Banking & Finance

Explainer: Why Kenya is Considered a High Climate Risk for Development Bank

Kenya’s latest climate risk profile presents a summary of climatic trends over two decades, from 1991 to 2020. It reveals that approximately 68 percent of natural disasters in the country are attributed to extreme climatic events, primarily floods and droughts, while the remaining 32 percent is linked to disease epidemics.

Published

2 years ago

October 1, 2024

Charles Wachira

Drought in Kenya's Ewaso Ngiro river basin in 2017 when pastoralists had to dig for water because much of the river system in Isiolo county had dried up. Credit: Denis Onyodi/KRCS

NAIROBI, Aug 07 (IPS) – Climate change-related extreme weather jeopardizes Kenya’s development agenda; even though it contributes very little to global warming, it is marked as a high-risk country by development banks.Kenya contributes less than 0.1 percent of global greenhouse gas emissions every year, yet development banks have flagged the East African nation as a high climate risk. This is due to extreme weather changes that are increasingly threatening the country’s development agenda, widening socio-economic inequalities, and deepening rural poverty and hunger.

Climate change is a long-term shift in temperatures and weather patterns. Climate risk is the potential harm caused by climate change, such as financial, social, and environmental destruction and loss of life. Country-specific climate risk profiles are a summary of an analysis of climate trends over a long period of time, revealing how variability in weather patterns affects life and livelihoods.

Countries are advised to use these profiles to inform their development agenda, as failure to do so can significantly derail achievement of set development goals. For instance, unpredictability in weather patterns has a negative impact on certain sectors of Kenya’s economy.

This includes agriculture, tourism, horticulture, livestock and pastoralism, and forest products. Nearly 98 percent of agriculture is rain fed. Using climate risk projections, the country can invest in irrigation to reduce the impact of climate change on the sector, as approximately 75 percent of Kenyans draw their livelihood from agriculture.

Kenya’s most recent climate risk profile provides a climatic trend summary spanning two decades from 1991 to 2020, revealing that an estimated 68 percent of natural disasters in Kenya are caused by extreme climatic events, mostly floods and droughts. The remaining 32 percent represents disease epidemic.

Drought in Kenya. Infographic: Cecilia Russell/IPS — Drought in Kenya from 2011 to 2022. Infographic: Cecilia Russell/IPS

High Temperatures Causing Frequent, Intense Droughts

Overall, 16 drought events are on record from 1991 to 2020, affecting millions of people and causing an overall estimated damage of USD 1.5 billion. Despite floods being a more recent phenomenon in Kenya they are becoming increasingly frequent, resulting in 45 flood events within the same period. While a pattern of droughts began to emerge as far back as 1975, a pattern of floods has only begun to emerge from 2012 to 2020.

A repeating pattern of droughts and floods costs the country approximately 3 to 5 percent of its annual Gross Domestic Product. Over the past two decades, Kenya’s mean annual temperature was 24.2 degree Celsius—with a high of 30.3 degree Celsius and a low of 18.3 degree Celsius.

To give a perspective of average temperatures in Kenya, 2023 was the hottest year on record and 2024 is following the trend. According to the Gilbert Ouma Associate Professor, Meteorology, University of Nairobi writing in The Conversation the capital Nairobi average temperatures fare normally moderate, between 24°C and 25°C on the higher side and 17°C-18°C on the lower side.

“These are generally very comfortable temperatures. However, in the December-January-February period, maximum temperatures are normally high, ranging between 26°C and 27°C.

“This year, temperatures in February went up to between 29°C and 30°C, even hitting 31°C. This is about 6°C higher than normal Nairobi temperatures. That is a big difference and our bodies are bound to feel the difference. If such an increase is sustained for a long time, it can lead to a heat wave.”

Droughts have been a most pressing and persistent problem in Kenya. As far back as 1975, drought cycles used to occur every 10 years. But as climate change escalates in both frequency and intensity, the drought cycle reduced from every 10 years to every five years, to every two to three years.

Each year there is an annual dry spell and a food shortage and the regularity of extremely dry periods makes it difficult for the country to recover from one drought to the next.

Temperature differences between 1901 and 2020. Infographic: Cecilia Russell/IPS — Temperature differences between 1901 and 2020 show a clear trend toward higher temperatures. Infographic: Cecilia Russell/IPS

A History of Drought Cycles in Kenya From 1991 to 2020

Drought is a regular occurrence in Kenya. In 1991–1992, more than 1.5 million people were affected by drought. This was followed by another cycle of widespread drought in 1995–1996 that affected at least 1.4 million people.

In January 1997, the government declared drought a national disaster, affecting more than two million people, and the famine continued into 1998. Shortly after, in 1999–2000, an estimated 4.4 million people were in dire need of food aid due to a severe famine. As far as natural disasters go, this was declared the worst in the preceding 37 years.

The 1998–2000 drought cost the country an estimated USD 2.8 billion, and this was largely due to crops and livestock loss, forest fires, damage to fisheries, reduced hydropower generation, reduced industrial production and reduced water supplies.

In 2004, failure of the March to June long rains led to a severe drought that left more than three million Kenyans in need of urgent food aid. In December 2005, the government declared drought a national catastrophe, affecting at least 2.5 million people in northern Kenya alone.

The drought in 2008 affected 1.4 million people and an overall 10 million people were at risk of hunger after an unsuccessful harvest due to drought in late 2009 and into early 2010. The severe and prolonged drought caused the country USD 12.1 billion in damages and losses, and cost over USD 1.7 billion in recovery.

