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Postbank to revive bid for commercial bank status – Business Daily

Postbank headquarters in Nairobi. PHOTO | NMG
Kenya Post Office Savings Bank (Postbank) will revive a bid for fresh funding to help transform into a full-fledged commercial bank following in the footsteps of its counterparts in Tanzania and Uganda.
The State-owned savings bank has for more than a decade set sights on entering the relatively lucrative commercial lending space in line with global trends.
Postbank managing director Raphael Lekolool says the transition goal is within reach in the medium term, usually measured as three to five years.
“When you look at the whole world, we are amongst the few post-banks that have retained this [savings banking] model. Even our neighbours Uganda and Tanzania have changed their post-banks and even names after they became fully commercial,” Mr Lekolool said in an interview.
“The model we have has been overtaken by events in the whole world. But it is always a journey because the government identifies what it wants to do based on priorities.”
Postbank’s transformation journey has lagged behind its counterparts in Tanzania and Uganda which are now full-fledged commercial lenders.
This is despite the local unit being the oldest in the region, having started operations in 1910, the Tanzanian peer in 1925 and Uganda’s a year later.
Tanzania’s TPB June last year rebranded to Tanzania Commercial Bank after a series of reforms that started gathering steam in 2015 and involved merger and acquisition deals for three other banks.
Uganda’s Postbank similarly became a full commercial bank last December after a restructuring that involved recapitalisation by the government.
The 97-branch Kenya Postbank’s plan to venture into commercial lending has largely been hampered by lack of fresh capital investment which is crucial to seeking the licence from the Central Bank of Kenya (CBK).
Unlike other banks that are regulated by the CBK, Postbank is governed by the Kenya Post Office Savings Bank Act where interest earned on savings is exempted from 15 percent withholding tax.
The bank has since 2013 made clear its plan to operate a new commercial banking subsidiary or launch a deposit-taking microfinance institution.
Getting CBK’s approval requires fulfillment of stringent requirements, including fresh capital injection.
An institution must maintain at least Sh1 billion core capital to operate as a commercial bank and between Sh20 million and Sh60 million as a microfinancier depending on the scale of its operations.
The CBK rules do not also allow a commercial lender to hold more than 20 percent of its capital in real property (buildings and land).
“Transforming into a full retail bank is what we really want to do here. Proposals have been made and we are just waiting for policy directions,” Mr Lekolool said.
“It’s out of our hands. If that funding was available, we will be able to go that route.”
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Finance specialist with courses ranging from corporate finance, perfonal finance and startup finance. Msc. Acturail Science, Bsc. Finance, COP Insurance and phD. Business Advministration -FInance(ongoing)