KBA expects pressure to drive more banks into restructuring

The banking sector is set for a round of layoffs, as lenders opt for technology to drive growth.

The Kenya Bankers Association (KBA) said pressure is mounting on banks to lower cost of services which can no longer be sustained by having high staff costs.

KBA Chief Executive Officer Habil Olaka said on Tuesday that banks are investing more on innovation to remain profitable in a highly competitive market.

“The biggest thing is that the cost of services was perceived to be high so there’s a lot of pressure on the banks to reduce the cost be it in terms of transacting or the cost of credit. The consequence of leveraging on technology is the fact that you don’t require as much human labor as before,” Mr Olaka said.

At least three banks have in the last two months announced major restructuring with plans to lay off employees.

Family Bank in early October announced that it was remodeling its business model to take advantage of emerging opportunities in the financial services sector.

The Bank has offered voluntary early retirement for its employees but did not give a number of those to be affected.

Sidian Bank also plans to lay off 108 employees, in its move to become more efficient while Ecobank plans to close nine branches.

Equity Bank recently announced it will no longer open new branches in favor of digital and mobile banking to drive growth.

Mr Olaka said the focus would also shift to branch positioning with banks also likely to close down non profitable branches.

“This is something that started a lot earlier a number of banks were already trying to rationalize the number of staff and branches, trying to see which branches are generating justifiable revenue,” he added.

According to KBA, plans by banks to downsize start well before the interest cap era following amendments to the Banking Act.

The banking lobby group however expects more banks to review their operations to reach and offer customers services at the least cost.