Uhuru secures deal for KCB entry into Somalia after visit

Kenya’s biggest bank by assets, KCB, is set to finally get a foothold in Somalia after President Uhuru Kenyatta secured the lender’s entry into the neighbouring country during his Tuesday visit to Mogadishu.

State House said in a statement that President Kenyatta won the concession from Somalia’s leadership for KCB to open an office in Mogadishu before the end of the year.

KCB Group and Commercial Bank of Africa (CBA) had applied for an operating licence in the troubled country along Gulf lenders seeking to operate in Somalia, where only four per cent of the population is banked.

“President Kenyatta secured an agreement from the Somali government to allow Kenya Commercial Bank to open an office in Mogadishu before the end of the year. The leaders also agreed that the two countries will continue their cooperation in security while Kenya will help Somalia strengthen its public service,” said the press statement.

KCB, which already has a presence in Uganda, Tanzania, South Sudan, Rwanda and Burundi, has been considering entry into Somalia, Democratic Republic of Congo and Djibouti under its strategic plan.

The NSE-listed lender, which is partly owned by the Treasury, has at times ridden on State-initiated deals to open up regional markets for Kenyan companies.

Early in the year, Somalia’s Foreign minister Abdusalam Omer and his Kenyan counterpart Amina Mohamed signed a Joint Commission on Cooperation Agreement to address gaps in immigration, security, banking, trade and other areas.

A similar arrangement with Ethiopia under the special status agreement saw KCB announce it had received a licence to operate a representative office in Africa’s second-largest market by population in November.

Somalia’s population

Ethiopia remains untapped due to restrictions on foreign investors venturing into the telecoms, banking, media, retail, insurance, and electricity sectors.
Like Ethiopia, Somalia’s population of about 12 million largely depends on the black-market and money transfer firms that handle close to $1.5 billion annually in remittances — offering great potential for Kenyan banks.

Equity Bank recently acquired a 79 per cent stake in a DRC bank, Pro-Credit, increasing the number of countries it currently operates in to six.

It has also indicated interests in entering both Somalia and Ethiopia. The Bank currently operates in Uganda, South Sudan, Tanzania, Rwanda and Kenya.

KCB may, however, have to fight off a reputational risk after the bank was adversely mentioned in a report on the pillaging and laundering of the war torn South Sudan.

The report revealed that the country’s politicians and their families have managed to accumulated wealth as citizens continue dying due to persistent war and hunger.

Sentry, a watchdog group co-founded by Hollywood actor George Clooney, says in a report titled ‘War Crimes Shouldn’t Pay’, that $3 million was moved through a personal account at KCB held by Gen Malek Reuben Riak, the South Sudan army’s deputy chief of staff for logistics, between 2012 and 2016. $1.16 million in cash was withdrawn from the account during the period.

KCB on Tuesday denied the allegations saying it operated within the law.

The lender said it works closely with the Government of South Sudan and the Bank of South Sudan with regards to resolutions on UN Security Council Sanction List 2206.

“We advise that KCB being a regulated entity deploys global standards applicable to anti- money laundering guidelines and know-your-customer requirements provided by the regulators in all the countries of our operations,” chief executive Joshua Oigara said in a statement.

The bank said its South Sudan unit will remain committed to safeguarding the confidentiality of customer information as required in the respective banking laws across the regional markets.

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