Paul Arithi 
Kenya’s economy demonstrated remarkable resilience in 2023,with the banking industry playing a pivotal role in supporting a broad-based economic expansion, even as the economy faced challenges from global and domestic fronts.
According to the State of the Banking Industry (SBI) Report 2024 released by the Kenya Bankers Association (KBA), the country’s economy achieved a growth rate of 5.6 percent, up from 4.9 percent in the previous year, largely buoyed by a strong performance in the services and agricultural sectors.
In the period under review, the banking industry saw a substantial increase in total assets, which rose by KES 1.2 trillion, a 17.6 percent annual rise in 2023.Meanwhile, the sector’s deposits increased by 15.1 percent, supported by the expansion of mobile and online banking platforms.
Despite the overall growth, the sector faced a rise in non-performing loans (NPLs), which reached 14.8 percent of gross loans, the highest level since 2007.This prompted banks to tighten credit standards and enhance their risk management practices.
The banking industry maintained robust capital positions, with a capital to risk-weighted assets ratio of 18.6 percent, ensuring stability despite economic pressures. While operating income grew by 21 percent, a faster growth in expenses (38 percent), offset the gains, resulting in a 9.1 percent decline in pre-tax profit.
“As we navigate the complexities of the global and domestic economic landscape, the SBI Report serves as an invaluable resource for understanding the dynamics at play within Kenya’s banking sector. We are committed to providing insights that will help stakeholders make informed decisions,” said Raimond Molenje, Acting Chief Executive Officer of the Kenya Bankers Association.
Looking ahead, the SBI Report 2024 expresses cautious optimism for Kenya’s economic outlook, predicting that growth would be anchored on the path of credit growth, particularly the Government’s implementation of expenditure-led fiscal consolidation.The report warns of potential risks from climate change, geopolitical tensions, and fiscal constraints, which could impact the banking sector’s stability.
