By Billy Mijungu
In an economy grappling with countless challenges, where ordinary Kenyans are struggling to stay afloat, one sector seems completely untouched by the prevailing hardship: the banking industry.
At a time when businesses are closing shop, unemployment is on the rise, and the cost of living is becoming unbearable, banks are reporting record profits with an almost surreal detachment from the realities faced by the rest of the country.
Let us take a look at the recently released full-year 2024 profit results for some of Kenya’s top banks.
KCB posted a 65 percent jump in profit after tax to Sh62 billion. Equity Bank registered a 12 percent increase to Sh49 billion.
Co-operative Bank’s profits rose by 10 percent to Sh25.5 billion. Standard Chartered reported a 45 percent surge to Sh20 billion.
NCBA earned Sh22 billion, a 2 percent rise.
Absa’s profits went up 28 percent to Sh21 billion.
Stanbic recorded a 13 percent increase to Sh13.7 billion. I&M Bank rose by 22 percent to Sh15.4 billion. DTB was up 13 percent to Sh7.6 billion.
HF Group jumped 35 percent to Sh524 million, and Sidian Bank made a remarkable turnaround with a Sh287 million profit after a loss of Sh448 million in 2023.
These figures paint a clear picture. While the economy is failing, banks are flying.
At the same time, major shareholders and executives are taking home staggering dividends.
The Ndegwa family received Sh1.35 billion from NCBA Group while the Kenyatta family took home Sh1.2 billion.
Equity Bank CEO James Mwangi earned Sh543 million. Co-operative Bank CEO Gideon Muriuki pocketed Sh146 million.
These numbers reveal just how lopsided the current system is, where a few individuals continue to benefit immensely while the majority of Kenyans face increasing economic pressure.
More reason why Windfall taxes are a necessity, such taxes can directly fund Private Enterprises.
The mechanism behind these profits is even more alarming. The average Kenyan deposits their money into a bank.
That same bank then lends the money to the government, which in turn charges taxes to that same Kenyan.
The taxes are used to pay back the banks, with interest.
Essentially, Kenyans are not only providing the banks with capital, but they are also funding the profits through the taxes they pay.
It is a closed loop where the citizen is used as both lender and payer.
Meanwhile, the Central Bank Rate was recently reduced from 10.75 percent to 10 percent, a move intended to encourage banks to lend more to the public and stimulate economic activity.
But this reduction has proven largely symbolic.
Banks are still far more interested in lending to the government than to ordinary Kenyans or small businesses.
And who can blame them when government debt remains the most profitable and secure form of lending available?
This situation is deeply problematic. Kenya’s domestic debt has reached approximately Sh5.8 trillion.
As long as the government continues to borrow heavily from local banks, there is little incentive for these financial institutions to support the real economy.
Entrepreneurs and small business owners who desperately need credit to grow and create jobs are shut out.
Banks are choosing the easy, guaranteed returns of government lending over the more transformative but riskier investment in local enterprises.
The rise of money market funds further illustrates the imbalance.
These funds are now being fed by debt instruments that banks use to finance the government.
This means more and more of our financial system is geared toward sustaining government borrowing, not economic growth.
This is not sustainable.
It is time to introduce windfall taxes on banks that are posting outsized profits at the expense of the public.
If these profits are coming from public debt funded by our taxes, then the public deserves a share of that return through taxation and redistribution.
But beyond taxes, we must make the bold and necessary decision to end domestic borrowing altogether.
It is the only way to force banks to turn their attention to the real economy.
Only then will they begin to finance the ideas, innovations, and enterprises that can lift this country.
We must break this cycle.
The status quo serves a few and dooms the many.
We must make the impossible possible, or we will slowly perish as a nation. Banks, Micro-lenders are growing as the face of cartel in Kenya and if left unchecked.
Hey will be the most powerful weapon of control, they are already in 1 foot, two feet and Kenyans are done
It’s time Government relooks at how it borrows locally.
I dare say it’s important that Government gets and external buyer for the KES 5.8 trillion and leave banks awash with Money, they will be forced to hawk it Kenyans.
