Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Kenya
Country Indicators
Information Last Updated
April 2007
Information Compiled by
Jeremiah Grossman, IRIS Center
Population (Millions)
34.3 [2005]
Population Density (per sq km)
60 [2005]
GNI per capita (US$)
530 [2005]
GNI per capita (PPP US$)
1170 [2005]
Total Unemployment (% of labor force)
21 [1994]
Employment in Agriculture (% of total employment)
19 [1999]
Gross domestic saving (% of GDP)
19 [2005]
% Population under $2/day (PPP)
56 [1997]
Size of informal sector
4.6 million, contributes 18.4% of GDP
Depth of Financial Sector (M2/GDP)
38 [2005]
Exchange rate
1 USD : 69.9 KES (as of Jan 22, 2007)
Percentage of population with access to banking services
Fewer than 10% of households and micro/small enterprises have access to financial services through maintstream financial institutions (as of 2006) (Annual Report 2006, CBK)
Ownership structure of banks (and financial institutions if available)
BANKS & FINANCIAL INSTITUTIONS: 4 branches of foreign-owned institutions; 6 majority foreign-owned locally-incorporated institutions (with local participation); all other banks locally-owned (private and public) (as of June 2005) ( Annual Report 2005, CBK).
Formal and Semi-Formal Sources of Microfinance
Banks, NBFIs, licensed Savings and Credit Cooperatives (SACCOs).
The Cooperative Societies Act allows the Minister of Cooperatives to establish a Cooperative Development Fund consisting of contributions by cooperative societies and other sources (Cooperative Societies Act (Amended) 2004)
NGO microfinance provider formalization or transformation issues
Capitalization, ownership structure, and taxation prevent NGOs from transforming into regulated financial institutions
Ongoing microfinance policy development status
On December 30, 2006, Kenya enacted the Microfinance Act 2006. On March 27, 2007, the Central Bank of Kenya (CBK) released draft prudential regulations for deposit-taking microfinance institutions. The CBK is soliciting feedback on these draft regulations and has scheduled a stakeholder conference for April 19, 2007. It is hoping to finalize and enact these regulations in the near future (Draft MF Regulations, 2007).
Safety net availability: insurance, pension, etc.
Old-age, disability, survivor benefits; certain medical benefits; worker's compensation (Social Security in Kenya, SSA).
» The Case of Kenya in "How to Regulate and Supervise Microfinance: Key Issues in an International Perspective"
Kitili, Jackson (2000)
Alfred Hannig and Edward Katimbo-Mugwanya, eds.
FSD Series No. 1, Eschborn, Germany: GTZ
General Participation in the Financial Services Market
MICROFINANCE ACCOUNTS (Cooperative Bank, Equity Bank, K-Rep Bank, Family Finance Building Society): Over 1.2 million savings accounts and over 278,000 loan clients (as of 2005) (Statistical Bulletin, CBK)
TOTAL ASSETS: US $9.1(KES 636.1 billion) (as of June 2006). MICROFINANCE-ORIENTED LOAN PORTFOLIO (Cooperative Bank, Equity Bank, K-Rep Bank, Family Finance Building Society): US $553.65 million (KES 38.7 billion) (as of 2005) (Statistical Bulletin, CBK).
