CFC Stanbic Bank will on Tuesday become the third Kenyan lender to open shop in South Sudan in an effort to get a piece of a market that is the most profitable among the regional subsidiaries of local banks.
The bank said it is moving closer to serve its corporate clients such as the UN and other international organisations, which they currently serve from Kenya and hope it will allow CFC Stanbic to break even faster.
It will join KCB and Equity Bank, which have seen their South Sudan subsidiaries emerge their best performing regional shops in a market that has also caught the interest of Family Bank and Co-operative Bank.
“We are moving there (South Sudan) to serve our corporate clients better.
We currently meet their banking needs from Nairobi,” said Greg Brackenridge, the managing director of CFC Stanbic Bank in an earlier interview.
In July last year, the South formally broke away from the North, ushering in independence that further raised its attraction as an investment destination while donors are pouring billions to modernise the nation.
Central Bank of Kenya (CBK) says that South Sudan accounted for 42 per cent of the Sh2.3 billion profit that Kenyan banks with regional shops posted in 2011. Uganda accounted for 27.3 per cent and Tanzania 33.8 per cent.
This comes despite Kenyan banks having increasingly focused on the Ugandan market, which has 113 of the 223 branches of the subsidiaries, according to the CBK data.
‘‘Subsidiaries operating in South Sudan accounted for 42 per cent of the total profits, although only two banks have operations there. This demonstrates potential in South Sudan,” said the CBK.
This is the reason financial institutions led by banks are increasingly factoring in South Sudan in their business plans.
“The establishment of Co-operative Bank South Sudan as a joint-venture has been approved by the government of South Sudan. We expect to play big,” said Gideon Muriuki, the CEO of Co-operative Bank.
Besides the banks, East African Breweries Limited, UAP Insurance and Kenya Airways are some of the Kenyan companies that have operations in South Sudan while companies such as DT Dobie, Uchumi Supermarkets and Nakumatt are planning to set shop there.
The increased flow of donor money and the rising interest of Kenyan companies is what are egging local banks to set up in South Sudan.
South Sudan is currently locked in row with the north of transit fees for its oil and the impasse has cut the flow of petro dollars to Juba and prompted the country to seek alternative logistic routes.
The row is threatening the optimism Kenyan firms have about opportunities in the infant state since oil accounts for 98 per cent of all government revenue and goes to support state salaries and the army--which soaks up 40 per cent of spending.