Progress of Kenyan banks' regional expansion strategy


A report by the Central Bank of Kenya for the year ended 2013 shows that eight out of 11 Kenyan banks with operations in Uganda, Tanzania, Rwanda, Burundi and South Sudan reported losses in some of their subsidiaries.

“For the different players it is a mixed bug because it is an aspect of two things; how someone entered the market and also the strategy in that market because the reality of it is that the markets are not exactly the same,” Francis Mwangi, Head of Research at Standard Investment Bank.

According to a World Bank survey, Kenya-based banks are leading regional integration in the East Africa Community (EAC) banking sector. The banks include Kenya Commercial Bank, Diamond Trust Bank Kenya, Commercial Bank of Africa, Bank of Africa, Cooperative Bank, Equity Bank and I & M Bank just to mention a few.


“If you look at the exodus of why [Kenyan banks] have gone to the East African region is that majority of them are following their clients. There are Kenyan clients who have expanded their operations to serve other East African markets,” Mwangi said.

According to an analysis brief by Standard Investment Bank, there is value in the banks growing their operations across the East Africa Community region however expected returns from different regional markets may vary and management should make a meaningful decision on which markets to operate in.

“Majority of the banks have been operational in most of the markets within the last two years. There is the process of set up cost and income catching up with the set up cost and that is why we are yet to see a number of them yet to break even in the regional market,” Mwangi explained.

According to Mwangi Kenyan banks still have a long way before they can step out of the East African region.

“Our Kenyan banks still have a lot to accumulate in terms of assets to justify why they are diversifying outside the East African region.”

Kenyan banks have been leading the invasion into the East African region, with minimal retaliation by locally-owned banks from Tanzania, Uganda and Rwanda.