There are 47 counties in Kenya. As only 20 percent of Kenya receives high and regular rainfall, Kenya’s arid and semi-arid (ASAL) areas comprise 18 to 20 of the poorest counties, which are particularly at risk from increased aridity and periods of drought.

ASAL regions have endured three significantly severe droughts from 2010 to 2020. The 2010–2011 period was severe and prolonged, affecting at least 3.7 million people, causing USD 12.1 billion in damages and losses, and costing over USD 1.7 billion in recovery and reconstruction needs.

That cycle was followed by the 2016–2017 drought. The 2020–2022 famine, which was the most severe, longest and widespread as more than 4.2 million people, or 24 percent of the ASAL population were facing high levels of acute food insecurity.

Disasters in Kenya from 1900 to 2020. Infographic: Cecilia Russell/IPS — The impact on people of disasters in Kenya from 1900 to 2020. Infographic: Cecilia Russell/IPS

Overview of Natural Disaster Events in Kenya, 1991–2020

Kenya is increasingly enduring periods of intense, heavy rainfall. During this period, there were a total of 45 flood events, directly affecting more than 2.5 million people and causing an estimated damage of USD 137 million. These events took place in 1997, 1998, 2002, 2012 and 2020, as they were short, frequent and intense.

Unlike drought and famine, Kenya’s history with floods is much shorter. There were many consecutive drought seasons from 1991 to 1997. From 1997, a pattern of floods begun to emerge in this East African country.

It all started with the historic severe and deadly El Nino floods in 1997–1998 that were widespread and affected 1.5 million people. This was followed by the 2002 floods, that affected 150,000 people. Kenya has experienced flooding almost every year from 2010 to 2020.

Flooding in Kenya. Infographic: Cecilia Russell/IPS — The impact of flooding in Kenya between 2010 and 2024. Infographic: Cecilia Russell/IPS

Projected Risk Moving Forward

“From 2020 to 2050, projections show that ASAL regions will continue to receive decreasing rainfall. Temperatures in the country will continue to rise by 1.7 degree Celsius by 2050 and even higher by approximately 3.5 degree Celsius before the end of this century. The escalation in climate change will increase our climate risk,” Mildred Nthiga, a climate change independent researcher in East Africa, tells IPS.

“We will have even more frequent and damaging floods, and this will be followed by longer periods of drought. We have already started to experience some worrisome landslides and mudslides and, this will become an even bigger concern, especially in the highlands.”

Stressing that additional soil erosion and water logging of crops will significantly affect agricultural productivity, reducing yields and increasing food security. There will also be significant economic losses, severe damage to farmlands and infrastructure.

Worse still, as already witnessed in the recent 2024 deadly floods—human causalities. This will deepen rural poverty and hunger, and derail Kenya’s progress towards achieving the UN’s Sustainable Development Goals.

Note: This feature is published with the support of Open Society Foundations.

IPS UN Bureau Report

Investment Banking

Ethiopia Grants First Foreign Banking Licence

Prime Minister Abiy Ahmed’s reform agenda has gradually opened banking, telecoms and capital markets since 2018. Ethiopia is now entering a structured financial opening phase.

Published

1 month ago

June 21, 2026

Charles Wachira

Ethiopia has granted Nigeria’s United Capital its first foreign investment banking licence. The move marks a key step in the country’s controlled financial liberalisation strategy.

United Capital’s entry signals growing intra-African financial expansion. African firms are increasingly exporting investment banking expertise across frontier markets.

Ethiopia approves Nigeria’s United Capital for first foreign investment banking licence under financial sector liberalisation push.

A Structural Shift in Financial Market Access

On June 9, 2026, Ethiopia granted its first foreign investment banking licence to a Nigerian financial group, marking a key milestone in the gradual opening of one of Africa’s most tightly controlled financial systems.

The licence was issued by the Ethiopian Capital Market Authority to a subsidiary of United Capital Group, allowing the firm to operate as a full Capital Market Service Provider under Ethiopian regulatory oversight.

The approval effectively gives the Nigerian financial services group entry into Ethiopia’s emerging investment banking sector, positioning it among the first foreign participants in a market that has historically been state-dominated.

Ethiopia’s Controlled Financial Liberalisation Strategy

The decision reflects a broader structural reform agenda under Prime Minister Abiy Ahmed, who has gradually opened strategic sectors of the economy since 2018.

Key sectors targeted for liberalisation include:

telecommunications
banking
capital markets
logistics and infrastructure

The objective is to attract long-term foreign capital while maintaining state oversight over systemic financial institutions.

The entry of United Capital signals that Ethiopia’s capital markets are moving from policy design phase to operational liberalisation phase.

Investment Banking Sector Still in Early Formation

The Ethiopian Capital Market Authority confirmed that United Capital Financial Services Plc will join six locally licensed investment banks operating under the country’s developing capital market framework.

This places Ethiopia’s investment banking ecosystem at an early but accelerating stage of development, with limited competition but high regulatory control.

Unlike mature African financial hubs such as Nigeria’s capital markets or South Africa’s Johannesburg exchange system, Ethiopia’s system remains:

structurally shallow
institutionally concentrated
regulatory-led in expansion

This creates a first-mover advantage for early entrants.

Why United Capital’s Entry Matters

The entry of a Nigerian institution into Ethiopia’s investment banking sector is strategically significant.

