Kenya leads EA peers in legacy banking despite digital wave

Wednesday October 11 2023

Kenya features more ATMs and commercial bank branches as a share of the population than Tanzania, Uganda and Rwanda. PHOTO | SHUTTERSTOCK


Kenya is more overbanked than its regional peers in spite of leading the way in the adoption of digital banking and financial channels in recent years.

According to an analysis of data from the International Monetary Fund 2023 Financial Access Survey, Kenya features more ATMs and commercial bank branches as a share of the population than Tanzania, Uganda and Rwanda.

For instance, for every 100,000 Kenyans there were 6.85 ATMs and 4.39 branches in 2022.

In contrast, Tanzanians have 5.61 ATMs and 2.35 bank branches for every 100,000 in the population while the ratios are lower in Uganda and Rwanda at 3.68 and 4.09 for ATMs and 2.34 and 3.14 for branches respectively.

Read: Global lenders want a piece of East Africa’s retail banking market

Despite the heavy dominance in the legacy banking network, Kenya leads its peers in digitisation with 2,176 registered mobile money accounts for every 1,000 adults, and equally features a significant count of registered mobile money agents for every 1,000 square kilometres at 559.8.


The report corroborates findings by institutions such as the Central Bank of Kenya (CBK).

According to data from the CBK 2022 Annual Banking Supervision Report, a total of 39 banks were licensed to operate.

The number of bank branches increased to 1,475 in 2022 from 1,459 in 2021 with the largest increase in branches recorded in Nairobi County of Kenya.

“A total of 17 counties registered an increase of 30 bank branches while nine counties registered a decrease of 14 bank branches. In 21 counties, there was no change in bank branches. The increase in bank branches is mainly attributed to opening of new branches by some commercial banks in emerging and new growth areas,” the CBK noted.

While the number of ATMs decreased by 65, Kenya still had some 2,301 automated teller machines in December 2022.

The drop in the number of ATMs was attributed to the ongoing adoption of agency, mobile and digital banking.

To ease Kenya’s ‘overbank-ness’ the CBK has persistently backed mergers and acquisitions in the sector to not only reduce the number of licensed banks but also minimise risks for the industry in tandem.

Read: Kenya banks adopt ‘smart branches’ for digitalisation growth

While mergers and acquisitions are desired at cutting the number of licensed banks, the move would also lower the number of operational banking branches.

The banking M&A scene has been largely active over the years with the latest deal involving the acquisition of Spire Bank by Equity Bank in September 2022.

Other deals struck have included the acquisition of Jamii Bora Bank by the Co-operative Bank in August 2020 and KCB Group buyout of the National Bank of Kenya in September 2019 while NCBA was formed in the same month from the merger of NIC and CBA.

Foreign banks have also swooped local banks, including Egypt’s Commercial International Bank which purchased Mayfair Bank, Nigeria’s Access Bank acquired Transnational Bank while Premier Bank, Somalia took control of First Community Bank in March this year.

Optimal number

M&A action has nevertheless been leaned towards expanding into new regional markets as top local banks angle for pan-African status.

Branches of Kenyan bank subsidiaries in the region rose to 552 in 2022 from 494 in 2021 with the DRC holding the bulk of the branches at 189.

Read: Kenya banks book $100m forex gain from foreign units

CBK Governor Kamau Thugge has backed mergers and acquisitions to deliver the optimal number of the banking network.

“We encourage more mergers and reducing the number of banks, it’s something I would like to pursue and look into. Ultimately, we will see where that goes, but right now, I can’t tell you what the optimal number of banks would be,” he told an investor conference in July.

Previously, the CBK has widely favoured market-driven consolidation but has been open to ‘arranged marriages’ in the sector as a crisis aversion mechanism in the case of distressed banks.

The recent wave of consolidation has roped in microfinance banks that have desired to grow, innovate and remain well-capitalised.