world class eac financial market

8/7/2019 World class EAC Financial Market

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Building a world class financialBuilding a world class financial

market for the East African Communitymarket for the East African Community

region.region.

Presentation to Institutional Investor,Africa Investment Conference


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Comprises: Banks, Insurance Companies, Brokerage Firms, Pension Funds,

Microfinance Institutions and SACCOs.

Contributes 5.4% of GDP and has potential to contribute as much as 8 to 15% of

GDP.

Banking Sector holds assets worth 61% of GDP.

Has potential to increase formal sector employment beyond the current share of

1%.

Developing and deepening faster than the overall economy.

Driven by financial infrastructure that has enabled financial inclusion and new

financial products like infrastructure bonds.

Retail banking services utilizing the mobile phone technological platform with

success

IntroductionIntroduction Over of Kenyas FinancialOver of Kenyas Financial

ServicesServices


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5,514

6,841

8,540 8,828

10,182

11,455

6,876

9,004

11,983 12,046

14,055

15,792

0

200

400

600

800

1,000

1,200

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2005 2006 2007 2008 2009 2010

N

o

.

o

f

B

r

a

n

c

h

e

s

U

S

D

Mi

l

l

i

o

n

s

Gross Loans Gross Deposits Bank Branches

Overview of Kenyan Banking SectorOverview of Kenyan Banking Sector

PerformancePerformance


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Opportunities to Fill Financial Services GapOpportunities to Fill Financial Services Gap

Access

Strands Kenya Uganda

Tanzani

a Rwanda Burundi*

Population

(millions)

38.6

2009

Census

32.3

2010 est.**

41

2010

est.**

10.7

2010

est.**

9.5

2010 est.**

Adult

Population

(millions) 18.7 13.2 22.3 3.7 4

Formal 22.6% 18% 12.4% 14% N/A

Formal

other 17.9% 3% 4.3% 7% N/A

Informal 26.8% 17% 27.3% 26% N/A

Excluded 32.7% 62% 56% 52% N/A


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Only 23% of the bankable population are formally banked.

Potential to mobilize deposits and support further increase in demand for

credit.

increase in Deposit accounts from 2.6 million in 2005 to 12.8 million in

2010.

Potential for expansion to rural and peri-urban areas.

Need for up-scaling the financial infrastructure:

Credit Reference Bureaus

Credit Rating Agencies

Venture Capital Firms

Deposit Taking Microfinance Institutions

Funds Management.

Implementation of AML law

These initiatives are to support increased demand for financial

services and mitigate risk.

Opportunities to fill financialOpportunities to fill financial

Services GapServices Gap


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1922

41

51

44

31

0

10

20

30

40

50

60

2004 2005 2007 2008 2009 2010

U

S

D

M

i

ll

i

o

n

s

Corporate Bonds

Past Treasury and Corporate bonds issues oversubscribed.

Potential to mobilize long-term funds through capital markets.

Maturity profile of debt instruments has been lengthened from 8 months in June 2001 to 5.6 years at present.

690

1,065

1,280

1,844

852

1,938

2,241

0

500

1,000

1,500

2,000

2,500

2004 2005 2006 2007 2008 2009 2010

U

S

D

M

i

l

l

i

o

n

s

Treasury Bonds

Bond MarketBond Market


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Infrastructure

Bonds Savings Bonds

Amount Raised (USD

mn) 1,048 221Average Yield 10.729 1 3.520

Sectors Funded

Water and

Irrigation

Energy

Transport

Funding implementation

of the New Constitution



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Plans to establish Nairobi International Financial Centre (NIFC).

Capitalizing on its current development level and strategic location.

Model to be adopted will:

Offer appropriate legal framework similar to world class financial markets.

Develop infrastructure relevant to a cluster of financial services.

Offer competitive investment, tax, and regulatory incentives.

Tap on global best practices in management, operations and technology.

Match global best practices and standards, quality and pricing of financial

services.

Investment OpportunitiesInvestment Opportunities

Creating a financial hubCreating a financial hub


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Investment in treasury and infrastructure bonds; To finance energy andtransport sectors Long-term Investments

Government plans to raise USD470m through bonds in the next 3 months

Relatively high yield

Investments in infrastructure bonds attract no withholding tax on interest

income.

Tradable in the Nairobi Stock Exchange

Can be used as collateral



IncentivesIncentives


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Investments in conventional treasury bonds with tenor of more than 10 yearsattracts a withholding tax on interest income of 10%.

Investments in conventional treasury bonds with tenor of less than 10 years

attracts a withholding tax on interest income of 15%.

All bonds are traded at the Nairobi Stock Exchange




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Establishment of representative office.

Buy out or investment in existing institutions.

Real estate and mortgage market constitute 14.4% of the banking sector credit. Insurance Market - less than 10% of Kenyan adults have individual insurance cover.

Regional integration to enhance capital mobilization currently 7 of Kenyas companies

are cross-listed in EA region and 8 Kenyan banks have opened subsidiaries in the region.


Other InvestmentsOther Investments


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Commodities futures exchange Institutional, policy and

legal framework being put in place.

Carbon trading - Policy, legal and regulatory frameworks are

being put in place.


Other InvestmentsOther Investments


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THANK YOU

world class eac financial market

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