US $7.69 billion (KES 537.5 billion), including all deposits except local-currency deposits by non-residents (as of June 2006) (Statistical Bulletin, CBK)
US $191.70 million (KES 13.4 billion), including all deposits except local-currency deposits by non-residents (as of June 2006) (Statistical Bulletin, CBK)
Cooperatives/Credit Unions
Savings and Credit Cooperatives
3,767, of which 179 are licensed to offer "front office service activities" (banking services for fixed deposit accounts and checking accounts). 40 SACCOs are members of MicrNet, a network devoted to supporting microfinance-oriented SACCOs (as of Dec. 2005) (Annual Report 2006, CBK)
Low- to middle-income clients, mostly salary-based and located in urban areas (Annual Report 2006, CBK)
History of subsidized lending; high delinquency rates, particularly for agricultural/producer SACCOs (Annual Report 2006, CBK)
Government lending funds and special purpose institutions
Development Finance Institutions
5 (Agricultural Finance Corporation, Industrial Development Bank, Kenya Industrial Estate, Kenya Tourism Development Corporation, and Industrial and Commercial Development Corporation) (Annual Report 2006, CBK)
These institutions are all wholly or partly government-owned, and they suffer from financial and operational constraints that limit efficiency/outreach (Annual Report 2006, CBK)
Non-profit institutions
NGOs
Approx. 50, of which about 20 offer only microfinance services. AMFI, the leading MFI network, has 25 members (Omino 2005) (Annual Report 2006, CBK)
Approx. 2.1 million savers and 500,000 borrowers (21 of 25 AMFI member institutions reporting) (as of Dec 2005) (Annual Report 2006, CBK)
OUTSTANDING LOAN PORTFOLIO: Approx. US $228.90 million (KES 16 billion) (21 of 25 AMFI member institutions reporting) (as of Dec 2005) (Annual Report 2006, CBK)
A company that accepts public time, demand, and savings deposits, provides checking accounts, and lends or invests deposits at its own risk. (Banking Act)
Central Bank of Kenya (CBK)
Full range of banking services, including intermediating deposits
Institutions that provide microfinance services, including acceptance of deposits; provision of short-term loans to small or micro enterprises or low-income households; and the use of collateral substitutes (MF Act, Section 2)
Central Bank of Kenya (CBK)
Deposit-taking and other financial services at aimed at the micro and small sector ("micro" and "small" not specifically defined).
A member-based society operating according to cooperative principles that exists to promote the welfare and economic interests of its members. Min. 10 individual members or (in the case of a cooperative union) two registered societies (Cooperative Societies Act (Amended) 2004, Sections 4-5)
FOR INCORPORATION: Registrar of Companies. FOR LICENSING: Ministry of Finance and Central Bank of Kenya
A company limited by shares
MAX. PER INDIVIDUAL OR RELATED GROUP: 25% of core capital, except for other financial institutions, governments (domestic or foreign), state corporations, or foreign financial institutions. Mortgage finance companies and non-bank financial institutions are prohibited from holding share capital in a bank. (Prudential Guidelines 2006, p122)
APPLICATION FEE: US $71.53 (KES 5,000). ANNUAL LICENSE FEE: US $5,722.46 (KES 400,000), plus an additional US $429.18 - $2,145.92(KES 30,000 - 150,000) per branch, depending upon the location. (Prudential Guidelines 2006, p5)(Banking Act, Fourth Schedule)
FOR INCORPORATION: Registrar of Companies. FOR LICENSING: Central Bank of Kenya
Incorporated company or wholly-owned subsidiary of a bank or financial institution (Companies Act, Section 4; MF Act, Section 4)
MAX. PER PERSON: 25% of shares, although persons owning greater than 25% before enactment of the MF Act have up to 4 years from receiving a license to fully comply. MAX. SHARE TRANSFER WITHOUT CENTRAL BANK APPROVAL: 10% of shares of institution (MF Act, Section 19)
Min. 10 owners, except for cooperative unions. No member -- except another cooperative society -- may hold more than 1/5 of the issued and paid-up share capital. Companies registered under the Companies Act and unincorporated groups are not permitted to join except with special written authorization at a general meeting (Cooperative Societies Act (Amended) 2004, Sections 5, 14, 16)
CEO, proposed Directors and "significant" shareholders must be "fit & proper." Considerations include the following: convictions for fraud or other crime of dishonesty; contravention of any law intended to protect members of the public against financial services losses due to incompetence, malpractice, or dishonesty; previous directorship of an institution that was liquidated, censured, or had its authorization revoked; engaging in fraudulent or otherwise improper business practices; personal bankruptcy or failure to repay a debt; etc. (Banking Act, First Schedule)(Prudential Guidelines 2006, pp12-24)
