Banking rivalry sparks changes at Postbank

By Jackson Okoth

The Government will amend the law to allow Kenya Post Office Savings Bank (Postbank) trade in foreign currency.

The move is seen as a deliberate effort by the Government to institute reforms at one of Kenya’s oldest financial institutions in the wake of intense competition in the banking industry.

Postbank Managing Director Koigi Nyambura in a past interview. She says the bank has been leasing its huge network to other users, which has opened up more avenues to generate revenue. [PHOTO: FILE/STANDARD]

While Postbank’s mandate remains mobilisation of savings, recent changes in the financial services landscape have called for changes at institution.

For instance, it has migrated from the old passbooks to electronic cards, cut long queues previously associated with its banking halls and entered into high profile partnerships, to remain visible.

While it has been lobbying to be allowed to offer credit facilities, Treasury is yet to yield to this demand.

"The mandate of Postbank is rather restrictive and has worked negatively on its profitability Finance Minister Uhuru Kenyatta told Parliament on Thursday, when he read his Budget.

Generate revenue

Although Postbank receives more than $100 million yearly through remittances from the Diaspora, it is not allowed to trade in foreign currency.

With more than 85 branches and 396 outlets, its unrivalled network is one of the most established in the financial market.

Unable to leverage on this, the bank has been forced to enter into partnerships, using its network to earn commissions.Postbank has been leasing its huge network to other users including utility firms, mobile phone service providers, stockbrokerage firms and online payment services.

"This has opened up more avenues to generate revenue," said Postbank Managing Director Koigi Nyambura in a past interview.

Capitalising on its target market, Postbank is involved in the disbursement of monthly pension to Government retirees through its branch network.

It also disburses loans to the public universities students on behalf of Higher Education Loans Board. The bank therefore derives a large bulk of its business from such commission based agency services.On the list of services it offers is cheque encashments, cash collection and salary payments, targeted at companies with a large countrywide presence.

Competition high

Postbank has also been paying cash prizes to winners by redeeming cash premiums offered by companies running product promotions countrywide and are offering cash prizes.

To attract savings, Postbank offers seven savings products. This is in addition to safe custody services, international money transfer, Visa credit card as well as payment collection services.

According to a June 9 gazette notice, Treasury is seeking to amend the law to allow Postbank trade in foreign currency market.

This is as long as it maintains a reserve account consisting of gold or convertible foreign exchange in the form of deposits with foreign central banks, agents or correspondents abroad.