Of Kenya's chequered banking past and glimpse into the future

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Climate change has been a bonanza for historians and researchers.

Falling water levels in dams, lakes, or rivers reveal submerged civilisations and crimes. A good example is the discovery of human remains as the water level in Lake Mead and the Hoover Dam on the Arizona-Nevada border fell in 2022. 

Think of the curiosity arising from the human remains. Who was that? How did he die? When? Falling river water levels have revealed remains of ancient civilisations in China on the Yangtze River and exposed sunken World War II (WWII) warships on the Danube River in Europe.

Our rivers are too small to reveal much, except maybe River Yala. Have we really fathomed the long-term consequences of climatic change?

Receding economic history waters in Kenya reveal a lot of unknowns, more so with receding national curiosity.  Noted that no one nowadays comments on forwards or anything shared on groups, except using emojis?

Even lecture halls have become quieter, compared with the generation that had no social media.

Receding historical and economic waters reveal a lot about South Africa's economic links to Kenya. Climate change in this case is the government's appetite for money leading to the sale of Safaricom to South Africans.

Add the sale of NCBA Bank to Nedbank. We forgot some private schools have also been snapped up by South Africans. Higher education has not felt the South African impact, but there are “feelers".

It seems the dream of Cecil Rhodes will be realised through South Africa's economic interests from the Cape to Cairo. Why was he buried in Zimbabwe, formerly Southern Rhodesia?

Why is South Africa not like Nigeria or India in movies? I can’t recall another hit after Sarafina.

The interest in South Africa is driven by the fact that it looks more like a first-world country on a third-world continent, more so in the Western Cape.

Remember, by the time Kenya got its independence in 1963, South Africa had a semblance of a nation for over 300 years; never mind the contest between the Afrikaners (Boers) and the Britons.  I love dates on South African wineries.

What did economic climatic change reveal?

Someone responded to my article last week on South African foray into Kenyan financing sector. He informed me that Nedbank had tried entering the Kenyan market as early as 2003.

They had offered to buy Daima Bank, which was closed in 2003 by the Central Bank of Kenya. It had two branches, one in Nairobi and the other in Machakos. Capitalisation seems to have been one of the issues.

Nedbank did not succeed. Curiously, Daima Bank is still in the news.  In a public notice dated 28th June 2023, the depositors and creditors were requested to fill claim forms to the Kenya Deposit Insurance Corporation for the sixth payment 20 years after the bank was closed! Is the process of liquidation over?

Other public notices had appeared in February 2014 as reported by Jackson Okoth in The Standard. The other listed victims of liquidation were Trust Bank and Fortune Finance.

Daima’s long agony could have been forestalled if Nedbank had been allowed to pay $5 million (Sh400 million) and take over the bank.

It gets more interesting: Equity Bank, then a building society, wanted to capitalise Daima and own it 50:50.

That did not happen. Instead, Equity got a license to convert into a bank. We can speculate where Daima would be if Nedbank or Equity had taken it over.

Banking is the country’s economic nervous system. No wonder it’s highly regulated. It seems once things go wrong, it can be agonising for the depositors and creditors.

Deposit protection guarantees a deposit of Sh100,000. Refund of more than that depends on the proceeds from liquidation or sale of assets.

What surprised me is how long it can take to get back your money. This has stifled the growth of the banking industry in Kenya. The big banks grow bigger, perceived as more stable and unlikely to fall.

Customers become choosier and avoid risks. I recall listening to a teary pensioner whose money was in a collapsed bank.

The case of Daima vs Nedbank shows how a single decision can have a long-lasting impact.

What if Nedbank got here two decades ago? What if Equity Bank had joined Daima? I tried getting clarification from Equity Bank and Nedbank but got no feedback by the time of going to press.

Our lives, whether social or economic, are full of "ifs". What if you married a different person? What if you took up a different career?  What if you had changed jobs?

You can’t answer all the questions. But we can learn from the past to make better decisions.

My economic history research also surprised me. Commercial Bank of Africa was formerly an affiliate of Bank of America. Beyond Citibank, why have American financial institutions kept off Africa, just like American car models, which are slowly returning? 

They returned with a bang during Uhuru Kenyatta’s regime, mostly through county governments.

Remember Chevy Blazer? Jeep and Ford are now common on the Kenyan road. I suspect it’s one way to differentiate yourself from the “rest".

American cars were more common during the colonial period.  In fact, in Central Kenya, a car is “mbiùki”, a corruption of Buick.

After the turbulent 1980s, Kenyan banks stabilised with occasional closures. Local banks have gone beyond the borders, while recent acquisitions could change the sector.

What do we expect? The political class has always been keen on the banking sector.  They are unlikely to lose that interest. Political power rests on economic power.

We expect consolidation as core capital is increased. I fear that the resulting big banks may not address the needs of the Small and Medium Enterprises (SMEs) and Wanjiku (ordinary citizen). Will the Saccos and microfinance banks fill that void?

A better question should be: what banking system, just like the transport or education system, will take Kenya into a first-world status or Singapore?