Orals East Africa>Search for deposits in provincial towns draws banks outside Nairobi At the hut of the story

Written by Oral East Africa

Two years of 'higher-forever' interest rates has sent Kenyan banks shopping for deposits outside the Capital Nairobi, with Kiambu, Mombasa, Nandi and Nyeri proving fertile ground to capture market share.

Kenyan banks remain concentrated in the capital where 15 branches were opened last year, as much as the branches opened in the next ten counties.

According to the Central Bank of Kenya (CBK) 2023 annual report, Nairobi hosts a total of 588 bank branches five times more than Mombasa which is the only other county to have more than a hundred bank branches.

Nairobi where 15 branches were opened last year, as much as the branches opened in the next ten counties.

But times are changing, provincial towns are punching above their weight especially since banks are targeting deposits; shutting down 19 ATMs while increasing the number of branches by 36.

Although banks hold Kes5.5 trillion in customer deposits, they have come under increased pressure as the Central Bank increased interest rates to 13 percent and has kept them elevated.

Transactions done by banking agents dipped with cash deposits reducing by almost 10 per cent, signal-ling the tough economic period and competing asset classes offering better returns like collective investment schemes- Unit trusts.

The Unit trust competition

The unit trust are then going round using their bargaining power to demand higher returns pushing up the overall cost of money in the market.

Unit trusts fund managers say they are now charging rates of up to 18 per cent on deposits from banks, beating the average returns of about 16 per cent offered on Treasury bills.

So banks are turning to county for farmers and traders’ cheaper deposits. Kiambu saw an increase of three outlets bringing its total outlets to 80 while Nandi and Nyeri counties saw two outlets opened in each..

Closures

Kenya’s third town Kisumu county now has now only 38 bank branches after one outlet was shut down same as Uasin Gishu which hosts Eldoret another provincial town eying city status.

Fortunes might change for Eldoret this year following the announcement by Absa Bank Kenya that it wil open its 85 branch at Rupa Mall, an expansive development spread out on 8.5 acres that hosts, among other things, a 100-room hotel, a supermarket, restaurants, offices, banks, cinema theatre, children’s play area, and water park, as well as regular retail shops and boutiques.

Absa Bank MD & CEO Abdi Mohamed they chose Eldoret, Kenya’s fifth-largest town, is known for its economic contribution through large-scale grain farming, dairy and horticultural farming, trade and commerce, an expansive manufacturing sector, a booming hospitality and tourism sector, and a rapidly growing micro, small, and medium sector.

He said the strategy would also open doors to the larger Rift region with Absa’s second branch in Eldoret. “Customers will have access to transactional accounts, savings accounts, deposit accounts, Shari’ah-compliant solutions, financial advisory services, and more. This is part of our ongoing commitment to enhancing customer experience and expanding our footprint to serve the underbanked,” Mr Mohamed said.

Hiring staff

As banks grow in geography they are back at hiring staff after years of cutting down workforce in the shift to the digital economy.

As banks expand to the villages lock depositors and borrowers with physical presence in the race for market share, the industry added 1,826 new jobs in 2023 to hit 37,933 staff members.

This marked a 5.1 percent jump from the 36,107 jobs recorded in 2022, according to the banking super-vision report published by the Central Bank of Kenya (CBK).