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Depositors with over half a million in bank drops
In 2024, the volume of insured deposits fell by 17.3 billion to Sh1.065 trillion from Sh1.083 trillion in 2023, indicating that the cash held in the high-quality accounts (which fall above the refund threshold) grew in the year.
The share of bank accounts holding more than Sh500,000 dropped to 0.65 percent last year, reflecting the cash flow problems in a soft economy plagued by Kenya's growing income inequality.
Central Bank of Kenya (CBK) data show that banks had 739,803 high-quality depositors last year, compared to 742,556, which accounted for 0.71 percent of all bank accounts in 2023.
The small share of moneyed accounts offers a sneak peek into Kenya's growing income inequality, where wealth is concentrated in the hands of a small segment of the population.
Kenya's economy has grown on average by 5.0 percent annually over the past decade, but the benefits have not been equally distributed, and the gap between rich and poor is rising, analysts argue.
The number of super-rich in Kenya is among the fastest growing in the continent, yet the economic benefits have not trickled down to the majority of Kenyans quickly enough.
Kenya's economy grew by 4.7 percent in 2024, down from 5.7 percent a year earlier, weighed down by a subdued performance of the agriculture sector and reduced lending to the private sector due to costly loans.
More people are also opting to open transactional accounts via digital and mobile platforms, growing the number of lower-value accounts at a much faster pace compared to the larger ones.
Mobile banking accounts also allow users easier access to credit and savings facilities from banks, adding to their growing popularity as some people opt to open multiple mobile accounts.
"Commercial banks mobilised for more account opening supported by the use of digital platforms, which explains the increase in the number of deposit account holders," said the CBK in its bank supervision annual report for 2024, which was released on Friday.
Riding on this shift to digital banking platforms, KCB Bank and NCBA remained the lenders with the largest number of deposit accounts in the industry at 53.69 million and 33.09 million accounts, respectively, together accounting for 76 percent of the industry's total accounts.
KCB grew its number of accounts from 47.54 million in 2023, as per the CBK data, while NCBA's accounts rose from 30.4 million.
KCB operates a mobile banking platform known as KCB-M-Pesa, while NCBA runs the M-Shwari platform, both offering loans and savings in partnership with Safaricom's M-Pesa mobile money platform.
Top lenders accounted for the lion's share of quality accounts, reflecting their attractiveness to depositors who see them as a haven, a decade after the collapse of Dubai Bank, Chase Bank, and Imperial Bank rattled the market.
Equity Bank led the market with 131,916 accounts that had more than half a million shillings, followed by KCB at 120,317 and Co-operative Bank at 87,556 accounts.
Some tier two and three lenders, however, held a larger share of quality accounts compared to their total number of accounts, a result of their policy of catering to a select number of niche clients.
Citibank Kenya led with 61 percent of its 2,318 total accounts holding balances of more than half a million shillings, followed by Victoria Commercial Bank at 55 percent out of 8,250 accounts and Bank of India at 48 percent of its 12,505 accounts.
The half-million deposit threshold is an important peg for bank depositors, given that it is the upper threshold of refundable deposits in case of a lender's collapse.
The Kenya Deposit Insurance Corporation (KDIC)—an independent State agency that manages deposit refunds for collapsed banks—in July 2020 raised the compensation ceiling for depositors in collapsed banks to Sh500,000 from the previous Sh100,000, to ease the discomfort with the smaller lenders following the closure of the three banks in 2015 and 2016.
This increase in the compensation threshold was the first in 30 years, making it necessary to keep up with inflation and the growth in volume of cash held in banks over the three decades.
KDIC is funded by charging commercial banks a small percentage of their deposits in the form of insurance.
The wealthy have, however, been accumulating their savings at a faster pace compared to smaller depositors, leading to a larger volume of deposits falling outside the insurance window.
In 2024, the volume of insured deposits fell by 17.3 billion to Sh1.065 trillion from Sh1.083 trillion in 2023, indicating that the cash held in the high-quality accounts (which fall above the refund threshold) grew in the year.
This means that the deposit insurance scheme now covers 19.4 percent of the Kenyan banking sector's total deposits of Sh5.48 trillion, which is just shy of the 20 percent mark that is considered best practice by the International Association of Deposit Insurance.
In 2023, the deposit insurance covered 19.36 percent of total deposits of Sh5.59 trillion, down from a cover of 20.6 percent in 2022 when total deposits stood at Sh4.76 trillion.