Required, and must project at least three years into the future. Must include: proposed organizational structure; detail CVs of all Directors and high-level Officers; schedule of preliminary expenses; projected balance sheets and profit/loss accounts; interest-rate sensitivity analysis of submitted projections; analysis of supply and demand for banking services in target market (Prudential Guidelines 2006, pp4-5)
Promoters of institution may be interviewed; proposed Directors and CEO will be interviewed prior to approving their appointments (Prudential Guidelines 2006, p5)
Required for licensing. At a minimum, they must cover all of the following: lending and credit administration policies; human resource and manpower development; investments; deposits and marketing; capital; liquidity; management information systems; planning and budgeting; accounting and operating procedures; and anti-money laundering (Prudential Guidelines 2006, p6)
Non-bank Financial Institutions
Deposit-Taking MFIs
DIRECTORS: Min. 5 Directors, who must be approved by Central Bank. In addition, must not exhibit any of the following disqualifying characteristics: minor or legal disabled; convicted of offense involving theft, fraud, forgery, financial loss, or perjury; removed from an office of trust due to misconduct, abuse of office, corruption, or incompetence (in past 10 years); is an auditor for a licensed deposit-taking company. OFFICERS: Officers must not exhibit any of the following disqualifying characteristics: undischarged bankruptcy; convicted of offense involving fraud or dishonesty; removed from office under provisions of the MF Act (MF Act, Sections 20-22)
Required. Feasibility study must include information on: objectives of the business; domestic economic situation; financial sector environment; legal framework; risk analysis; economic and financial analysis; organizational structure; proposed management (including information on qualifications, skills, and relevant experience); equity and ownership in the business; and any other requirements prescribed by the CBK (MF Act, Section 5(f))
Feasibility study must include information on "equity and ownership of the business", but details are not provided (MF Act, Section 5(f)(ix))
MEMBER OWNERS: Must be 18 or older; fit the employment or profession relevant to the cooperative society; and reside or own land in the cooperative's area of operations. MANAGEMENT COMMITTEE: 5-9 members, subject to the following qualifications and restrictions: must be members of the cooperative society; 18 or older; must be literate; may not receive salary or other remuneration for participation on management committee; may not be a committee member of two or more other cooperative societies; may not lend money on her/his own account; must declare assets to Commissioner; may not be experiencing an undischarged bankruptcy, owe money to a cooperative society (except as permitted under the Act), or owe money under a legal decree; may not be insane; no record of conviction for offense involving dishonesty or imprisonment for over 3 months. (Cooperative Societies Act (Amended) 2004, Sections 14, 28)
12% of total risk-adjusted assets plus risk-adjusted off-balance-sheet items. Of this 12%, at least 8% must be "Core" capital. Core Capital must also equal at least 8% of total deposit liabilities (Prudential Guidelines 2006, p50)
CORE CAPITAL (TIER I OR PRIMARY): Permanent shareholders' equity; and disclosed reserves, including those created through share premiums, retained earnings, and 50% of unaudited after-tax profits; minus investments in subsidiaries conducting banking business, investment in equity of other institutions, intangible assets, and goodwill. SUPPLEMENTARY CAPITAL (TIER II): Subordinated debt; hybrid (debt equity) capital instruments; 25% of asset revaluation reserves that have received prior Central Bank approval; and any other capital instrument approved by the Central Bank. (Prudential Guidelines 2006. p49)
0%: Cash; loans and advances secured by cash; balances with CBK; claims on the Kenya Government held through government securities; loans guaranteed by the Kenya Government. 20%: Deposits and balances due from domestic commercial banks, mortgage finance institutions, building societies, and other domestic financial institutions; securities issued by foreign governments and banks; balances due from foreign banks; loans and advances guaranteed by certain multilateral development banks. 50%: Fully-secured and perfected loans with first priority over residential property in cities or municipalities in Kenya that is either occupied by the borrower or rented out. 100%: All other assets. (Prudential Guidelines 2006. pp51-52)
