Kenyan small savers with bank balances of less than Ksh100,000 ($666.66) have closed 5.66 million accounts in the past two years while others have reduced their account balances to a bare minimum in the backdrop of hard economic times and proliferation of alternative savings channels such as mobile wallets and ‘chamas’.
Latest Central Bank of Kenya (CBK) data shows that the number of deposit accounts in the banking sector declined by 7.78 percent (5.66 million) to 67 million accounts in 2022 from 72.66 million accounts in 2020, disrupting a decade- long growth trend that started in 2010.
CBK, through its Financial Sector Stability Report (2023), also reveals that bank customers are increasing maintaining ‘low bank balances.’
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Kenya Bankers Association (KBA) Chief Executive Habil Olaka played down the new trend that is likely to adversely impact lenders’ liquidity buffers and funding base.
“That is not a trend we have observed ourselves so I wouldn’t give you a position that this is what the industry is thinking about,” said Dr Olaka.
The latest report comes amid a recent CBK study that revealed Kenya’s Micro and Small Enterprises (MSEs) prefer to keep their money in mobile wallets and chamas instead of banks and saccos as part of a new savings trend rocking the financial sector.
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The findings of the latest MSEs Tracker Survey showed that 51.5 percent of the businesses save in mobile money wallets such as M-Pesa, Airtel Money and T-Kash while 42.7 percent save with chamas or groups.
The ration of MSEs that save in banks (including microfinance), mobile banking (M-Shwari and KCB M-Pesa) and saccos stood at 30.8 percent, 25.4 percent and 11.3 percent respectively.
On the other hand the proportion of MSEs that save in secret places including cash boxes was 23.9 percent.
Among female-owned businesses, 57.3 percent save in chamas/ groups while 55.1 percent of the male owned businesses opt for mobile money wallets, according to the survey.
Owner operated businesses and those with one to nine employees as well as those located in rural and urban areas save in mobile money wallets at 51.5 percent, 51.4 percent, 52.8 percent and 50.2 percent, respectively. The survey which, was conducted in June this year (2023) sampled 1,961 businesses of which 1,422 (72.6 percent) were still operational while 539 (27.4 percent) had closed.
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About 57.6 percent of the operational businesses were female-owned and the rest male-owned. The survey shows that 63.4 percent of MSEs save for daily household needs, 62.3 percent for educational needs and 55.6 percent for business expansion while 4.7 percent save for unexpected occurrences/ emergencies. More female owned businesses saves for daily household needs at 65.5 percent compared to male owned businesses at 60.6 percent.
Last year (2022) banks held Ksh4.8 trillion ($32 billion) deposits with the Kenya Deposit Insurance Corporation (KDIC) insuring Ksh 750 billion ($5 billion, equivalent to a 15 percent coverage.
However, the deposit cover of 15 percent is below the recommended minimum of 20 percent as the best practice by International Association of Deposit Insurance (IADI).
It is estimated that 90 percent of total deposit accounts in the banking sector have balances of less than Ksh100,000 ($666.66).
Source: The East African