Prepared by Robert Powell.
This section draws on the reports of MAE technical assistance missions in March and October 2001.
On January 24, 2002 the High Court ruled that one element of the Donde Act was unconstitutional. The full implications of this ruling for the immediate applicability of the remainder of this act are unclear and the government is expected to issue guidance on this issue. In the circumstances, the eventual implementation of this law is still possible.
Foreign exchange bureaus may buy or sell foreign exchange in cash, travelers checks, personal checks, and bank drafts. The sale of instruments other than cash is allowed only with explicit approval of the Central Bank of Kenya, which also acts as the licensing authority.
Two of the four largest banks, the Kenya Commercial Bank (KCB) and the National Bank of Kenya (NBK), are partially government owned, and the other two are majority foreign owned. The government shareholdings in the KCB is 35 percent; in NBK direct government shareholding is 22.5 percent, while it indirectly holds 47.5 percent through the National Social Security Fund. Four more banks and one NBFI also have government shareholdings, while most of the numerous smaller banks are family owned and operated.
Provisional data for end December 2001 indicate that the share of NPLs has increased to 42 percent.
For some of the smaller banks, low ratios may be primarily due to smaller deposit-taking operations.
Underprovisioning also distorts the profitability figures and capital asset ratios for some institutions.
The Act is also known as the “Donde” Act, named after the member of parliament who initiated it.
The mandatory reference to the 91-day treasury bill rate also complicates the setting of rates for deposits with other maturities.