This archive report was first published on 21 October 2019.
Published on October 21, 2019, by HABIL OLAKA, a renowned author.
The banking industry is a vital component of Kenya's economy, driving growth and development through the provision of affordable finance.
Kenyan banks have been working closely with various stakeholders in the public and private sectors to align their operational models with the national development agenda.
One of the key initiatives undertaken by the banking sector is the deepening of financial inclusion, as outlined in the 2019-2023 Strategic Plan.
Commercial banks have made significant contributions to the economy through various corporate social responsibility (CSR) initiatives, with a cumulative expenditure of Sh6.7 billion over the past three years.
Direct support to social causes through marketing and sponsorships has also been substantial, amounting to Sh1.7 billion.
Furthermore, banks have remitted over Sh73 billion in taxes to the Kenya Revenue Authority (KRA) in the 2017/2018 financial year.
Employment opportunities have also been created, with commercial banks spending Sh39 billion over the same period.
As of September 2018, banks had lent a total of Sh2.53 trillion to various sectors of the economy.
Despite these efforts, there is still a need to reduce barriers to finance for vulnerable groups, including women, youth, and persons with disabilities.
The banking sector's umbrella body, Kenya Bankers Association (KBA), has championed sector-wide initiatives, including the launch of a green bond, a regional first.
The green bond is a product of the Green Bonds Programme initiated by the industry, which aims to support Kenya's transition to a low-carbon economy.
Global green bond issuances reached $167 billion in 2018, highlighting the potential of this initiative.
A stable and resilient banking industry is essential for creating more jobs, providing a revenue stream for the government, and driving initiatives towards public goods in education, environment, and health.
However, the Banking (Amendment) Act 2016 has presented a challenge to the industry, with interest rate controls leading to a downward trend in credit to the private sector in 2016-2018.
Discussions are underway to review the Act and replace the cap with risk-based lending frameworks, which will create room for greater financial inclusion and facilitate the industry's contribution to the economy.
