The value of transactions handled by representative offices of foreign banks in Kenya grew by 13 percent or Sh47.7 billion in 2023, with a marked increase in project, property, and energy financing deals.
New data from the Central Bank of Kenya (CBK) shows that the offices facilitated business valued Sh413.3 billion in 2023, compared to Sh365.6 billion in 2022.
There are currently nine authorised representative offices in Kenya, established by lenders from The Netherlands, France, China, Pakistan, Egypt, India, South Africa, and Mauritius.
Rwanda’s Bank of Kigali operated a representative office in Nairobi between February 2013 and April 2024. It shut it down to focus more on digital service delivery channels. The lender is also cross-listed on the Nairobi Securities Exchange (NSE).
“The increase was largely due to increased business activities facilitated through energy finance, term loans, borrowing base, working capital, bilateral receivable discounting, project financing, property financing, and correspondent banking,” said the CBK in the 2023 supervision report that was published on Thursday.
The representative offices carry out research, marketing, and liaison roles on behalf of their parent banks, but unlike fully-fledged branches or subsidiaries, they are barred from conducting commercial banking services such as deposit-taking.
They therefore help their parent banks to develop products and services that can meet the needs of the external market, contributing to improved business opportunities and revenue growth.
The rep offices also provide useful early insights on opportunities and risks for a bank that is looking at future expansion into new markets.
In Kenya, the offices mainly facilitate project finance, trade finance, correspondent banking, syndicated finance, and corporate finance.
Last year, the offices saw their project financing deals more than double to Sh21.7 billion from Sh9.2 billion in 2022, while property financing deals rose by 65 percent or Sh24.6 billion to Sh62.7 billion.
The growth in property financing indicated an appetite for local real estate in a period when the weaker shilling against the dollar handed external buyers an exchange advantage or gain when putting foreign capital into the local economy.
Other areas of growth included specialised finance, which was up by 18 percent to Sh11.1 billion, and correspondent banking which grew by 7.2 percent to Sh51.9 billion.
Correspondent banking involves transactions originating from other overseas branches conducted through the Kenyan office where the local parties or partners are based.
Trade finance deals, which are the biggest line of transactions the offices handle, fell by Sh58.6 billion or 38 percent last year to Sh97.1 billion.
The offices also failed to handle any corporate finance deals during the year, compared to the Sh15.1 billion deals they facilitated in 2022.
Syndicated finance deals meanwhile remained little changed in the period, coming in at Sh40.3 billion compared to Sh40.5 billion in 2022.
Transactions classified as “others”, which include energy finance, term loans, domestic borrowing, working capital, and bilateral receivable discounting collectively rose one-and-a-half times in the period under review, to hit Sh128.5 billion last year compared to Sh49.2 billion in 2022.
