Kenya's interest rate cap pushes banks to expand regionally: expert

Source: Xinhua| 2019-06-17 19:32:16|Editor: xuxin
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NAIROBI, June 17 (Xinhua) -- Kenya's interest rate cap is pushing commercial banks to expand regionally, an expert said on Monday.

Caleb Mugendi, investment associate at investments management firm Cytonn Investments, told a media briefing in Nairobi that Kenyan banks are likely to continue to pursue their growth strategies beyond the country.

"By expanding into markets where credit pricing is unrestricted, Kenyan banks will be able to expand both its funded and non-funded income revenue streams," Mugendi said when Cytonn released its first quarter report on Kenya's banking industry.

In 2016, the east African nation put in place a law which capped banks' lending interest rates at four percentage points above the central bank's benchmark rate.

Mugendi said that through establishing a regional footprint, Kenya's banking sector can enhance its performance which has in the recent past been constrained by thin margins due to the caps on loans and stiff competition.

Equity Bank, KCB Bank, NIC Bank and Co-operative Bank are some of the Kenyan banks that have established subsidiaries in eastern and central Africa.

Mugendi said that consolidation activity has also remained one of the key highlights witnessed in Kenya's banking sector, as players in the sector are either acquired or merged leading to formation of relatively larger, well-capitalized and possibly more stable entities.