In 1971, the kenya commercial bank was formed following the merger of the national and grindlays bank, with the government owning a 60per cent majority stake. Background of the study this section broadly discussed the concept of mergers and acquisitions highlighting how it has been done over the years by various sectors of the economy. However, agency banking is a fairly new concept in africa with it being highly implemented in kenya and south africa agalla, 2014. The business environment has changed in kenya as in other parts of the world and it has been characterized by stiff competition among the players and the banking industry. By offering different types of services, such as facilitating money transfers between countries and ensuring that savers and borrowers are brought together in wellorganised structures, the industry determines countries economic development and longterm. There are, however, more than 45,500 agents offering financial services. Kenyas central bank has been pushing for a merger between the countrys banks because it has more banks per person than south africa and nigeria. Agency banking in kenya is the new way that banking in kenya is using to take banking services to the unbanked and under banked at a cheaper rate. What was for many decades a largely unchanging industry, is now constantly evolving, with many banks battling to keep. Investigation on importance of agency banking in provision of banking services in kenya. The effect of agency banking on the financial performance. To determine the effect of synergy on financial performance of commercial banks in kenya iii. Both the primary and secondary data collected was merged into. Investigation on factors facilitating accessibility of.
More consolidation expected in kenyas banking sector. Merger of two weaker banks or merger of one health bank with one weak bank can be treated as the faster and less costly way to improve profitability then spurring internal growth franz, h. Be vigilant of money launderers during demonetization period kenya bankers. According to kemal, 2011, takeovers can also arise because of the agency problem. The objective of this paper is to examine whether the 2004 bank consolidation exercise in nigeria has influenced positively the credit allocation and saving mobilization through reduced cost of borrowing and increased returns on savings respectively. Seminar on trade in services and investment kenya banking industry experience on tuesday 17022009 at southern sun hotel dares salaam tanzania by felix o. Bank of kenya or are in the process of acquiring or establishing one in house e. Ational council for law reporting received 0 2 sep 2116 p 044300100 aox 1 nairobi, kenya trl fax. A survey of all the 42 licensed commercial banks in kenya was done. To find out the effect of shareholders value on financial performance of commercial banks in kenya. Cooperative bank of kenya opened its doors in the year 1968. Efforts by authorities to promote saving and deepen the local market, including by widening the range of available investment options, should also support growth.
Kenyas asset management sector retains longterm growth potential as rising wealth supports rising demand for savings and investment. The origin of commercial banking in kenya related to commercial connections in east africa, which existed towards the end of the 19th century. Kenya has experienced banking problems since 1986 culminating in major bank failures 37 failed banks as at 1998 following the crises of. It served the needs of growing farming communities and started operations in 1968. If this deal goes through, this would be the 3rd successful local bank acquisition in. The association promotes and develops sound and progressive banking principles and practices and contributes to the sectors development. Hence there have been increased synergies between the banking, insurance and securities sectors with removal of regulatory barriers between the different segments of the financial sector.
Merger is a process of combining two business entities under the common ownership. Premised on the analysis above, the authority approved the proposed merger between commercial bank of africa limited and nic group plc on condition that none of the 1,872 employees of the merged entity are declared redundant for a period of 12 months from the date of closing of the transaction in kenya. Use virtual keyboard to enter your user id and password. In addition, smaller banks have emerged and experienced tremendous growth in recent years. Bank of kenya or are in the process of acquiring or establishing one inhouse e. Agency banking data for banks value of transactions. Effect of mergers on financial performance of commercial banks in kenya george macharia gathuku 1, dr agnes njeru2 1jomo kenyatta university of agriculture and technology, p. What kenya cbanic merger means for banking in tanzania. The main objective of the study was to establish the influence of mergers and acquisitions on financial performance of commercial banks in kenya. Bank of africa limited and nic group plc on condition that none of the employees. This study set to establish whether the many mergers and acquisitions that have happened in kenyas banking sector have influenced financial performance. The effect of mergers and acquisitions on financial performance of.
The study recommends further research on customer satisfaction and how it influences the growth of agency banking in kenya. Despite the numerous economic challenges that have been witnessed within the sector, the industry remains strong and vibrant. Noteworthy is the banking and insurance sectors in kenya, which are likely to witness significant deal activity in the near future due to the revised regulatory capital requirements. Kenyas banking sector had influenced financial performance. Investigation on importance of agency banking in provision of.
However, in kenya, how the utilization of agency banking has contributed to the performance of these banks is not documented. The banking industry in kenya has also involved itself in automation, moving from the traditional banking to better meet the growing complex needs of their customer and globalization challenges. The merger in kenya isunder the section 4 of the banking act, and approval by the cabinet secretary, national treasury on september 20, for the merger under section 9 of the banking act, reads a part of the statement. The kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. A consumer guide to banking in kenya cost of credit. A case of equity bank in kitui central district, kitui county, kenya. Other trends to watch for include exits by private equity. In todays digital age we have seen a major transformation in the financial services industry. If successful, a merger of two of the largest statecontrolled banks, would result in kenyas biggest bank by assets, branch network and even profitability. Kenya banking sector news archives kenyan wallstreet. Access bank to acquire kenyan bank seven months after.