NORMAL (Not Overdue): 1%. WATCH (Overdue up to 3 months): 3%. SUBSTANDARD (Overdue more than 3 months - 6 months): 20%. DOUBTFUL (Overdue more than 6 months - 12 months): 100%. LOSS (Overdue more than 12 months): 100%. (Prudential Guidelines 2006, pp67-73)
Minimum core capital of US $858.37 thousand (KES 60 million). However, the Minister of Finance has the right to create categories of deposit-taking MFIs based upon geographic, administrative, or other criteria that may have a minimum core capital as los as US $286.12 thousand (KES 20 million) (MF Act, Schedule)
Must comply with both of the following: (i) Min. 12% of total risk-adjusted assets and off-balance sheet items, of which at least 10% must be core (Tier I) capital (i.e. up to 2% can be Tier II capital); and (ii) Core capital of min. 8% of total deposit liabilities. (MF Act, Schedule)
CORE CAPITAL (TIER I OR PRIMARY): Shareholders' equity (issued and fully paid-up shares of common stock); disclosed reserves; goodwill and other intangible assets are not counted. (MF Act, Section 2) SUPPLEMENTARY CAPITAL (TIER II): Not specified (MF Act, Section 2)
Not specified (will likely be addressed in upcoming Regulations)
Not specified (will likely be addressed in upcoming Regulations)
Liquidity requirements to be determined by Central Bank of Kenya (MF Act, Section 12)
Societies wishing to provide Front Office services must make provisions for bad and doubtful debts before declaring a surplus. Provisions must comply with guidelines presecribed by the Commissioner (Cooperative Societies Rules 2004, Section 52(3))
RESERVE FUND: Must create reserve fund and contribute at least 20% of net surplus annually. No withdrawals without Commissioner's written consent. Reserve must be invested in one of the following institutions: Post Offoce Savings Bank; another cooperative society; any bank licensed under the Banking Act; investments or securities authorized for the investment of trust funds; a corporate or statutory body incorporated in Kenya; or any other manner, if approved via resolution at a general meeting of the society. Societies wishing to provide Front Office services must have reserves of at least 10% of total liabilities. LIQUIDITY RATIO: Societies wishing to provide Front Office services must maintain minimum liquidity ratio of 10% of deposits. (Cooperative Societies Act (Amended) 2004, Sections 45, 47)(Cooperative Societies Rules 2004, Sections 37, 52(3))
Risk Management Guidelines
Guidelines & restrictions on financial services
Guidelines & restrictions on operational rules
Guidelines & restrictions on interest rates
Concentration of risk
Connected/insider business
Banks
Commercial Banks
PERMITTED: Complete line of financial services. PROHIBITED: Wholesale or retail trade; acquisition of land, except for conducting business and providing staff with amenities (Prudential Guidelines 2006, pp121-122)
1. CBK permission required to open, close, or change locations of branches; or to merge institutions. 2. Banks must comply with identification and verification requirements aimed at combating money laundering and other criminal activities (Prudential Guidelines 2006, pp125-138, 166-178, 179-190)
MAX. LOAN OR ADVANCE TO INDIVIDUAL/RELATED GROUP: 25% of core capital (except for mortgage finance companies with CBK's and Minister of Finance's approval). MAX. SHARE CAPITAL IN ANOTHER COMPANY: 25% of core capital. MAX. AGGREGATE LANDHOLDINGS: 20% of core capital. MAX. AGGREGATE ADVANCES FOR THE PURCHASE OF LAND: 25% of total deposit liabilities, except for mortgage finance companies. With CBK authorization, this may be extended up to 40%. MAX. AGGREGATE OF "LARGE EXPOSURES" (EACH OVER 10% OF CORE CAPITAL: 500% of core capital. (Prudential Guidelines 2006, pp119-122)
No advances to other companies (other than other financial institutions) if the institution holds more than 25% of the other company's share capital. No unsecured advances to employees or their associates. No unsecured or partially secured advances to Officers and their related parties. No preferential loan terms for "insiders" (Officers, Directors, employees, shareholders owning over 5% of shares, and their associates) (with limited exceptions). MAX. ADVANCES TO INSIDERS: 20% of core capital per individual/related group, 100% of core capital in the aggregate. (Prudential Guidelines 2006, p118-121). (Prudential Guidelines 2006, pp118-121)
Non-bank Financial Institutions
Deposit-Taking MFIs
PERMITTED: Savings and credit services aimed at low-income households and small/micro enterprises. PROHIBITED: Checking and current accounts; foreign trade operations; trust operations; investing in enterprise capital; wholesale and retail trade; securities; purchase or acquisition of land (except for housing business operations). (MF Act, Sections 2, 14)
Prior Central Bank approval required to open or close a branch (MF Act, Section 13)
None specified.
