The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG Difficulties in getting new bank licences from the Central Bank of Kenya (CBK) has forced multinationals seeking to enter the local market to pursue acquisition of existing lenders.
The banking sector regulator put a moratorium on licensing of new commercial banks in November 2015 following the collapse of Dubai Bank and Imperial Bank.
CBK is yet to lift the suspension which it said was necessary to strengthen oversight before admitting new players in the market.
This has left foreign banks with acquisitions as the only way into the Kenyan market, placing a premium on licences held by players.
The latest entrant Access Bank of Nigeria revealed in a conference call to investors and analysts that it had to settle on buying loss-making Transnational Bank due to the bureaucracy involved in getting a greenfield licence.
“We have gone through the list of lenders in that market and basically weighed what it meant in terms of either pursuing a greenfield licence or buying an existing lender,” Access Bank CEO Herbert Wigwe said in a transcript of the conference call.
“Now, if you understand how that market is configured today, getting an existing licence would have taken a lot longer.”
Dubai Islamic Bank and Mayfair Bank were the last institutions to be given new licences in 2017, with the lenders having made their applications before the ban.
Mauritius’ SBM Bank also used the acquisition route to enter the Kenyan market in 2016 when it bought Fidelity Bank. It then followed up with the 2018 acquisition of certain assets and liabilities of Chase bank, which had gone into receivership.
Besides being the only way to enter the Kenyan market at the moment, acquiring an existing lender has other advantages compared to starting operations from scratch.
Analysts say a buyout of an existing business has the benefit of sidestepping the high cost of customer acquisition and raising deposits from a new operation.It also eliminates the regulatory burdens associated with a new operation, including acquisition of the licence.Kenya has a total of 39 banks and most of the lenders are profitable. The industry is however dominated by the top five banks — KCB , Equity , Co-op , NCBA and I&M Holdings — that account for more than half all the profits and loan book.
