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{
    "id": 1511235,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/1511235/?format=api",
    "text_counter": 311,
    "type": "speech",
    "speaker_name": "Kitui Rural, WDM",
    "speaker_title": "Hon. David Mwalika",
    "speaker": null,
    "content": " Thank you very much, Hon. Temporary Speaker, for this opportunity to also say one or two things about this Bill. I am a member of the Departmental Committee on Finance and National Planning. I want to focus on only two clauses to allow others to speak. I want to focus on Clauses 3 and 10. Clause 3 proposes that banks increase their core capital from Ksh1 billion to Ksh10 billion within three years. Core capital, by definition, is the amount of money required by banks to transact business. It has advantages and disadvantages. One of its advantages is that it reduces the risk of banks collapsing when they face panic withdrawals by customers or when there is a run on banks. Many banks have collapsed because they did not have enough core capital. Two, when you increase core capital, you will have strong banks with huge capital. The banks can even lend syndicated loans. Several big banks can come together and raise capital to fund big projects, which would be an advantage to this country and the economy. Core capital also has disadvantages. Banks have lent the country to the tune of 45 per cent of total government securities. If we increase core capital, banks will have reduced funds to lend to the Government and the private sector. Some small banks may end up in mergers and acquisitions. With mergers and acquisitions, we will have fewer banks, which may be elite and fail to cater to small depositors. That is another disadvantage which we need to note. If you push small banks too hard, they may collapse. This country has 38 banks in three tiers. Tier 1 is for the big boys. Tier 2 banks have core capital between Ksh7 billion and Ksh9 billion. Tier 3 has small banks operating between Ksh1 billion and Ksh3 billion. These are the banks we need to be careful with. There are about six of them, and they cannot raise the required funds. They need to be given some time. And we have to admit that they serve their own clientele. Some people cannot go to the big banks. When Equity Bank started, it penetrated small estates. That is called financial penetration. If we force the small banks to increase their core capital, they may collapse, and people may lose their jobs. Hon. Temporary Speaker, three years is not enough time for the process of merging and acquisition to take place. Therefore, they will collapse because it is difficult to get government institutions like the Competition Authority of Kenya and the Capital Markets Authority. Auditing these banks so they can merge or be acquired takes a bit of time. Therefore, the Committee proposes increasing the period from three to seven years. This is very important so that we give these banks time for the ones who want to merge to do so, those that are going to be sold by their owners to be sold, and the ones who wish to increase their capital will do so. Banks are owned by people. If we pass that they raise this capital within seven years, you will realise that some will struggle to raise it by the seventh year. The proposal is that they raise their capital to Ksh5 billion within three years. This will enable them to move forward. As we help these banks, it is also good to note that they have forgotten their functions as financial institutions. They have concentrated on lending to the Government. Forty-five per cent of government securities are owned by banks, which is around Ksh2.2 trillion. The economy will grow if this money can be loaned to business people. As much as we help them, they need to come up with a clear programme of lending to the Small and Medium-Sized Enterprises (SMEs), which are the engines of economic growth. Clause 10 of the Bill proposes to include non-deposit-taking institutions in the ambit of the Central Bank of Kenya. These are institutions which operate without any legal framework."
}