The Central Bank of Kenya(CBK) intends to progressively increase the minimum core capital for banks from the current KSh 1.0 billion to KSh 10.0 billion.
According to the 2024/25 Budget statement, the CBK will engage the market for an appropriate time table to achieve this goal.
The Cabinet Secretary for National Treasury Prof Njuguna Ndung’u said in his 2024/25 budget statement that the plan to hike the minimum core capital for banks is intended to strengthen the resilience and increase the capacity of Banks to finance large scale projects while creating sufficient capital buffer to absorb and withstand shocks posed by the continuous emerging risks associated with adoption of technology and innovations as institutions expand.
The CBK also plans to amend the Banking Act to provide for stiff dissuasive penalties that are proportionate to the violations committed, support a strong compliance culture in banks, and align to international best practices.
Available figures indicate that Kenya’s banking sector remains stable and resilient and continues to play its role of mobilizing funds and channelling them to the deserving productive economic activities.
The Banking sector remained profitable with a growth in assets of 0.3% from KSh 7.72 trillion in February 2023 to KSh 7.74 trillion in February 2024.
Credit from commercial banks to the private sector stood at an annual growth rate of 6.9% in April 2024 and benefited key sectors of the economy.
The Financial Inclusion Fund, popularly known as the Hustler Fund, and the de-risking of lending to the MSMEs through the Credit Guarantee Scheme have facilitated additional lending to the MSMEs sector.
National Treasury has been aggressive to position the banking sector to effectively play its role in Kenya’s socio- economic transformation. Several key reforms have been implemented so far, to achieve these objectives.
Firstly, the CBK has taken over the licensing and oversight of Digital Credit Providers to address inherent challenges including high cost of credit, unethical debt collection, inadequate disclosure and lack of transparency, breach of data privacy, and abuse of personal information.
As at the end of March 2024, 51 Digital Credit Providers had been licensed.
In order to provide guidelines for Banks to go green and involve in climate change issues, CBK in April 2024, released the draft Kenya Green Finance Taxonomy for public participation that will serve as a tool to classify whether particular economic activities are ‘green’ or environmentally sustainable and serve as a guide for banking sector and other market participants in making informed investment or financing decisions.
To curb and deal with dirty cash, the CBK has been keen to eliminate money laundering vulnerability in the banking sector. It has thus revised its Anti-Money Laundering, and Combating the Financing of Terrorism and Proliferation Financing supervisory framework through implementation of risk-based supervision, undertaking institutional and sectoral risk assessments, and enhancing staff complement and capacity for supervision.