United Capital Financial Services Plc is part of a broader West African financial ecosystem that has developed deep expertise in:

debt capital markets
structured finance
asset management
sovereign advisory services

Its expansion into Ethiopia signals the beginning of regional export of investment banking expertise within Africa, rather than reliance on Western financial institutions.

This is part of a wider trend where African financial groups are increasingly cross-expanding into frontier markets ahead of global banks.

Ethiopia’s Capital Market Opening Logic

Ethiopia’s liberalisation strategy is not uniform across sectors.

Instead, it is being executed in a sequenced financial opening model, where:

strategic sectors remain state-controlled
but capital markets are partially opened to foreign expertise
regulatory oversight remains centralised

The Ethiopian Capital Market Authority has been positioned as the gatekeeper of this transition, balancing:

foreign capital attraction
systemic risk management
domestic financial sector protection

This explains the cautious but progressive issuance of licences.

Regional Competition for Financial Hub Status

Ethiopia’s gradual opening comes as East Africa becomes increasingly competitive for financial services expansion.

Regional peers such as Kenya and Rwanda have already positioned themselves as capital markets hubs with stronger institutional depth.

Ethiopia’s entry strategy differs in three ways:

larger domestic economy but weaker financial depth
slower but more controlled liberalisation
state-led sequencing of reforms

This creates a unique hybrid model of controlled financial integration into global capital systems.

Strategic Signal: Africa-to-Africa Financial Expansion

A key intelligence signal from this development is the rise of intra-African financial expansion.

Instead of relying solely on European or American investment banks, African institutions are now:

entering new jurisdictions
exporting financial expertise
competing for frontier market advisory mandates

This reduces dependency on external capital intermediaries and strengthens regional financial integration.

United Capital’s licence in Ethiopia represents a practical case of this shift.

Market Implications: First-Mover Advantage Phase

Ethiopia’s investment banking sector is still in early formation, meaning:

pricing models are still evolving
deal flow is limited but expanding
regulatory frameworks are still being tested

This creates a classic first-mover advantage environment, where early entrants can establish:

advisory dominance
client relationships
infrastructure financing pipelines
sovereign engagement roles

Over time, this could become a multi-billion-dollar advisory and capital markets ecosystem.

Intelligence Takeaway: Controlled Financial Opening

Ethiopia’s licensing decision signals more than regulatory approval.

It reflects a broader structural shift toward controlled financial liberalisation, where:

foreign expertise is welcomed selectively
capital markets are opened incrementally
regulatory oversight remains central
and domestic institutions retain strategic protection

For African financial groups like United Capital, this marks the beginning of a new phase:

expansion not into Western markets, but into Africa’s underdeveloped capital systems.

The long-term implication is clear:

Africa’s financial integration is increasingly being driven from within the continent, not imposed from outside it.

Commercial Banking

Standard Chartered Sees Africa Capital Return

According to Standard Chartered, new UAE economic partnership agreements could unlock larger investments across Africa. Energy, mining, logistics and food security are expected to attract significant Gulf capital.

Published

1 month ago

June 21, 2026

Charles Wachira

Standard Chartered says Africa is beginning to attract investors who retreated during the post-pandemic debt and currency crisis. The lender believes reforms are reshaping how global capital evaluates risk across the continent.

Dalu Ajene says Africa's reform momentum is helping attract both concessional funding and commercial investment. The shift could become increasingly important as international aid budgets come under pressure.

Standard Chartered says reforms are attracting Gulf capital, hedge funds and export financiers back to Africa’s key economies.

A Shift From Aid-Driven Finance to Investment Flows

Africa’s financing landscape is undergoing a structural shift that leading lenders say is beginning to reshape capital allocation across the continent.

According to senior executives at Standard Chartered, years of macroeconomic reforms across key African economies are gradually restoring investor appetite after a prolonged post-pandemic risk-off period.

The London-based lender, which has one of the most extensive cross-border banking footprints in Africa, says it is now observing a measurable return of global capital into markets that had been largely avoided during the 2020–2023 period of volatility.

These flows are no longer limited to concessional funding. Instead, they now include export credit agencies, Gulf sovereign investors, hedge funds and global asset managers repositioning into selected African markets.

This marks a shift from emergency financing toward structured investment-led capital deployment.

Standard Chartered Positions Itself at the Centre of Flows

Few international banks are as structurally embedded in African capital flows as Standard Chartered.

The bank operates across major markets including Nigeria, Kenya, Ghana, Uganda, Zambia, Egypt and South Africa, positioning it at the intersection of sovereign financing, trade flows and infrastructure investment.

This positioning gives the lender early visibility into capital rotation trends long before they appear in macroeconomic datasets.

Speaking to Reuters, Dalu Ajene, Chief Executive and Head of Coverage for Africa at Standard Chartered, said investor sentiment has materially shifted since the immediate post-pandemic period.

“The financial challenges after the COVID-19 pandemic were quite deep, and hence there was a risk-off mindset,” Ajene said.

He added that the market environment has now changed:

“It’s now attracting both concessionary funding, but also real money investors… looking at Africa in a much more serious way than they otherwise would have three years ago when a lot of African balance sheets were in a mess.”

This suggests a transition from defensive capital preservation to selective risk re-entry.

Nigeria Becomes the Reform Benchmark Case

Among African economies, Nigeria has emerged as the most closely watched reform laboratory.

