Mombasa’s Banking Sector Experiences Growth with New EntrantsEconomic Strain Elevates Loan Default Rates in Kenya’s Saccos

Mombasa – The coastal city of Mombasa is witnessing a notable expansion in its banking sector, marked by the establishment of new branches and franchises, indicating robust investor confidence and economic potential. During the inauguration of Premium Bank’s fourth branch in Nyali, the institution’s Head of Business, Yahya Dahir, emphasized Mombasa’s strategic importance as a vital gateway to the East African region, which has been instrumental in attracting financial entities to the area.

According to Kenya News Agency, the banking sector in Mombasa is not only expanding in numbers but also innovating in services to adapt to the evolving global financial landscape. He highlighted the sector’s focus on developing banking solutions that cater to specific local needs, including the burgeoning blue economy, which the bank aims to support through targeted financial products and services.

Dahir further elaborated on the bank’s commitment to fostering economic growth in Mombasa through strategic initiatives, such as offering incentives for smart investment and promoting a culture of saving among the populace. He underscored the role of financial institutions in contributing to the sustainable development of key local industries.

Echoing Dahir’s sentiments, Abud Jamal, Chairperson of the Kenya National Chamber of Commerce and Industry (KNCCI) Mombasa Chapter, acknowledged the positive impact of governmental and private sector efforts to enhance the business climate in Mombasa. Jamal pointed out that the establishment of significant financial institutions is a critical driver of capital influx and economic vitality for the county, reinforcing the importance of investor confidence in sustaining financial growth and prosperity in the region.

MURANG’A – Kenya’s Savings and Credit Cooperative Societies (Saccos) experienced a notable increase in loan default rates in 2023, as challenging economic conditions impacted members’ ability to fulfill their financial obligations. This trend led to liquidity constraints within these cooperative entities, underscoring the broader financial turbulence in the country.

According to Kenya News Agency, Chief Executive Officer of Amica Sacco, the non-performing loans within the institution surged to 14.8 percent of the total loan portfolio last year, indicative of the prevailing economic hardships. The CEO’s insights were shared during Amica Sacco’s annual general meeting in Murang’a town, where he detailed the adversities facing the sector, including increased default rates that stymied the performance of many Saccos.

Mbui elaborated that external economic factors, such as the depreciating value of the Kenyan shilling, compelled the Central Bank of Kenya to adjust its lending base rate, which in turn escalated the cost of borrowing across financial institutions. These adjustments adversely affected the propensity for loan acquisition, with a particularly profound impact on Amica Sacco’s predominantly farmer membership, further strained by delays in coffee auction processes.

Despite these challenges, the CEO expressed optimism for 2024, citing early signs of economic stabilization and a resilient Kenyan shilling. He emphasized the Sacco’s strategic focus on enhancing customer experience and aggressive marketing efforts to overcome the economic downturn.

In response to the financial strain on members, Amica Sacco adapted its policies to extend loan repayment periods for those in distress. Mbui also noted the Sacco’s growth in membership and financial metrics, including an increase in share capital and deposits, alongside a growing loan book despite the adverse conditions.

Furthermore, the CEO highlighted the Sacco’s pivot towards digital banking as a transformative strategy to better serve its members. The transition to mobile banking platforms and the ongoing efforts to digitize and automate credit processes are expected to streamline operations, reduce costs, and enhance service delivery and financial inclusivity for its members.