Revealed: Kenyans with over Sh100,000 in bank

By CHARLES MWANIKI
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Summary

• The Central Bank of Kenya (CBK) data released Wednesday show that the number of the high-quality accounts increased to 1.69 million in the year to December.
• It was expected that layoffs, job cuts and closure of small businesses due to coronavirus-induced slump would cut the number of bank accounts with more Sh100,000.

The number of bank accounts holding more than Sh100,000 rose by 134,000 last year in the face of uncertainty about jobs and incomes following the Covid-19 pandemic.

The Central Bank of Kenya (CBK) data released Wednesday show that the number of the high-quality accounts increased to 1.69 million in the year to December, reflecting a growth of 8.7 percent.

It was expected that layoffs, job cuts and closure of small businesses due to coronavirus-induced slump would cut the number of bank accounts with more Sh100,000, especially those held by salaried workers.

But the increase in the high quality accounts was the highest in three years and happened in the year consumers and rich firms stockpiled an extra Sh341 billion since the onset of the pandemic in Kenya.

Analysts say the growth of accounts with more than Sh100,000 in a pandemic year was driven by a cut in spending for workers that remained in the job market.

The reduced spending was linked to the uncertainty about jobs and loss of pay, and closure and restriction of service businesses like schools, bars and restaurants, which traditionally drive consumer expenditure.

As a result, household savings rates and banks deposits increased to a new peak.

“Total deposits increased by 13.9 percent from Sh3.6 trillion in December 2019 to Sh4.1 trillion in December 2020. The growth was supported by mobilisation of deposits through agency banking and mobile phones platforms,” said the CBK in the annual banking sector report.

The mounting bank deposits is an indication that wealthy individuals and firms opted to save rather than seek new areas in which to invest.

The savers stockpiles emerged when Kenya imposed tough restrictions, including a dusk-to-dawn curfew, closure of schools and bars that led to the country’s first quarterly economic contraction since the global financial crisis 12 years ago in the three months to June.

The virus-linked reduced economic activity was expected to hurt savings due to reduced cash flow from firms hit by subdued demand and individuals who had lost income.

Banks say they also witnessed increased deposits from digital channels after the government introduced various relief measures to encourage cashless payments on mobile phones.

The measures included doubling of the daily transaction limits to Sh300,000 on mobile phone transactions and removal of charges on small transactions. Charges on bank deposits from mobile phone wallets were also waived.

But the share of bank accounts holding more than Sh100,000 continued to drop, an indicator that lenders are tapping poorer savers under the financial inclusion drive.

The share of the high quality accounts dropped to 2.41 percent last year, 2.49 percent in 2019 from 3.33 percent in 2017.

About 97.59 percent or 69.88 million accounts hold less than Sh100,000, offering a sneak peek into Kenya’s growing income inequality where wealth is concentrated in the hands of a small segment of the population.

Economic growth recorded in the past decade to 2020 of between 4.6 percent and 8.4 percent has not helped ease entrenched income inequality with fewer jobs and stagnant pay hurting the middle class most.

While Kenya’s economy expanded 5.8 percent in 2018 and 6.3 percent in 2018, private sector activity — which translates to jobs and higher pay — has remained muted.

About 78,500 new formal jobs were created in 2019, unchanged from 2018 and down from 114,400 in 2017, according to the Economic Survey 2020 data.

This is the slowest pace of formal job growth since 2012 when the economy churned out 75,000, adding to the crisis of youth unemployment. The data does not capture job cuts and net employment.

The Kenya National Bureau of Statistics (KNBS) has delayed releasing the 2020 jobs report that will capture the impact of the Covid-19 economic fallout on the employment market.

Top lenders continued to command the lion’s share of high quality accounts, with the leading nine banks accounting for 78.8 percent of accounts holding more than Sh100, 000. Equity Bank leads with 377,148 accounts followed by KCB (280,186), Co-operative Bank (262,614) and NCBA with 122, 535.

Standard Chartered had the largest proportion of high quality savings, with 31.45 percent of its 236,616 accounts having in excess of Sh100,000.

Stanbic Kenya followed with 19.8 percent of its accounts being the top savers, while DTB had 10.8 percent.

Wealthy savers have been moving their cash from small banks in the four years that followed three mid-sized banks being placed under receivership after failing to meet their obligations.

Depositors and investors in Kenya were rattled three years ago when the CBK took control of Chase Bank, Imperial Bank and Dubai Bank after they ran into financial trouble.