Deals done by representative offices of foreign banks in Kenya increased by 18.4 percent in 2018 which amounts to Sh356 billion, according to local media reports.
The Central Bank of Kenya 2018 Banking Supervision report shows that trade finance amounts to a majority of the Sh356 billion worth of deals done by foreign banks.
The Central Bank of Kenya said in the report that, “The representative offices facilitated business worth an estimated Sh355.58 billion in 2018, a notable increase when compared to the business facilitated in 2017. The activities facilitated largely comprised corporate finance, syndicated finance, and correspondence banking.”
Trade finance deals carried out by these representative offices of foreign banks in Kenya increased to Sh109.3 billion in 2018 from Sh93.5 billion in 2017. Similarly, corporate and syndicated financing increased by Sh3.86 billion and Sh4.87 billion respectively to hit Sh13.7 billion and Sh42.8 billion.
During the same period, correspondence banking fell by Sh13 billion to Sh29.3 billion, despite seeing a growing in 2017.
Currently, there are nine representative offices of foreign banks operating in Kenya. Some of them are HDFC Bank, Nedbank, FirstRand Bank, Bank of China, Bank of Kigali, and Bank AL Habib. Even though they have been granted permission to open representative offices by the Central Bank of Kenya, they do not have a licence to carry out commercial banking activities.
Recently, Kenya decided to remove the controversial interest rate cap introduced in 2016 which led to declining access to credit for the small players in the private sector. As a result of the interest cap, banks in Kenya often refrained from lending to the private sector and concentrated on lending to only the government and large multinational corporations.