The Next Wave: Kenyan banks have forgotten how to lose money
Kenya’s biggest banks continue to post record profits as small businesses struggle to access credit. A closer look at lending risks, mobile loans, and the business of banking reveals why.
Kenyan banks have defied economic challenges, maintaining robust profits despite the struggles of their borrowers. Over the past five years, no tier-1 bank recorded a net loss. Instead, their combined pre-tax profits surged, with NCBA Group witnessing a whopping 409% increase in profit after tax. Despite record profits, banks remain cautious, as lending to high-risk borrowers can be complex and costly.
Roughly three-quarters of potential borrowers never apply for loans due to rejection fears, collateral issues, or high costs. Those who apply face high approval rates, but banks are now diversifying their strategies. They're increasingly investing in consumer payments, partnering with mobile telecom networks for services like Safaricom's Fuliza overdraft facility.
This approach has proven lucrative, with Fuliza generating significant revenue and contributing to a substantial portion of Safaricom's credit portfolio revenue.
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