The removal of fuel subsidies, combined with foreign exchange market adjustments, has fundamentally altered fiscal dynamics in Africa’s largest economy.

Although these reforms have created short-term inflationary pressure and household cost shocks, investors are increasingly interpreting them as signals of policy correction and fiscal discipline.

Standard Chartered views this shift as critical because it changes how sovereign risk is priced in international markets.

In effect, Nigeria has moved from being viewed as a structurally constrained economy to a reform-sensitive re-rating candidate.

Gulf Capital Is Emerging as a Structural Force

One of the most significant changes identified by Standard Chartered is the growing role of Gulf sovereign capital.

The bank expects investment flows from the UAE and broader Gulf region to expand materially as new bilateral frameworks take effect.

Countries such as Kenya, Nigeria, Morocco and Mauritius have signed economic partnership agreements that are designed to formalise long-term investment pipelines.

According to Ajene, these frameworks could significantly scale up deal sizes:

“Once you have the cooperation frameworks, then you can now start seeing the kind of chunky investments that matter.”

He noted that future transactions could move beyond the traditional $100 million bracket, enabling multi-sector sovereign-scale investments.

Key target sectors include:

Energy infrastructure
Mining and critical minerals
Food security systems
Ports and logistics corridors
Renewable energy platforms

This signals a transition from fragmented capital deployment to large-scale structured investment corridors.

Institutional Investors Return to African Debt

Beyond sovereign capital, Standard Chartered is also observing a return of institutional investors into African fixed income markets.

Hedge funds and asset managers are gradually rebuilding positions in local-currency sovereign debt markets after exiting during the height of global tightening cycles.

Countries attracting renewed interest include:

This matters because institutional capital is fundamentally different from aid or emergency financing.

It is driven by:

Yield expectations
Currency stability
Policy credibility
Liquidity conditions

Its return signals that African markets are being re-integrated into global risk frameworks, rather than treated as frontier outliers.

Export Credit Agencies Become Catalysts

Development finance institutions and export credit agencies are also playing a catalytic role in unlocking larger private flows.

Ajene cited UK Export Finance support for a $1 billion port rehabilitation project in Lagos as an example of how blended finance structures are evolving.

In this model, public or quasi-public capital does not replace private investment. Instead, it de-risks projects to enable commercial participation.

This structure is becoming increasingly important as global aid budgets face structural pressure from domestic fiscal constraints in advanced economies.

The Debate Over Structured Sovereign Instruments

Standard Chartered has also defended the use of structured financing tools such as Total Return Swaps (TRS), which have been deployed by governments including Angola, Nigeria and Senegal.

These instruments have faced scrutiny from institutions such as the IMF over transparency concerns.

However, Ajene rejected the criticism, arguing:

“It’s actually unfair to say they’re not transparent, and I think it’s also unfair to classify them as more or less risky.”

He said such instruments provide flexibility during periods when traditional capital markets are constrained or closed.

This highlights a broader reality: African sovereigns are increasingly relying on non-traditional financing architectures to bridge liquidity gaps.

Intelligence Takeaway: A New Capital Order Emerging

Standard Chartered’s assessment points to a deeper structural shift in Africa’s financing model.

The continent is moving away from:

Aid-dependent financing
Crisis-driven liquidity support
Fragmented bilateral funding

And toward:

Sovereign wealth capital
Institutional debt markets
Export credit-driven infrastructure funding
Structured Gulf-Africa investment corridors

The bank’s positioning is strategic. It sits at the centre of these flows, connecting African sovereign demand with global liquidity pools.

The key question now is not whether capital is returning to Africa.

It is whether reform momentum in key economies can be sustained long enough to lock in this emerging multi-trillion-dollar reallocation cycle of global capital toward Africa.

Banking & Finance

StanChart Kenya Rethinks Credit Litigation

The bank reports a non-performing loan ratio of about 5.2%, one of the lowest in Kenya’s banking sector. It attributes part of this performance to faster, out-of-court credit resolution mechanisms.

Published

1 month ago

June 20, 2026

Charles Wachira

Standard Chartered Kenya is increasingly prioritising negotiated settlements over court litigation to resolve long-standing credit disputes. The bank says this approach has been part of its risk strategy for more than a decade.

Chief Executive Officer Birju Sanghrajka highlighted that some disputes have taken up to 40–50 years to resolve through the courts. The bank has concluded several major legacy cases in the past 18 months, underscoring slow judicial timelines.

Standard Chartered Kenya shifts to negotiated settlements over litigation to resolve legacy disputes and improve credit risk efficiency.

Kenya’s Credit Enforcement Model Is Shifting Quietly

Kenya’s banking sector is undergoing a structural change in how credit disputes are resolved. The shift is increasingly moving away from courtroom litigation toward negotiated settlements between banks and borrowers.

At the centre of this transition is Standard Chartered Kenya, which has explicitly adopted private treaty settlements as a core credit risk management strategy rather than relying on judicial enforcement.

This is not a reactive measure. It is a long-running strategic position that the bank says it has maintained for more than a decade.

Negotiation Replaces Litigation as Primary Recovery Tool

Standard Chartered Kenya has increasingly prioritised structured agreements with borrowers facing financial distress, particularly in legacy credit exposures.

Speaking during a media briefing, Risk Officer James Mucheke confirmed the shift in approach:

“As much as possible, what we’re trying to do is look for private treaties with clients who get into trouble so that we avoid that route of going into the courts.”

