Types of Financial Institutions in Kenya

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In this article, we are going to look at the types of financial institutions in Kenya.

We are going to try as best as possible to explain what the financial sector in Kenya is made up of.

Types of financial institutions

  • Central Bank of Kenya,
  • Savings and credit cooperative societies
  • Commercial and retail banks
  • Microfinance lending institutions
  • Insurance companies
  • Investment firm and banks
  • Kenya capital market
  • Informal financial services Sector

What is a financial institution?

A financial institution is an organization that its main business is to deal with monetary and financial transactions such as exchanging currency, deposit, investment as well as the issuance of loans.

Therefore, this means that any institution whereby a Kenyan citizen can deposit and borrow money is a financial institution.

Kenya is made up of a wide variety of financial institutions, each distinct offering value add to its consumers. Below we will look at what these varieties are and what do they contribute to the economy.

Types of financial institutions in Kenya

As mentioned earlier, Kenya’s financial sector is made up of a wide variety of financial institutions. These institutions come in various types.

Here are the major types of financial institutions in Kenya:

1. The Central Bank of Kenya

The central bank of Kenya is the most important type of financial institution in Kenya as it regulates the operations of all other institutions.

Its primary role is to act as an oversight and ensure that all the other institutions are operating ethically and for the benefit of the common Mwananchi. Take, for instance, the regulation of interest rates by lending organizations to ensure that the citizens are not milked dry.

The Central bank of Kenya also is the one that issues treasury bonds on behalf of the government.

2. Savings and credits Cooperative societies (Saccos)

Saccos are another type of financial institution in Kenya. At the moment, Kenya has a lot of Saccos sprawled all over the country.

These savings and credits cooperative societies exist to offer Kenyans with an easy and cost-effective way to access funds to improve their lives.

As long as one has been saving in a particular SACCO for six months or less, they are eligible to get a loan without having to go through many bottlenecks.

However, before deciding to invest in a particular SACCO, please do your research to avoid losing money. Here is a full list of investment SACCOs in Kenya.

3. Commercial and Retail banks

In Kenya, the banking sector has thrived over the years. Many banks are operating in Kenya these days, thereby providing an opportunity for healthy competition.

Commercial banks are banks that work directly with companies and businesses, while retail banks are deposit-taking. However, most banks have diversified their portfolio to include both.

Some of the tier 1 banks in Kenya include:

  • Equity Bank
  • Kenya Commercial Bank
  • Stanbic Bank
  • Absa Group (formerly Barclays Bank)
  • Standard Chartered Bank
  • Cooperative Bank of Kenya
  • I&M Bank
  • Prime Bank

4. Microfinance lending Institutions

Another form of financial institutions in Kenya is microfinance lending institutions.

Microfinance lending institutions are organizations that offer small loans to Kenyans to improve their livelihoods.

Most of these Microfinance institutions operate in rural areas in Kenya. These organizations have existed in Kenya for the longest time. There are even some which are extensions of major banks in Kenya.

They include:

  • SMEP Microfinance Bank
  • KWFT
  • Momentum Credit

5. Insurance companies

Insurance companies are financial institutions in Kenya that help businesses and individuals transfer the risk of loss.

In Kenya, we have all kinds of insurance companies such as Medical Insurance companies, car insurance companies and personal insurance companies.

These insurance companies may shield us from a wide variety of risks such as medical cover, marine cover, third party accident cover, fire cover, among many others.

Some of the leading insurance companies include:

  • Jubilee Insurance company
  • UAP Insurance
  • AAR Insurance
  • British America Insurance company limited

6. Investment firms and Banks

Moreover, Kenya has the best investment companies that exist to offer the best returns to its investors.

An investment firm will invest your money in financial securities such as stocks and ventures to ensure that you have a piece of each.

The firm diversifies your investment to bring the best returns.

The top investment firms in Kenya include:

  • NIC Securities
  • Centum Investment
  • Cytonn Investment etc.

7. Kenya Capital Markets

The capital market authority regulates the capital market in Kenya.

Majorly, the capital market authority exists to make sure that the Nairobi Securities Exchange is operating as it should.

A capital market is, therefore, the trade of securities, forex exchange and stocks in Kenya.

Since all this is a means of exchanging money, a capital market is, therefore, a financial authority.

8. Informal financial services Sector

The informal financial sector in Kenya is very active. It is the last financial institution in Kenya today.

Most of us have been in a merry go round before.

In Kenya, the informal sector is made up of merry go rounds – Chama’s. If you have been in a Chama, then you are still promoting the flow of cash in the economy.

Moreover, this sector is also comprised of lending relatives, friends and family as long as they return.

Financial Institutions in Kenya Conclusion

In conclusion, Kenya’s financial sector is made up of Central Bank of Kenya, Savings and credit cooperative societies, Comercial and retail banks, Microfinance lending institutions, Insurance companies, an Investment firm and banks, Kenya capital market and Informal financial services Sector.

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