The population for this study was 16 commercial banks that have embraced agency banking. Through mergers and acquisitions in the banking sector. Kenyan bank sees decades biggest merger as african. Mergers and acquisitions in banking sector economy watch. Agency banking rollout in kenya was meant to address the low financial inclusion in kenya. Similarly, reorganisations mergers and acquisitions experienced in 2018 are expected to. Kunle awosika the concept of banking has been around for centuries and has had to evolve with changing human needs. Kenya has a population of 50 million with about 40 banks. Devarajappa s 2012 in their research explored various motives of merger in the indian banking sector.
Pages in category banking in kenya the following 4 pages are in this category, out of 4 total. In terms of branchless banking, kenya is probably best known for nonbankbased models, specifically those launched by mnos. O box 6200000200, nairobi, kenya 2jomo kenyatta university of agriculture and technology, p. Jan 17, 2018 government to merge 6 banks into 1 by miriam musyoki on 17 january 2018 9. Kenya had twentyeight 28 mergers in 1990s, ten 10 in 2000s and three 3 in 2010s. In the same year, the national bank of kenya became the first fullyowned government bank. Already in 2019, kcbs takeover of national bank of kenya, nic and cba mergers and latest transnational bank takeover by access bank plc shows a continuing. The effect of mergers and acquisitions on the financial. Noteworthy is the banking and insurance sectors in kenya, which are likely to witness signi. The main motive behind the merger and acquisition in the banking industry is to achieve economies of scale and scope. Studies on corporate governance have been based on agency theory and this is. As per the 2009 national financial access survey, 32% kenya.
School of business and economic, mount kenya university, main campus general kago rd p. On 18 th april 2019, for instance, kenyas leading bank kenya commercial bank kcb group plc gave notice of its intention to acquire 100 percent of shares of national bank of kenya nbk, a governmentowned bank the deal, which is subject to regulatory approval, would see kcb make the acquisition. After agreeing to kenyas biggest banking merger in at least a decade, commercial bank of africa ltd. At the moment, three banks have been placed under receivership with only one having recovered and back to operations.
Branchless banking which involves the use of agency banking and electronic banking channels in the. The banking sector was liberalised in 1995 and exchange controls lifted. The kenyan banking industry has experienced considerable growth in the past few years. Kenya supervision report, 1999 profitability of th e banking sector declined sharply from shs. The challenges facing the implementation of agency banking in kenya a case study of kcb. Fidelity bank acquisition and what it means to kenyas banking sector the central bank of kenya announced this week the proposed acquisition of fidelity commercial bank by sbm holdings limited, subject to regulatory approvals in both kenya and mauritius.
The drive for consolidation had led sbm holdings ltd of mauritius to acquire some of the assets of chase bank kenya limited and the entire capital of fidelity. In 1968 national bank of kenya took over the ottoman bank. Thus, the type of industry does seem to make a difference to the acquiring firms postmerger operating performance. Effects of mergers and acquisitions on the financial. Fidelity bank acquisition and what it means to kenyas. Waithanji 2012 found out that there was a link between agency banking and financial deepening. Kenyas cba gets 53% of nic in biggest bank deal in decade. Mergers and acquisitions in banking sector are forms of horizontal merger because the merging entities are involved in the same kind of business or commercial activities. This study set to establish whether the many mergers and acquisitions that have happened in kenyas banking sector had influenced financial performance. Oct 31, 2017 agency banking outlets extend banking services in kenya. Capability to identify, formulate and solve banking and finance problems.
Kenyan mergers and acquisitions of 2015 quantum economics. Its an era that has seen a number of banks either merge or are acquired. Pdf the effect of branchless banking strategy on the financial. Mar 26, 2015 merger activity resulting in a deemed change of control may require regulatory approval from either or both of the competition authority of kenya cak and the comesa common market for eastern and southern africa competition commission ccc for regional transactions.
The banks are training agents who will engage in banking services on behalf of the banks. The study sought to establish the effect of agency banking on financial performance of commercial banks in kenya. The general objective of this study was to establish the factors influencing the uptake of agency banking services by customers in commercial banks in kenya. Government to merge 6 banks into 1 by miriam musyoki on 17 january 2018 9. Ensure that your browser is enabled with javascript and cookies. Bank supervision annual report 2018 central bank of kenya. Banking agents and the bank itself coordination influences the growth of agency banking in kenya. It was followed by standard bank of south africa in 1910. The countrys major insurance groups will continue to dominate the market. The sector is dominated by multinational banks such as standard chartered, barclays, etc. Mergers and acquisitions that will shape kenyas economy in 2019 by rahab mbiriti february 14, 2019 11. Kenyas economy has highest covid19 risk exposure in. Jun 15, 2016 the banking sector in kenya is ever evolving. Barclays bank of kenya financial results 2011 posted on february 20, 2012 by banker barclays bank is one of the international banks that operates banking in kenya functions.
