Bank branches show wealthy, poor counties

economy

Bank branches show rich, poor districts


Central Bank of Kenya. FILE PHOTO | NMG

Timothy Odinga

Summary

  • Data from the Central Bank of Kenya (CBK) shows that the three counties have 794 branches, or 53 percent of Kenya’s 1,502 bank branches.
  • Nairobi accounted for 39.5 percent of Kenya’s bank branches, reflecting the capital’s economic dominance over the other 46 decentralized entities created in 2013 to help offset the prosperity imbalance.
  • Bank CEOs say banks’ spread is determined by cash flow and economic activity in the counties, suggesting that the outlets in the decentralized units are an editorial of wealth.

More than half of the Kenyan bank branches are in Nairobi, Mombasa and Kiambu, which reflects the wealth and income inequality in the 47 counties of Kenya.

Data from the Central Bank of Kenya (CBK) shows that the three counties have 794 branches, or 53 percent of Kenya’s 1,502 bank branches.

Nairobi accounted for 39.5 percent of Kenya’s bank branches, reflecting the capital’s economic dominance over the other 46 decentralized entities created in 2013 to address the wealth imbalance.

Bank CEOs say banks’ spread is determined by cash flow and economic activity in the counties, suggesting that the outlets in the decentralized units are an editorial of wealth.

The heavy concentration of offices in Nairobi indicates an inequality in the country’s economic development, partly attributed to the previous centralized system of government that has directed the division of resources since independence.

The decentralized system of government has raised hopes of addressing the economic imbalance, but analysts say incentives need to be put in place to attract private investors to the districts.

LOWER COUNTIES

The lower 20 counties each have fewer than 10 bank branches, with some such as Samburu, Tana River, and Mandera each having three branches.

“Banks follow economic growth, so the branches are concentrated where the centers of the economy are,” said NCBA managing director John Gachora.

“As banks competed for corporate customers in big cities, it led to a focus on areas where they would find these types of customers.”

17 percent of Kenyans live in the three districts with high banking concentration, but 53 percent of the country’s lenders.

Counties like Nakuru, Kakamega, Bungoma, Meru, Kilifi, Machako and Kisii have fewer banks than Mombasa, even though they are more populous.

The CBK data on the distribution of bank branches match the property data of previous districts of the Kenyan Statistical Office (KNBS).

Nairobi, Mombasa and Kiambu accounted for 30.9 percent of Kenya’s GDP and total wealth, respectively. The bottom 20 made up 15.6 percent of the country’s total wealth.

Nairobi had 597 bank branches at the end of last year, 39.8 percent of the country’s branches.

The Africa Wealth Report for 2019 released earlier this month by Mauritius-based AfrAsia Bank showed that Nairobi accounted for 73 percent of Kenyan billionaires.

“We believe that Nairobi will soon become one of the five richest cities in Africa and possibly replace Lagos, which has slipped down the list,” says AfrAsia Bank.

Bank branches have hardly changed in the last four years, although lenders have stepped up digital and mobile banking.

The number of bank branches decreased from 1,518 in 2017 to 1,502 last year, a decrease of 16.

“The decline in physical bank branches was mainly attributed to the introduction of alternative delivery channels such as cell phone banking, internet banking and agency banking,” the CBK said.

The rise of mobile banking has enabled lenders to reach customers directly, reducing the need for physical locations, which has also resulted in massive job losses for office workers. Over the past five years, banks have cut 6,574 office jobs from 18,539 in 2014 as the move to digital banking on cell phones enabled them to use technology to eliminate mundane tasks, manage costs and improve efficiency.

Basic services such as account opening, over-the-counter transactions and sales are shifting to digital platforms.

DIGITAL PLATFORMS

The digital platforms offer not only money transfers, but also credit and savings credits, payments for goods and services, and e-commerce through connections with various financial and non-financial institutions.

Mr. Gachora, the NCBA chief, said the void left by the on-site presence will be filled by digital banking, which relies on high mobile penetration.

“Financial inclusion has been a success in Kenya as most people in rural areas have access to online mobile banking services. In the future, more stores will be opened and the focus will be on sales rather than service as most services are now available on digital platforms, ”he said.

According to the FinAccess household survey carried out jointly by CBK, KNBS and FSD-Kenya, the penetration of formal financial services was 82.9 percent in 2019, compared to 75.3 percent in 2016.

FSD Kenya found that traditional bank account usage decreased from 32 percent in 2016 to 30 percent in 2019.


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