He further noted that a large portion of the bank’s legal exposure is not new credit distress, but legacy disputes:

“A lot of the cases that we have are legacy cases, the ones that have been there for 20 or 30 years.”

This highlights a key structural issue in Kenya’s credit system: dispute resolution timelines often extend far beyond normal credit cycles.

Credit Risk Strategy Linked to Portfolio Stability

The bank links this approach directly to credit risk performance.

Standard Chartered reports a non-performing loan ratio of approximately 5.2%, which it identifies as one of the lowest in the sector.

The implication is that negotiated settlements are not just a legal convenience tool, but part of a broader credit risk containment framework.

By resolving disputes outside court, the bank reduces:

legal cost accumulation
provisioning uncertainty
capital lock-up duration
recovery timing volatility

In effect, litigation is being repositioned from a recovery mechanism to a contingency channel for unresolved disputes.

CEO Signals Structural Legal System Constraint

The scale of legacy disputes also reflects systemic inefficiencies in Kenya’s judicial resolution framework for financial cases.

Chief Executive Officer Birju Sanghrajka highlighted the time distortion embedded in the system:

“The wheels of justice turn very slowly,” he said. “One case was 40 years old and another was almost 50 years old.”

He added that three major legacy disputes had been concluded over the past 18 months, underscoring both the backlog and the gradual clearing of historical exposures.

From a credit systems perspective, this creates a structural mismatch between:

banking risk cycles (short to medium term)
legal resolution cycles (multi-decade in extreme cases)

Pension Case Highlights Long-Tail Credit Exposure

One of the most significant recent closures involved a pension dispute involving 629 former employees.

The case originated from a 1997 actuarial valuation that identified a surplus of KSh1.536 billion in the pension fund.

The Retirement Benefits Appeals Tribunal ruled that KSh1.1 billion be refunded to the pension scheme, along with recalculation of benefits and arrears dating back to 2009.

While the Supreme Court ultimately dismissed the bank’s appeal on jurisdictional grounds, the total estimated exposure is believed to exceed KSh7 billion ($54 million) once interest and adjustments are included.

The case illustrates a key systemic reality: credit-related legal exposure can persist across multiple economic cycles while remaining unresolved in court.

Sector-Wide Shift Toward Private Credit Resolution

While Standard Chartered Kenya is among the clearest articulators of the strategy, the approach reflects a broader shift in Kenya’s banking system.

Traditionally, lenders relied heavily on courts for:

loan enforcement
collateral recovery
dispute resolution

However, growing inefficiencies in judicial timelines have led to increased use of:

private debt restructuring agreements
negotiated asset sales
bilateral settlement frameworks
out-of-court compromise arrangements

This is gradually creating a parallel credit enforcement system outside formal litigation channels.

Why Banks Are Moving Toward Private Settlements

The shift is driven by three structural pressures:

First, time inefficiency in courts reduces recovery value over long durations.
Second, capital remains tied up during litigation, affecting balance sheet flexibility.
Third, uncertainty in judicial outcomes increases provisioning risk.

Negotiated settlements solve all three by offering:

faster resolution
predictable recovery timelines
reduced legal cost exposure

As a result, credit risk management is increasingly defined by recovery efficiency rather than legal victory.

Implications for Kenya’s Credit System

If sustained, this shift could gradually reshape Kenya’s credit architecture in three ways.

First, litigation will become a secondary enforcement mechanism rather than the primary recovery route.

Second, private negotiation frameworks will become the dominant channel for resolving large distressed exposures.

Third, banks will increasingly treat legal systems as backstop enforcement structures, not operational recovery tools.

This does not reduce the importance of courts. Instead, it changes their position in the credit hierarchy.

Intelligence Takeaway

Standard Chartered Kenya’s adoption of negotiated settlements reflects more than operational efficiency.

It signals a structural evolution in Kenya’s financial system where credit risk resolution is shifting away from judicial timelines and toward private, bank-led restructuring frameworks.

In this emerging model, the key performance metric is not legal success, but speed and certainty of recovery.

Ultimately, Kenya’s banking sector is moving toward a system where courts define legal boundaries, but credit outcomes are increasingly determined in negotiated settlement rooms rather than court rulings.

Fintech

Uganda Cash Limits Accelerate Digital Shift

Interbank cheque thresholds have been cut by 50% across multiple currencies, further narrowing reliance on paper-based transactions. The change reinforces a broader retrenchment of traditional payment instruments.

Published

1 month ago

June 20, 2026

Charles Wachira

Uganda’s central bank has introduced system-wide cash withdrawal limits, marking a structural shift in how money moves through the economy. The policy signals a move from encouraging digital payments to actively enforcing their dominance.

Despite rapid digital growth, cash remains deeply embedded in agriculture and informal trade sectors. The central bank has introduced limited waivers to manage the transition without disrupting key parts of the economy.

Bank of Uganda imposes cash withdrawal caps and cheque cuts, accelerating Uganda’s shift toward digital payments and formal finance rails.

Uganda Rebuilds Its Payment Architecture

Uganda is entering a structural shift in how money moves through its economy. The Bank of Uganda has introduced system-wide limits on over-the-counter cash withdrawals and sharply reduced interbank cheque thresholds, effective 1 January 2027.

Importantly, this is not a routine banking adjustment. Instead, it reflects a deeper redesign of the country’s payment system.

