With the recent move by the Kenya Bankers Association to regulate high value transactions, the question of whether we are starting to see over-regulation is come up again.
The banking sector is probably the one that will be most hard hit. It takes effort and a lot of investment to attract and retain a customer base. Unfortunately, the recent guidelines are only going to deter customers from engaging banks even more.
Banks in Kenya are already heavily regulated and this space is complex enough. Adding an extra layer to this is no doubt going to shift, and possibly tip, the market. This may very well drive the market to adopting more informal solutions like we have previously seen.
Moving from Formal to Informal
Among the bank CEOs who understand this aspect of banking is Jeremy Awori, CEO, Barclays Kenya. While speaking at the Finnovation event a couple of weeks ago, he said:
“We’re already heavily regulated . . . If we over-regulate, which I think we’re starting to see, and that is not necessarily coming from the regulators, it’s also coming from legislators . . . .. We have to be careful that we do not end up with dysfunctional outcomes where you drive things from a formal system into an informal system because people now can’t get the service that they’re looking for.”
Awori gave an example of how this has happened before when the rate cap moved businesses to shy-locks where there is no protection or regulation.
The cost of banking is getting more expensive despite the emergence of digital technologies and products that are mean’t to bring such costs down.
The recent move may very well see a similar move by more people looking for alternatives that are more convenient. As a matter of fact, we cannot rule out the possibility of more people getting into the crypto space that enables large transactions with almost no regulation or control.