Banks close 43 branches as innovation takes root
By John Otini, May 30, 2022Commercial banks in Kenya reduced the number of branches in 2021 as uptake of digital technology continues to take root, however, salaries increased across the sector, says a new report.
The annual banking sector report by the Central Bank of Kenya (CBK) shows that the number of branches decreased from 1,502 in 2020 to 1,459 in 2021, which translates to a decrease of 43 branches countrywide.
“Nairobi County registered the highest decrease in the number of branches by 33 branches,” says the banking sector report.
During that period, micro-finance institutions also shed five branches after ther numbers decreased from 120 to 115 branches.
Its drop was attributed to closure of branches by some commercial banks due to adoption of alternative delivery channels including agency banking, mobile phone banking, and internet banking.
The government’s intentional call for enhanced use of digital alternatives to transact during the Covid-19 pandemic lockdowns reduced customers movement to banks.
“Those who used physical bank branches declined from 29.6 per cent in 2019 to 23.8 per cent in 2021,” says the 2021 FinAccess Household Survey.
Nairobi County
Nairobi County which registered the highest rate of digital technology adoption and increased access to the internet led banks.
Analysts say that increasing use of digital banking was largely driven by the Covid-19 pandemic which saw more consumers access funds through their mobile apps.
The CBK says that a total of 11 counties opened 19 new branches while 14 counties lost 62 branches. However, in 22 counties, there was no change in the number of branches. The number of branches decreased from 1,505 in 2018 to 1,490 in 2019 countrywide translating to a decrease of 15 branches.
But in what appears to be a paradox of sorts, salaries and wages increased by 6.9 per cent from Sh97.1 billion in December 2020 to Sh103.8 billion in December 2021, indicating that the remaining employees earned more.
Salaries and wages increased
The report estimates that salaries and wages as a ratio of income decreased to 16.5 per cent in 2021 from 16.8 per cent in 2020, reflecting a lower increase in staffing costs compared to the increase in income.
CBK reports showed that banks saved Sh6.3 billion in rental charges in 2020, after lenders shut down branches, closed automated teller machines (ATM) and moved away from expensive real estate spaces in commercial areas to their own premises in a move to save on costs.
Early CBK data shows that banks paid Sh5 billion in rent last year down from Sh11.3 billion in 2018.
Surge in cyber attacks
However, the increasing use commercial banks have increased cyber attacks which is now a key risk to innovation, said another CBK survey.
The banking sector innovation survey conducted by the regulator noted that 92 per cent of banks and 86 per cent of micro-finance banks(MFBs) identified cyber-risks as one of the top three innovation-related risks. This comes at a time the Global System for Mobile Communications Association (GSMA) warns that increased use of alternative means of transacting money in Kenya have increased the risk of infiltration by criminal elements.
That while the mobile money industry has become a key sector in Kenya, it has come with financial hazards such as mobile money scams, which needs to be addressed urgently.