Visit the internet banking faq for more information. According to bank supervision and annual report 2014, the banking sector in kenya comprise of the 44 banking institutions, 9 microfinance banks, 2 credit reference bureaus, 87. However, in kenya, how the utilization of agency banking has contributed to the performance of. Evaluating the legal framework governing mergers and.
Vihiga college of business and technical training, vihiga. How do mergers and acquisitions affect the equity returns of banks in kenya. Banks lead sustained economic growth in kenya report. According to central bank of kenya statistics on the distribution of agents, 87% are with 3 banks equity bank with 25,428 agents, kenya commercial bank with 12,883 and cooperative bank with 8,856 agents.
The competition authority of kenya has approved the proposed merger between commercial. The banking industry in kenya is governed by the companies act, the banking act, the central bank of kenya act and the various prudential guidelines issued by the central bank of kenya cbk. Kenyas banking system in international comparison private creditgdp financial depositsgdp bank concentration kenya 25. Kenya commercial bank kcb has put on the table an offer to buy the troubled national bank of kenya, according to. In addition to the eurobond, which in our view cannot be completed during this fiscal year given the approximately 4months leadtime for the last eurobond, kenya is in the process of. In 1960s, the indian banking industry had turned into an efficient tool to facilitate the development of the indian economy. Agency banking is a model that is aimed at enhancing financial inclusion by reaching out to millions of people in need of financial services. According to safaricom 2011,financial inclusion is a big challenge in kenya,only 22. The report, which is the product of a twoyear survey of the banking market by financial sector deepening fsd kenya, indicates that some bank customers are forced to pay up to sh14,000 a year in. The section also focused on the banking industry in kenya and how mergers and. Effect of mergers on financial performance of commercial.
Oct 16, 2014 the kenyan banking sector is composed of 52 institutions, including 43 commercial banks, 1 mortgage finance company and 8 deposittaking microfinance institutions. In the last few years banking sector has witnessed many tremendous mergers and one of the most prominent mergers is a merger of icici ltd. People pass outside a national bank of kenya branch. Challenges associated with adoption of agency banking and. In the year 1955, the ottoman bank and the commercial bank of africa were established. Mergers and acquisitions that will shape kenyas economy. Other trends to watch for include exits by private equity firms and growth in the inancerelated technology services sector to increase kenyas banked population. This year, the largest concluded deals have seen helios sell a stake in equity bank to norwegian funds and and old mutuals purchase of a 60. The study used secondary data and was collected from previously collected data, general. Kenya first issued eurobonds in june 2014 currently trading at yields of 7. Kenyan banks with highest account charges revealed. Usually merger occurs when an independent bank loses its charter and becomes a part of an existing bank.
First of all there was national bank of india in kenya in 1896 after the establishment of the british in the region. Effect of mergers and acquisitions on financial performance. Central bank of kenya is the regulating authority with 45 banking institutions whereby. Make sure that you are viewing the site in secured mode. Agency banking took effect in kenya in may 2010 after the publication of prudential guidelines by the central bank of kenya. The effect of mergers and acquisitions on financial performance of banks a survey of commercial banks in kenya 1. The effect of mergers and acquisitions on the financial performance of commercial banks in kenya by winfred atieno kaol a research projectreport submitted to chandaria school of business in partial fulfillment of the requirement for the degree of masters in business administration mba united states international universityafrica fall 2017. Kenya bankers association is the umbrella body of the financial institutions licensed under the banking act, cap 488, and the kenya post office savings bank act cap 493b. There has been increased competition from local banks as well as international banks, some of which are new players in the country. In 1971, kenya commercial bank was formed as a result of the merger between national and grindlays bank with the governing owning a stake of 60. Colleges and universities offering diploma in banking and. This paper looked at the effects of mergers and acquisitions on financial performance of commercial banks in kenya. Sometimes, nonbanking financial institutions are also merged with other banks if they provide similar type of services.
Kenya takes a different approach, requiring agents to be forprofit actors and regulating banking agents no. The challenges facing the implementation of agency banking in. Overview of the banking industry in kenya lexology. The banking sector was robust and stable and registered.
In addition, there were two 2 acquisitions in 2000s and six 6 completed 20102018. Mauricio and maudrile 2008 did a study on a new agent model for agency banking in colombia. As of december 31st, 2010, the country included 1,063 bank. The effect of mergers and acquisitions on financial. Capability to communicate effectively and work in different organisations across diverse cultural settings and environment. Agency problem leads some companies to undertake mergers and. However, the banking sector is essentially dominated by seven tier 1 commercial banks, namely equity bank, kenya commercial bank, barclays bank of kenya, diamond trust bank, cooperative bank, central bank of africa and standard chartered.
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