In simple terms, Uganda is moving from cash tolerance to payment steering.

Cash Controls Introduce a New Liquidity Framework

The new rules create direct limits on how much cash can move through banking halls.

For individuals, daily withdrawals are capped at UGX 50 million ($13,245), while weekly limits are set at UGX 250 million ($66,225). At the same time, corporate accounts face higher thresholds of UGX 500 million ($132,450) per day and UGX 2.5 billion ($662,250) per week.

However, the structure is important. Electronic channels are fully exempt.

RTGS transfers, Electronic Funds Transfers (EFTs), and mobile money transactions remain unrestricted. As a result, the policy does not block liquidity. Instead, it redirects it.

Therefore, Uganda is not reducing money movement. It is reshaping how money moves.

Cheque System Is Being Phased Down

In parallel, Uganda has reduced interbank cheque thresholds by 50% across five currencies.

UGX cheques fall from 10 million to 5 million
USD cheques drop from $2,750 to $1,375
EUR cheques fall from €2,250 to €1,125
GBP cheques decline from £2,200 to £1,100
KES cheques drop from KSh300,000 to KSh150,000

These changes apply only to interbank clearing.

However, the signal is broader. Cheques are being pushed into low-value use cases.

Therefore, Uganda’s payment system is steadily removing mid-tier paper instruments from active circulation.

In effect, three layers are emerging:

digital rails (dominant)
limited cash (controlled)
shrinking cheques (secondary)

Digital Infrastructure Becomes the Core System

Uganda’s reforms build on already strong digital growth.

Electronic payments reached UGX 326.3 trillion ($86.4 billion) in 2025. In addition, transaction volumes rose more than 20%, reaching 8.4 billion transactions.

Meanwhile, mobile money adoption has reached scale. There are now 36.7 million active users supported by more than one million agents nationwide.

This matters for one key reason.

Digital payments are no longer emerging tools. Instead, they are already the dominant settlement layer in Uganda’s economy.

Therefore, the central bank’s policy does not introduce digital payments. It consolidates them.

Telecom Operators Gain Structural Advantage

As cash usage becomes constrained, mobile money operators are gaining structural importance.

Platforms operated by MTN Uganda and Airtel Uganda sit directly inside this transition.

In particular, high-volume cash users—such as traders, SMEs, and cross-border operators—are expected to shift toward mobile money rails.

As a result, telecom firms are no longer just service providers. They are becoming core financial infrastructure nodes.

This shift also changes competitive dynamics in Uganda’s financial system. Banks increasingly depend on telecom rails for retail transaction flow, while telecoms gain more control over payment liquidity.

Policy Design Shows a Behavioral Strategy

The structure of the reforms reveals a clear policy logic.

First, cash is limited. Second, digital systems are unrestricted. Third, cheques are compressed.

Taken together, this creates a directional system.

However, the goal is not prohibition. Instead, it is behavioral migration.

In other words, users are not forced out of cash. They are economically encouraged to move away from it.

This approach reflects a broader trend in emerging markets where regulators use system design—not bans—to shape financial behavior.

A Strategic Shift From Incentives to Enforcement

Uganda’s National E-Payments Strategy 2021–2026 focused on infrastructure building and voluntary adoption.

Now, the next phase is different.

The strategy is shifting from:

building systems → enforcing usage
promoting adoption → steering behavior
optional digitalization → structural digital dominance

This transition is supported by scale data:

UGX 326.3 trillion in digital transactions
8.4 billion transaction volumes
36.7 million mobile money users

Therefore, Uganda is moving past adoption stage and entering system consolidation stage.

Policy Friction: Pricing vs Adoption

However, a contradiction remains in the system.

While digital payments are being promoted structurally, transaction costs remain relatively high for low-income users.

A proposed reduction in mobile money excise duty from 0.5% to 0.25% was rejected in the 2026/27 budget cycle.

As a result, users face a dual pressure:

higher friction in digital transactions
tighter limits on cash usage

This creates a policy tension.

Therefore, adoption speed may depend not only on regulation, but also on affordability.

Informal Economy Remains the Key Constraint

Despite strong digital growth, cash remains deeply embedded in Uganda’s real economy.

Agriculture, artisanal mining, and informal trade continue to rely heavily on physical cash flows.

However, the central bank has introduced discretionary waivers for supervised financial institutions. These waivers are conditional and require enhanced due diligence.

This structure effectively creates a dual-track system:

regulated digital economy
monitored cash economy

Therefore, Uganda is not eliminating cash. It is reorganizing its role.

Regional Implications for East Africa

Uganda’s model is significant for regional policy design.

Across East Africa, most regulators have focused on incentives and infrastructure expansion. Uganda is now adding direct cash constraints to accelerate digital migration.

This makes the policy structurally different.

If successful, it could influence future frameworks in Kenya, Tanzania, and Rwanda, especially in areas such as:

cash management policy
digital tax enforcement
payment system hierarchy design

Therefore, Uganda is effectively testing a new regulatory model for emerging-market payment systems.

Intelligence Takeaway

Uganda’s cash withdrawal limits and cheque reductions represent more than payment reform.

They signal a structural redesign of the financial system.

Instead of encouraging digital adoption through incentives alone, the country is now actively shaping transaction behavior through system constraints.

As a result, Uganda is entering a new phase where:

cash is constrained
digital rails are dominant
cheques are marginal

Ultimately, the policy marks a shift from financial inclusion strategy to financial system engineering.

