Local rep units of foreign banks grow business 26pc

Business transacted by representative offices of foreign banks in Kenya grew by more than a quarter to hit Sh313.2 billion last year.

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

IN SUMMARY

  • Single largest growth category was trade finance, which stood at Sh93.52 billion.
  • The second largest category of business was correspondence banking, which involves transactions originating from other overseas branches conducted through the Kenyan office where the local parties or partners are based.
  • The third largest type of transaction was in syndicated finance where Sh37.97 billion was carried out compared to Sh61.49 billion in the previous year — a major decline during the year.

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Business transacted by representative offices of foreign banks in Kenya grew by more than a quarter to hit Sh313.2 billion last year, a new Central Bank of Kenya (CBK) report shows.

The single largest business was in trade finance, which stood at Sh93.52 billion last year compared to Sh18.11 billion in the previous year, amounting to a five-fold growth.

“During 2017, representative offices facilitated business worth Sh313.2 billion. There was a notable increase in business activities facilitated by the representative offices in 2017 when compared to the Sh247.6 billion reported in 2016,” said the CBK.

The second largest category of business was correspondence banking, which involves transactions originating from other overseas branches conducted through the Kenyan office where the local parties or partners are based.

The value rose more than three-fold or 247 per cent to Sh41.36 billion from Sh11.92 billion realised in the year before. The third largest type of transaction was in syndicated finance where Sh37.97 billion was carried out compared to Sh61.49 billion in the previous year — a major decline during the year.

“The representative offices were mainly active in the commodities, energy, infrastructure and trade sectors,” said the CBK.

The offices carry out research, marketing and liaison roles but are barred from conducting commercial banking services unless they open a full-fledged subsidiary or branch.

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Kenya has in recent years become a popular destination for financial institutions with such offices, having more than doubled their transactions in 2016 to hit Sh247.6 billion compared to the previous year.

The 2016 figure has been revised slightly upwards as it was originally published as Sh239.7 billion.

The latest to set up a representative office in Nairobi is Bank Al-Habib Ltd of Pakistan (BAHLP) whose local unit is called BAHL representative office. The office was opened in April.

The CBK said that in the course of last year, it cancelled the authority to the Central Bank of India to operate such an office in Kenya.

The move followed the closure of the bank’s office in Nairobi the previous year.

The CBK also granted a licence to France-based Societe Generale to open a similar office in Kenya.

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