MAX. CREDIT TO INDIVIDUAL BORROWER: A certain percentage of core capital (to be prescribed by the Central Bank). (MF Act, Section 17)
MAX. CREDIT TO OFFICER, EMPLOYEE, OR RELATED PARTIES/INSTITUTIONS: To be prescribed by the Central Bank (MF Act, Section 18)
Cooperatives/Credit Unions
Savings and Credit Cooperatives
Permitted: Savings and lending for members. No loans to non-members except if bylaws specifically allow it subject to passage of such a resolution at the general meeting. No deposits or loans from non-members except as permitted by bylaws and/or Cooperative Societies Rules (Cooperative Societies Act (Amended) 2004, Sections 43-44)
MAX. LOAN TO SINGLE MEMBER: Must be specified in bylaws. MAX. AGGREGATE LIABILITY TO NON-MEMBERS: Societies that borrow or accept deposits from non-members must establish maximum liability limits at a general meeting. These limits are subject to the Commissioner's approval. MAX. INVESTMENT IN REAL ESTATE: Not more than 25% of the society's share capital, and the society may not hold over 20% of the overall equity in the real estate investment. (Cooperative Societies Rules, 2004, Sections 7(2), 34, 36, Form VIII)
N/A, as society is created to provide financial services to members.
Non-profit institutions
NGOs
Permitted: Loans and other charitable services
Reporting and Supervision
Supervision Method
Supervision costs and fees
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
REPORTING: Every Two Weeks: Liquidity ratio report. Monthly: Capital adequacy ratios; Quarterly: Risk classification of assets and provisioning; loans/advances performance report; report on advances to person/group exceeding 25% of core capital; report on advances employees, shareholders, and Directors and their associates; exposure to 50 largest borrowers; maturity analysis of assets and liabilities. Annually: Audited financial statements, including balance sheet with assets and liabilities, profit and loss account, and other disclosures. DISCLOSURE: Quarterly: Must publish unaudited quarterly financial statements in a national newspaper; Annually: Must publish in a national newspaper -- and display conspicuously in every branch and office -- copies of the audited balance sheet and profit and loss account, and any other requirements prescrbied by the CBK. (Prudential Guidelines 2006, pp61, 75-84, 92-98, 148-149)(Banking Act (as ammended through 2004), Section 22)
Deposit Protection Fund protects deposits of up to US $1,430.62 (KES 100,000). Banks must annually contribute to the Fund a sum determined by the Minister of Finance, which will be at least US $1,430.62 (KES 100,000) and no more than 0.4% of average total deposit liabilities during the preceding twelve month period (Banking Act (as ammended through 2004), Section 38)
REPORTING: Annually: Audited balance sheet; audited profit and loss account; copy of auditor's report (which must contain information on solvency, any violations of prudential standards, or any other contraventions of the Act). Must disclose existence of: any shareholders owning over 25% of total shares; any loans or advances exceeding any core capital limits prescribed by the Central Bank; and any insider lending. Periodically (timing to be prescribed): Must submit reports detailing: compliance with capital requirements; composition and quality of assets and liabilities; quality of loan portfolio; performance of management; other information, as prescribed by the Central Bank. DISCLOSURE: Must publish balance sheet and profit/loss account annually in a national newspaper. In addition, must keep a copy of most recent audited financial statements in every branch or office. (MF Act, 26, 27, 31, 36)
