Editorials
In-tray full for the new Central Bank governor
Wednesday May 24 2023
Kamau Thugge was among the six candidates shortlisted in race to replace Dr Patrick Njoroge as CBK Governor. He has been nominated to succeed him. FILE PHOTO | NMG
Credit Bank, a struggling lender, is the latest beneficiary of Central Bank of Kenya’s (CBK) deals midwifing role aimed at injecting stability in the financial sector.
On Monday, the regulator reported that it had given the green light for a 20 percent stake sale in the small bank to Mauritius-based private equity fund, Shorecap III, LP.
The investment is expected to put the lender, whose key financial health indicators were in the red, on the road to recovery.
Yet, while Credit Bank’s fortunes change, the latest data shows that 13 others are still in dire straits. It should concern and move the regulator to adopt a multi-pronged approach.
Even as the CBK continues to play the midwife role, it should address the fundamental weakness in the sector that has seen small banks struggle to stay afloat even as their bigger peers report record profits every other quarter.
One of the biggest weaknesses is capital flight whenever customers suddenly withdraw their deposits for fear of the lenders collapsing.
Perhaps the incoming CBK governor should prioritise coming up with policies to protect against capital flight.
That way, the fundamentals will be effectively addressed, and perhaps then the CBK won’t need to play the midwife.
