Includes special features of this country’s banking system and rules/laws that might impact U.S. business.

The Central Bank of Kenya (CBK) is the primary regulator of the banking industry. The primary classification of banks in Kenya is by ownership. Some banks belong to local individuals/companies while others belong to foreign individuals or organizations. Another general classification of banks is by nature, that is, microfinance banks and commercial banks. The Central Bank of Kenya which governs banks further classifies commercial banks based on their assets. Tier 1 banks are large banks that have hundreds of billions in assets and are not likely to collapse financially. They are the top banks in Kenya. Tier 2 banks are medium-sized banks while tier 3 consists of small banks. Kenya has many banks. In 2017, this number stood at 42.

Currently there are 28 domestic and 14 foreign commercial banks with branches, agencies, and other outlets throughout the country; one mortgage finance company; eight representative offices of foreign banks; eleven licensed deposit taking microfinance institutions; 49 insurance companies; the Post Office Savings Bank with a large network of branches around the country; 79 foreign exchange (forex) bureaus; three licensed credit reference bureaus, 14 money remittance providers and about 200 deposit-taking licensed savings and credit cooperative organizations (SACCOs) with a membership of over 3 million Kenyans. However, the banking sector is essentially dominated by seven tier 1 commercial banks, namely Equity Bank, Kenya Commercial Bank, Barclays Bank of Kenya, Diamond Trust Bank, Cooperative Bank, Central Bank of Africa and Standard Chartered. In addition, smaller banks have emerged and experienced tremendous growth in recent years.

More than 10 Kenyan banks—including Kenya Commercial Bank, Commercial Bank of Africa, Equity Bank and Bank of Africa—have subsidiaries operating in the East Africa Community and South Sudan. Increasing access to finance has been abridged with the use of innovation such as agent banking, which allows commercial banks and Deposit-Taking Microfinance (DTM) institutions to engage the services of third party outlets to deliver specified financial services on their behalf.

With the advent of mobile money and integration with the formal banking systems, the number of Kenyans with access to electronic financial services has grown rapidly. Customers have also increased the use of bank platforms through a wide array of services. Mobile money platforms have been used to offer medical insurance, microloans, transfer money to a pre-paid credit card, and even to pay parking, electricity, and water bills. Short term loans are also provided on mobile money platforms with a minimum repayment period of thirty days.

Kenya’s capital markets have also continued to expand. While treasury bills and bonds dominate the market for short-term securities there is only light trading in commercial paper. However, the sector has seen increased activity via issuances of corporate bonds and the establishment of collective investment schemes (unit trust, investment clubs, mutual funds and employer share ownership plans), asset-backed securities and venture capital funds.

U.S. investors, who consider extending short term financing to Kenyan businesses, should exercise caution in evaluating repayment risk. Possession of an audited financial statement and an attractive credit rating does not necessarily mean that debt will be repaid.

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