All institutions must contribute to the Deposit Protection Fund annually. The amount will be prescribed by the Fund. The Fund will determine and disclose the maximum balance per customer that is protected in case of insolvency (MF Act, Sections 39-40)
Cooperatives/Credit Unions
Savings and Credit Cooperatives
On-site inspection at Commissioner's or Mininstry's discretion, or upon application by creditors or at least 1/3 of voting members of the society. In addition, passive supervision through annual audit by a Commissioner-approved auditor (Cooperative Societies Act (Amended) 2004, Sections 24-25, 58-59, 60A)
Commissioner administers a Management and Supervision Fund, consisting of the following: 1) An amount equivalent to 10% of the cost of the annual audit fees paid by the society to the registered auditor (paid by the society); 2) The annual US $42.92 (KES 3,000) fee paid by each auditor to be licensed to act as an auditor for cooperative societies (paid by auditor); 3) The greater of US $2.86 (KES 200) or 0.2% of the cost of the annual audit fees paid by the society to the registered auditor (paid by the auditor); and 4) An annual audit and supervision fee (paid by the society; amount to be determined). (Cooperative Societies Rules 2004, Sections 16-18)
REPORTING: Must submit financial accounts audited by a Commissioner-approved accountant to the Commissioner annually. At a minimum, these accounts must include a signed balance sheet, separate accounts for each activity, and information on: share capital; statutory reserve; assets and liabilities; loans; any provision for dividends, bonuses, or honoraria; depreciation of fixed assets; all investments; and stocks and cash balances. DISCLOSURE: Must keep copies of the following available for public inspection: Cooperative Societies Act and Rules; the cooperative's bylaws. Must conspicuously display audited financial statements in registered office and all branches. Must present audited accounts at general meeting annually. All societies' bylaws, annual returns, audited accounts, balance sheets, and registers of charges may be viewed by the public at the Commissioner's office for a fee of US $14.31 (KES 1,000) per inspection. Certified copies of these documents may be requested for a fee to be determined (but no greater than US $ 28.61(KES 2,000) per copy). (Cooperative Societies Act (Amended) 2004, Sections 24-25)(Cooperative Societies Rules, 2004, Sections 15, 17, 46, Form IVA)
Deposit and loan insurance by SACCOS
Non-profit institutions
NGOs
None
Tax Treatment
Taxes on Income
Taxes on Transactions
Taxes on Payroll
Other
General Applicability
General Applicability
Corporate income tax rate : 30% (37.5% for foreign branches). Newly-listed companies on the Nairobi Stock Exchange are generally eligible for 20% rate for first 5 years (as of October 2006) (Kenya Snapshot, Deloitte)
VAT: 16%, but financial services are generally exempt from VAT (as of October 2006) (Kenya Snapshot, Deloitte)
Income taxes are automatically withheld by employers from employees' paychecks at progressive rates up to 30% (as of October 2006) (Kenya Snapshot, Deloitte)
Dividends: 5% (residents), 10% (non-residents). Interest:15%. Royalties: 20% (as of October 2006) (Kenya Snapshot, Deloitte)
Other Relevant Business Legislation
Debt Enforcement and Collection
Credit Rating and Reporting Requirements: Formatting requirements (e.g., CGAP, GAAP, or other international standards)
