The five sectors comprising Kenya’s financial system each have their own regulator: Central Bank of Kenya (CBK) for banking, the Capital Markets Authority (CMA) for the capital markets, the Insurance Regulatory Authority (IRA) for insurance, the Retirement Benefits Authority (RBA) for pensions, and Sacco Societies Regulatory Authority (SASRA) for saccos.
The first of these to be established was the CBK, back in 1966, drawing its mandate from the Banking Act CAP 488. CBK’s primary role is promoting financial stability within Kenya. To that end, the regulator issues local currency and manages foreign exchange reserves. The CBK is also the banker for the government and provides tools through which monetary policy is implemented. A recent regulatory development in the banking sector is the repeal of the interest rate cap in 2019, intended to incentivise banks to increase lending to the private sector.
The CMA was established next in 1989, drawing its mandate from the Capital Markets Act CAP 485A. Its core function is to promote integrity and investor confidence in Kenya’s capital markets. Additionally, it supervises the development and growth of long-term investment activities to spur economic growth. In line with its duty to license investment marketplaces and intermediaries, the CMA released regulations for the commodity markets and coffee exchanges earlier this year. In 2019, it opened the Regulatory Sandbox to facilitate the live-testing of innovative products, solutions and services in the investments sector.
After the CMA’s formation, RBA followed in 1997, following the gazettement of the Retirement Benefits Act No. 3 of 1997. The regulator is also in charge of licensing service providers within the industry. Earlier this year, the authority put in place regulations allowing for members to access part of their accrued retired benefits to finance the purchase of residential housing.
The Insurance Regulatory Authority (IRA) came next following the Insurance Act CAP 487 Amendment in 2006. RBA maintains the confidence of insurance consumers and promotes an efficient, fair and stable insurance market. In this regard, the authority moved to restrict the handling of insurance premiums by insurance brokers and agents in 2019. The intermediaries are required to remit collected premiums to relevant insurance firms within fourteen days.
The latest entrant to the regulatory space was SASRA, which draws regulatory power from the Sacco Societies Act, 2008. SASRA licenses SACCOs to receive deposits and supervises their activities to protect members’ interests.
International and national development finance institutions also play a critical role in mobilising capital in Kenya. Their activities are supervised by the various state departments within the scope of their operations.
Standard Investment Bank Ltd (SIB) is duly licensed to operate as capital markets intermediary in Kenya. SIB was founded in 1995 as a licensed stockbroker focusing on high-value client relationship management and integrity. The firm currently holds licenses for investment banking, operating unit trusts and online forex money management obtained in 2003, 2007, and 2018 respectively. Today, SIB is a one-stop-shop offering capital markets services to a substantial and diversified client base that includes governments, private institutions, high net worth individuals and retail investors.
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This article was written by Thomas Juma, a Corporate Finance Associate at Standard Investment Bank.