Kenya's financial sector : institutional structure, evolution and resource mobilization, mobilization of development

Abstract

Kenya's financial system is relatively developed for a country at its income level and also compared with many other Sub-Saharan African countries. The financial system comprises of numerous commercial banks, non-bank financial institutions, a range of insurance companies and a stock exchange. A three-fold growth in the number of commercial banks has taken place in Kenya over the last thirty years. Similarly, there has been a phenomenal growth of non-bank financial intermediaries and the insurance industry has also experienced a rapid expansion, both in terms of numbers and services offered. The country also has thousands of savings and credit associations to which most Kenyan workers belong and which have become important avenues for mobilization of savings. Furthermore, unlike many other Sub-Saharan African countries, the Kenyan economy is highly monetized with the monetary sector contributing for nearly 95 percent of the country's Gross Domestic Product (GDP) and broad money (defined as narrow money plus savings deposits) being nearly 42 percent of GDP in 1993 and when deposits with non-bank financial institutions are included this ratio rises to nearly 58 percent. This ratio is significantly higher than for most Sub-Saharan African countries where the subsistence sector remains important.