And in that shift, Uganda is positioning itself as one of the most intervention-driven digital payment environments in Africa’s current monetary evolution cycle.

Banking & Finance

Stanbic’s $1bn Green Finance Push Reshapes EA

Stanbic’s D.A.D.A platform has disbursed Sh49.5 billion ($383 million) to women entrepreneurs since its launch, supporting more than 112,640 women-led businesses. The initiative reflects the lender’s commitment to expanding financial inclusion and strengthening female economic participation.

Published

1 month ago

June 20, 2026

Charles Wachira

Stanbic exceeded its sustainable trade finance target by nearly 48 per cent, deploying Sh133 billion ($1.03 billion) across Kenya and South Sudan in 2025. The performance highlights the growing role of green finance in driving economic growth and climate resilience across East Africa.

Regional chief executive, East Africa, Standard Bank, Joshua Oigara with UN Women Country representative to Kenya, Ms. Antonia N'gabala Sodonon during the unveiling of Stanbic Bank’s Sustainability Report 2025.

Stanbic exceeded its sustainable finance target by 48%, deploying Sh133bn ($1.03bn) across Kenya and South Sudan in 2025.

Sustainable Finance Moves to the Centre of African Banking

For decades, African banks were primarily judged by loan growth, profitability and balance-sheet strength. Today, however, a new measure of performance is emerging: the ability to finance economic growth while supporting climate resilience, financial inclusion and sustainable development.

That shift is becoming increasingly visible at Stanbic Holdings Plc, which surpassed its sustainable trade finance target in 2025 by deploying Sh133 billion ($1.03 billion) across Kenya and South Sudan.

The figure exceeded the lender’s original target of Sh90 billion ($696 million) by nearly 48 per cent, underscoring the growing importance of sustainable finance as a strategic pillar within East Africa’s banking sector.

Rather than treating sustainability as a compliance requirement, Stanbic is positioning it as a core business model capable of generating both financial returns and measurable development impact.

Why the Numbers Matter Beyond Banking

The significance of the Sh133 billion deployment extends beyond the banking sector.

Across Africa, governments face mounting pressure to finance energy transition projects, climate adaptation programmes, affordable housing and food security initiatives while dealing with fiscal constraints and rising debt burdens.

Banks are increasingly being called upon to bridge this financing gap.

Stanbic’s performance suggests sustainable finance is becoming one of the most effective channels through which private capital can support long-term economic development.

The trend mirrors a broader global movement in which investors are directing capital toward institutions that demonstrate measurable environmental and social outcomes alongside profitability.

Oigara’s Strategic Shift Towards Resilience

Stanbic Holdings Chief Executive Officer Joshua Oigara says the bank deliberately repositioned its lending portfolio to support sectors capable of strengthening long-term economic resilience.

“We made a deliberate strategic shift, re-orienting our portfolio toward sectors and segments that foster long-term national resilience, including green financing.”

He added:

“We have embedded sustainability into the fabric of our daily decision-making, ensuring that performance is measured against clear targets and aligned to our strategic direction.”

Those remarks reflect a growing shift across African financial institutions where sustainability is increasingly viewed as a source of competitive advantage rather than a reporting obligation.

Green Buildings and Solar Projects Attract Capital

A review of the lender’s sustainability performance reveals where capital is flowing.

Stanbic advanced Sh4.5 billion ($34.8 million) in green building loans and an additional Sh273 million ($2.1 million) toward solar energy projects.

These investments support cleaner energy systems and environmentally efficient infrastructure while helping businesses lower operating costs and reduce carbon emissions.

The investments also align with global sustainability goals promoted by organizations such as United Nations and the broader climate-finance agenda.

SMEs Remain the Backbone of the Strategy

Small and medium-sized enterprises continue to occupy a central position in Stanbic’s sustainability framework.

Through the Stanbic Foundation, the lender provided Sh105.73 million ($817,000) in grants and catalytic funding aimed at helping micro, small and medium-sized enterprises expand operations and improve resilience.

Across Africa, SMEs account for the majority of business activity and employment creation. However, access to affordable financing remains one of the biggest barriers to growth.

By directing capital toward this segment, Stanbic is strengthening a critical engine of economic development.

Housing Finance Targets Kenya’s Supply Gap

The lender also expanded support for affordable housing, providing Sh1.8 billion ($13.9 million) in home financing during the year.

The move comes as Kenya continues to face a significant housing shortage driven by rapid urbanisation and population growth.

Affordable housing has become one of the country’s major economic priorities because of its links to construction activity, employment creation and improved living standards.

As a result, financing institutions are increasingly treating housing as both a commercial opportunity and a development priority.

Climate-Smart Agriculture Gains Momentum

Agriculture remained another major focus area.

Stanbic advanced Sh2.5 billion ($19.3 million) in climate-smart agriculture financing, increasing agriculture’s share of the lender’s total loan book to 9.9 per cent.

The funding supported farmers adopting sustainable farming practices designed to improve productivity while protecting natural resources.

Given agriculture’s contribution to employment, exports and food security across East Africa, climate-smart financing is increasingly becoming a strategic investment category for lenders.

Risk Screening Becomes a Competitive Advantage

An important but often overlooked aspect of sustainable finance is risk management.

According to Stanbic Chief Risk Officer Edwin Mucai, environmental and social screening now plays a central role in protecting the quality of the bank’s loan portfolio.

