World class EAC Financial Market
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Transcript of World class EAC Financial Market
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8/7/2019 World class EAC Financial Market
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Building a world class financialBuilding a world class financial
market for the East African Communitymarket for the East African Community
region.region.
Presentation to Institutional Investor,Africa Investment Conference
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Comprises: Banks, Insurance Companies, Brokerage Firms, Pension Funds,
Microfinance Institutions and SACCOs.
Contributes 5.4% of GDP and has potential to contribute as much as 8 to 15% of
GDP.
Banking Sector holds assets worth 61% of GDP.
Has potential to increase formal sector employment beyond the current share of
1%.
Developing and deepening faster than the overall economy.
Driven by financial infrastructure that has enabled financial inclusion and new
financial products like infrastructure bonds.
Retail banking services utilizing the mobile phone technological platform with
success
IntroductionIntroduction Over of Kenyas FinancialOver of Kenyas Financial
ServicesServices
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5,514
6,841
8,540 8,828
10,182
11,455
6,876
9,004
11,983 12,046
14,055
15,792
0
200
400
600
800
1,000
1,200
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2005 2006 2007 2008 2009 2010
N
o
.
o
f
B
r
a
n
c
h
e
s
U
S
D
Mi
l
l
i
o
n
s
Gross Loans Gross Deposits Bank Branches
Overview of Kenyan Banking SectorOverview of Kenyan Banking Sector
PerformancePerformance
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Opportunities to Fill Financial Services GapOpportunities to Fill Financial Services Gap
Access
Strands Kenya Uganda
Tanzani
a Rwanda Burundi*
Population
(millions)
38.6
2009
Census
32.3
2010 est.**
41
2010
est.**
10.7
2010
est.**
9.5
2010 est.**
Adult
Population
(millions) 18.7 13.2 22.3 3.7 4
Formal 22.6% 18% 12.4% 14% N/A
Formal
other 17.9% 3% 4.3% 7% N/A
Informal 26.8% 17% 27.3% 26% N/A
Excluded 32.7% 62% 56% 52% N/A
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Only 23% of the bankable population are formally banked.
Potential to mobilize deposits and support further increase in demand for
credit.
increase in Deposit accounts from 2.6 million in 2005 to 12.8 million in
2010.
Potential for expansion to rural and peri-urban areas.
Need for up-scaling the financial infrastructure:
Credit Reference Bureaus
Credit Rating Agencies
Venture Capital Firms
Deposit Taking Microfinance Institutions
Funds Management.
Implementation of AML law
These initiatives are to support increased demand for financial
services and mitigate risk.
Opportunities to fill financialOpportunities to fill financial
Services GapServices Gap
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1922
41
51
44
31
0
10
20
30
40
50
60
2004 2005 2007 2008 2009 2010
U
S
D
M
i
ll
i
o
n
s
Corporate Bonds
Past Treasury and Corporate bonds issues oversubscribed.
Potential to mobilize long-term funds through capital markets.
Maturity profile of debt instruments has been lengthened from 8 months in June 2001 to 5.6 years at present.
690
1,065
1,280
1,844
852
1,938
2,241
0
500
1,000
1,500
2,000
2,500
2004 2005 2006 2007 2008 2009 2010
U
S
D
M
i
l
l
i
o
n
s
Treasury Bonds
Bond MarketBond Market
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Infrastructure
Bonds Savings Bonds
Amount Raised (USD
mn) 1,048 221Average Yield 10.729 1 3.520
Sectors Funded
Water and
Irrigation
Energy
Transport
Funding implementation
of the New Constitution
Bond MarketBond Market
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Plans to establish Nairobi International Financial Centre (NIFC).
Capitalizing on its current development level and strategic location.
Model to be adopted will:
Offer appropriate legal framework similar to world class financial markets.
Develop infrastructure relevant to a cluster of financial services.
Offer competitive investment, tax, and regulatory incentives.
Tap on global best practices in management, operations and technology.
Match global best practices and standards, quality and pricing of financial
services.
Investment OpportunitiesInvestment Opportunities
Creating a financial hubCreating a financial hub
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Investment in treasury and infrastructure bonds; To finance energy andtransport sectors Long-term Investments
Government plans to raise USD470m through bonds in the next 3 months
Relatively high yield
Investments in infrastructure bonds attract no withholding tax on interest
income.
Tradable in the Nairobi Stock Exchange
Can be used as collateral
Investment OpportunitiesInvestment Opportunities
Bond MarketBond Market
IncentivesIncentives
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Investments in conventional treasury bonds with tenor of more than 10 yearsattracts a withholding tax on interest income of 10%.
Investments in conventional treasury bonds with tenor of less than 10 years
attracts a withholding tax on interest income of 15%.
All bonds are traded at the Nairobi Stock Exchange
Bond MarketBond Market
Investment OpportunitiesInvestment Opportunities
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Establishment of representative office.
Buy out or investment in existing institutions.
Real estate and mortgage market constitute 14.4% of the banking sector credit. Insurance Market - less than 10% of Kenyan adults have individual insurance cover.
Regional integration to enhance capital mobilization currently 7 of Kenyas companies
are cross-listed in EA region and 8 Kenyan banks have opened subsidiaries in the region.
Investment OpportunitiesInvestment Opportunities
Other InvestmentsOther Investments
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Commodities futures exchange Institutional, policy and
legal framework being put in place.
Carbon trading - Policy, legal and regulatory frameworks are
being put in place.
Investment OpportunitiesInvestment Opportunities
Other InvestmentsOther Investments
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THANK YOU