sector's assets grew by 10% and accounted for 49.5% of the country's GDP, primarily due to increased loans and investments in government securities.
Customer deposits surged by 12.4% thanks to the proliferation of agency banking and mobile banking services. The private sector also registered a 3% growth, while investments in government securities slowed down to 19.03% from 24.6% in the previous year.
However, credit risk increased due to the rise in gross non-performing loans by 19.6% to Ksh 316.7 billion in December 2018 from Ksh 264.6 billion in 2017. In response, banks tightened lending standards to mitigate credit risk.
Operational risks escalated as banks adopted automation and financial technologies, increasing their vulnerability to fraud and cybercrime in 2018.
Foreign investor outflows increased due to trade tensions, slow economic growth, and poor performance of some listed companies at the Nairobi Securities Exchange, resulting in a decline in share prices and market capitalization.
The Capital Markets Authority (CMA) and NSE established the futures market in 2018 to deepen the financial market.
Lastly, the insurance sub-sector reported a decline in performance, attributed to operational inefficiencies and an unfavorable economic environment. In contrast, the pension subsector remained stable, with a growth rate of 8% and an increase in the diversity of its portfolio.
