Wednesday, October 10, 2007

Reprieve for small banks

Opposition MP’s in Parliament yesterday appeared to shoot down a proposal by the Government requiring commercial banks to have a minimum share capital of 1 billion shillings ($14m) by 2010 – up from the current minimum of 250 million shillings.

This has been seen as likely to cause several smaller banks to merge or be absorbed into larger entities. So for at least, another year, the barriers to entry to the banking sector remain low.


J said...

There are too many banks and small banks are liable to close. As long as farmers and those in rural areas are supplied with a decent banking service. Close the rest that waste space!

don said...

I hope it remains low, more banks, more competition... winner is the consumer.

just what? said...

big banks may be better than small banks what matters is the ownership.

i'd rather have a good percentage of them be kenyan owned like KCB rather than be almost totally foreign like BBK.

bankelele said...

J: some invcentive has to be given to banks to expand in rural areas. Many don't have the understanding to derive profit from the villages

Don: Even with competition, cost of banking is rather high

Just What?: BBK is not total foreign

kichwa said...

BoU Governor has spoken of 2 Kenyan Banks coming to Uganda - KCB & Fina. Fina seem to be making a lot of noises in Kenya on SME market. Bankelele, do you know any more on Fina. Seem like a small bank - clearly there is a future for them..

Man143Steph637 said...

The entry requirements need to be high so that the entrants come with sizeable assets to risk not just a platry figure to attract gullible depositors before going under.

Nigeria did it and has some of the biggest banks in Africa following mergers and acquisitions.

Really, our MPs should be shot. One wonders whether they think with their heads or whether they think at all

mmnjug said...

I think that the banks bill ought to have gone through so that we can avert a bank crisis like the one we had in the 80's and 90's. In any case, a higher capitalisation is for the benefit of the clients as well as the shareholders.

Banking is still a high street business but thanks to the likes of Equity and Family, things are changing real fast. I rephrase, they have changed the rules of engagement.

bankelele said...

kichwa: Fina are big in Rwanda, and with their Kenyan base, it's natural that Uganda in between woudl be a target. KCB would also like to become a regional giant to go along with Tanzania and S.Sudan (though off to a shaky start there)

Man143Steph637: Am sure the motion will be reintroduced in the next financial year's budget

mmnjug: But even big banks can collapse.


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