Building a world class financial

market for the East African Community

region.

Presentation to Institutional Investor,

Africa Investment Conference
 Introduction – Over of Kenya’s
Financial Services

• Comprises: Banks, Insurance Companies, Brokerage Firms, Pension Funds,

Microfinance Institutions and SACCOs.

• Contributes 5.4% of GDP and has potential to contribute as much as 8 to 15% of

GDP.

• Banking Sector holds assets worth 61% of GDP.

• Has potential to increase formal sector employment beyond the current share of

1%.

• Developing and deepening faster than the overall economy.

• Driven by financial infrastructure that has enabled financial inclusion and new

financial products like infrastructure bonds.

• Retail banking services utilizing the mobile phone technological platform with

success
Overview of Kenyan Banking
Sector Performance
Opportunities to Fill Financial
Services Gap
Access Tanzani
Strands Kenya Uganda a Rwanda Burundi*
38.6 41 10.7
Population 2009 32.3 2010 2010 9.5
(millions) Census 2010 est.** est.** est.** 2010 est.**
Adult
Population
(millions) 18.7 13.2 22.3 3.7 4
Formal 22.6% 18% 12.4% 14% N/A
Formal
other 17.9% 3% 4.3% 7% N/A
Informal 26.8% 17% 27.3% 26% N/A
Excluded 32.7% 62% 56% 52% N/A
Opportunities to fill financial
Services Gap

• Only 23% of the bankable population are formally banked.

• Potential to mobilize deposits and support further increase in demand for
credit.
• increase in Deposit accounts from 2.6 million in 2005 to 12.8 million in
2010.
• Potential for expansion to rural and peri-urban areas.
• Need for up-scaling the financial infrastructure:
•Credit Reference Bureaus
•Credit Rating Agencies
• Venture Capital Firms
• Deposit Taking Microfinance Institutions
• Funds Management.
• Implementation of AML law
•These initiatives are to support increased demand for financial
services and mitigate risk.
Bond Market

• Past Treasury and Corporate bonds issues oversubscribed.

• Potential to mobilize long-term funds through capital markets.
• Maturity profile of debt instruments has been lengthened from 8 months in June 2001 to 5.6 years at present.
Bond Market

Infrastructure
Bonds Savings Bonds
Amount Raised (USD
mn) 1,048 221
Average Yield 10.729 13.520
• Water and
Irrigation
• Energy Funding implementation
Sectors Funded • Transport of the New Constitution
Investment Opportunities

Creating a financial hub

• Plans to establish Nairobi International Financial Centre (NIFC).

• Capitalizing on its current development level and strategic location.

• Model to be adopted will:

 Offer appropriate legal framework similar to world class financial markets.

 Develop infrastructure relevant to a cluster of financial services.

 Offer competitive investment, tax, and regulatory incentives.

 Tap on global best practices in management, operations and technology.

 Match global best practices and standards, quality and pricing of financial

services.
Investment Opportunities

Bond Market

• Investment in treasury and infrastructure bonds; To finance energy and

transport sectors → Long-term Investments
• Government plans to raise USD470m through bonds in the next 3 months

Incentives
 Relatively high yield
 Investments in infrastructure bonds attract no withholding tax on interest
income.
 Tradable in the Nairobi Stock Exchange
 Can be used as collateral
 Investment Opportunities

Bond Market

 Investments in conventional treasury bonds with tenor of more than 10 years

attracts a withholding tax on interest income of 10%.
 Investments in conventional treasury bonds with tenor of less than 10 years
attracts a withholding tax on interest income of 15%.
• All bonds are traded at the Nairobi Stock Exchange
Investment Opportunities

Other Investments

• Establishment of representative office.

• Buy out or investment in existing institutions.
• Real estate and mortgage market – constitute 14.4% of the banking sector credit.
• Insurance Market - less than 10% of Kenyan adults have individual insurance cover.

• Regional integration to enhance capital mobilization – currently 7 of Kenya’s companies

are cross-listed in EA region and 8 Kenyan banks have opened subsidiaries in the region.
Investment Opportunities

Other Investments

• Commodities futures exchange – Institutional, policy and

legal framework being put in place.

• Carbon trading - Policy, legal and regulatory frameworks are

being put in place.
THANK YOU