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Deals by foreign banks' Kenya offices hit Sh356 billion

Central Bank of Kenya
The Central Bank of Kenya building in Nairobi. FILE PHOTO | NMG 

Representative offices of foreign lenders in Kenya saw the volume of business rise by 18.4 percent in 2018 to hit Sh356 billion, largely from financing trade deals.

Central Bank of Kenya (CBK) 2018 Banking Supervision report shows the bulk of transactions remained on trade finance, while correspondence banking and project financing recorded relatively the biggest drop in volumes last year.

“The representative offices facilitated business worth an estimated Sh355.58 billion ($3.51 billion) in 2018…a notable increase when compared to the business facilitated in 2017.

“The activities facilitated largely comprised of corporate finance, syndicated finance and correspondence banking,” said CBK in the report.

In 2017, the offices were mainly active in the commodities, energy, infrastructure and trade sectors.

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Trade finance deals rose to Sh109.3 billion last year from Sh93.5 billion in 2017, while corporate and syndicated financing rose by Sh3.86 billion and Sh4.87 billion respectively to hit Sh13.7 billion and Sh42.8 billion.

On the other hand, volumes from correspondence banking fell by Sh13 billion to Sh29.3 billion, reversing the growth that had been seen in 2017 in the line of business.

Correspondence banking involves transactions originating from other overseas branches conducted through the Kenyan office where the local parties or partners are based.

Project financing also fell, by Sh3.85 billion to Sh7.4 billion, while specialised finance was flat at Sh19.9 billion compared to previous Sh19.6 billion.

There are nine representative offices operating in Kenya, carrying out research, marketing and liaison roles.

They are, however, barred from conducting commercial banking services unless they open a full-fledged subsidiary or branch.

The most recent entrant through this window is Bank Al-Habib Ltd of Pakistan, which was granted a CBK licence in April 2018. The CBK in 2017 also granted a licence to French banking giant Société Générale to open a similar office in Kenya.

The CBK in 2017, however, cancelled the representative office licence of the Central Bank of India (not to be confused with the Indian banking regulator the Reserve Bank of India) whose activities in Nairobi had ceased in 2016.

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