NAIROBI: Kenyan central bank Governor Patrick Njoroge said measures introduced by the government to stoke consolidation in the country’s banking industry may be premature.
Raising minimum core-capital requirements is not the appropriate instrument to strengthen lenders in East Africa’s biggest economy, Njoroge told lawmakers Thursday in the capital, Nairobi. In his annual budget speech in June, Treasury Secretary Henry Rotich said minimum capital requirements would increase fivefold over the next three years to promote competition among lenders.
“This is not how to approach it and this is not the time,” Njoroge said. “We may have rushed consolidation.”
Kenya, with a $55 billion economy, has 43 commercial lenders and a mortgage-finance company, according to the Central Bank of Kenya. About 70 percent of banking business is done by eight companies. Industry fragmentation is hindering the development of scale lenders need to offer more complex services, according to Joshua Oigara, chief executive officer of Kenya Commercial Bank Ltd., the country’s most profitable lender.
