The Kenya Financial Sector Stability Report for January to December 2018 period was recently released. The report stated that in 2018, the global macro-financial conditions were tight and led to slow growth in global output.
Regional and local economy growth was reported to be stable. This was attributed to good weather and a stable macro-economic environment. The stable growth enabled Kenya’s financial sector to withstand vulnerabilities emanating from the trade tensions, difficult global financial conditions, operational risks, and weak demand from advanced economies.
The banking sector’s assets grew by 10% and amounted to 49.5% of the GDP. This was due to an increase in loans and investments in government securities.
Customer deposits went up by 12.4% thanks to agency banking and mobile banking. The private sector credit grew by 3% while investments in government securities slowed down to 19.03% from 24.6% in the previous year.
Credit risk increased due to the increase in gross non-performing loans by 19.6% to Ksh 316.7 billion in December 2018 from Ksh 264.6 billion in 2017.
Banks tightened lending standards in order to mitigate credit risk. Automation of operations and adoption of financial technologies elevated operational risks thus increasing banks’ vulnerability to fraud and cybercrime in 2018.
Due to trade tension, slow economic growth, and poor performance of some listed companies at the Nairobi Securities Exchange, foreign investor outflows went up. This resulted in a decline in share prices and market capitalization.
There was no new listing through Initial Public Offers(IPOs) in the NSE in 2018. During the year 2018, the Capital Markets Authority (CMA) and NSE established the futures market in order to deepen the financial market.
Finally, the insurance sub-sector reported a decline in performance. This was attributed to operational inefficiencies and unfavorable economic environment. The pension subsector was reported to be stable and had a growth rate of 8% and had an increase in the diversity of its portfolio.
Related;
