Postbank seeks to issue loans by end of year

Postbank is set to start issuing loans by the end of the year upon conclusion of ongoing talks with the Treasury that include significant capital investment.

Anne Karanja, Postbank’s acting managing director, said the bank is looking secure a licence to either operate a new commercial banking subsidiary or launch a deposit-taking microfinance institution.

A consultant completed a review of Postbank’s lending capabilities in December and the bank is implementing the recommendations in consultation with the Treasury, she said.

“The bank is making significant progress towards the provision of credit and other commercial banking services … we anticipate to start offering loans before the end of the year,” Ms Karanja said Tuesday during the launch of a partnership with Visa International.

“We are already preparing our core banking system to align it with this new service. The bank is also crossing out a checklist of prudential guidelines and financial reporting standards that we will be required to adhere to.”

Whichever option Postbank picks, it will be opening its operations and books to a whole new set of rules that the regulator uses to keep commercial lenders and microfinance institutions in check.

For instance, the Central Bank of Kenya (CBK) requires a commercial bank to have a minimum core capital of Sh1 billion while that for a microfinance institution stands at between Sh20 million and Sh60 million depending on the scale of its operations.

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State-owned Postbank, which posted a Sh1.4 billion loss in the year ended June 2015, will have to secure these funds from a government that is driving an austerity agenda under the strain of a high recurrent expenditure.

“Things like capital requirements will become clearer as we conclude negotiations with the Treasury but this time we are confident that we shall begin offering loans in quarter four,” Ms Karanja said.

The CBK in November issued an indefinite moratorium on the licensing of new commercial banks, another hurdle that Postbank will have to overcome if its goes for the banking subsidiary option.

Postbank was established as a savings bank and has therefore not been able to offer loans and cheque clearing services to its more than 1.3 million customers whom it serves through 104 branches.

This inability to directly lend money to customers has left it at a disadvantage compared to microfinance institutions and commercial banks that offer a wide range of financial services.

Despite this limitation, the bank has been innovating in recent years as it seeks to keep up with ever-changing banking trends while lobbying to join the club of lenders.