“Our environmental and social risk management framework, which mandates screening for all loans above $1 million, strengthens the quality and resilience of our loan portfolio.”

He added:

“It protects the bank and its clients from financing projects with material environmental and social vulnerabilities, helping us build a more resilient book that can withstand economic shocks.”

This approach reflects a growing trend among leading international lenders, where sustainability assessments are increasingly integrated into core credit-risk processes.

Gender Inclusion Expands Economic Participation

The sustainability report also highlights progress in advancing gender inclusion.

Procurement spending directed to women-owned businesses rose to 15.53 per cent, while women accounted for 43 per cent of board representation.

In addition, Stanbic signed the UN Women’s Empowerment Principles, reinforcing its commitment to advancing gender equality throughout its operations and supply chain.

Meanwhile, the bank’s D.A.D.A platform has disbursed Sh49.5 billion ($383 million) to women entrepreneurs since inception and onboarded more than 112,640 women.

These figures illustrate how financial inclusion is increasingly becoming a measurable business outcome rather than a corporate responsibility initiative.

Environmental Restoration Supports Long-Term Sustainability

Beyond financing, Stanbic intensified conservation efforts by planting more than 204,000 trees and restoring over 107 hectares of degraded land.

The restoration programme includes indigenous forests around Mount Kenya and mangrove ecosystems within the Sabaki Estuary.

Such projects are becoming increasingly important as financial institutions seek to align business growth with environmental stewardship.

Intelligence Takeaway

Stanbic’s deployment of Sh133 billion ($1.03 billion) in sustainable finance signals a broader shift underway across African banking.

The lender’s performance suggests that future banking leadership may increasingly be defined not by the size of a balance sheet alone, but by the ability to finance climate resilience, inclusive growth and long-term economic transformation.

For East Africa, the message is becoming clearer: sustainable finance is evolving from a niche activity into a mainstream driver of investment, competitiveness and economic development.

Commercial Banking

FX Hedging Surge Hits Kenya Banks

Standard Chartered Kenya says investors continue to gravitate toward the US dollar during periods of global market stress. This safe-haven trend is prompting corporates to strengthen their currency risk management strategies.

Published

1 month ago

June 20, 2026

Charles Wachira

The renewed focus on FX hedging highlights the growing sophistication of treasury management across East Africa. Moreover, Kenya’s position as a regional financial hub is making it a key market for advanced risk management solutions.

Growing geopolitical tensions are pushing Kenyan businesses to rethink their foreign exchange exposure. As a result, demand for hedging tools is rising as firms seek greater certainty over future cash flows and import costs.

Standard Chartered Kenya sees rising FX hedging demand as geopolitical tensions and USD safe-haven flows reshape currency risk strategy.

Currency Risk Returns as Global Volatility Reprices Africa’s FX Landscape

Foreign exchange markets across Africa are entering a renewed phase of sensitivity, as global geopolitical tensions and shifting capital flows push corporates and investors back into active currency risk management.

In Kenya, this shift is becoming increasingly visible within the banking system. Standard Chartered Kenya is reporting a marked rise in demand for foreign exchange hedging tools, reflecting a broader reassessment of risk exposure across import-dependent businesses, institutional investors, and multinational corporates operating in East Africa.

At the centre of this shift is a simple but powerful market dynamic: uncertainty is rising globally, and capital is once again seeking protection in the US dollar.

Global Shock Cycles and the Return of the Dollar

According to market commentary from Standard Chartered Kenya’s Head of Markets, Moses Kiboi, recent geopolitical developments — particularly tensions in the Middle East — have reinforced a long-standing pattern in global finance.

During periods of stress, whether the Global Financial Crisis, the COVID-19 pandemic, or current geopolitical disruptions, investors tend to move toward highly liquid safe-haven assets, especially the US dollar.

This recurring behavior has direct implications for Kenya’s financial markets, where many corporates hold dollar-linked obligations for trade, fuel imports, and external financing.

As a result, demand for FX protection instruments has accelerated in recent months, reversing a brief period of reduced hedging activity during exchange rate stability.

Rising Demand for FX Hedging Instruments

Market participants in Kenya are increasingly engaging with structured foreign exchange solutions designed to stabilize future cash flows.

These include:

Forward contracts for locking exchange rates
Options strategies for flexible exposure control
Structured derivatives for longer-term risk positioning

The shift reflects a more sophisticated approach to currency management, where businesses are no longer reacting to volatility but actively planning around it.

Importantly, this demand is not limited to large multinationals. Mid-sized importers and sector-specific firms — particularly in energy, manufacturing, and retail distribution — are also increasing their hedging activity.

Stability Phase Ends as Risk Awareness Returns

Earlier in the year, relatively stable exchange rate conditions reduced immediate pressure on corporates to hedge aggressively. During that period, many firms scaled back active currency protection strategies.

However, this stability phase has now weakened.

Recent geopolitical shocks have reintroduced uncertainty into global trade and capital markets. Consequently, currency risk management has returned to the centre of corporate financial planning in Kenya.

In dollar terms, hedging decisions are increasingly being evaluated across exposure horizons ranging from one month to as long as two years. In local terms, this reflects how businesses are planning against volatility in the Kenyan shilling (KES) while maintaining dollar-linked obligations.

USD Liquidity and Safe-Haven Behaviour

One of the key structural drivers behind this shift is global liquidity preference.

During periods of uncertainty, capital tends to concentrate in highly liquid markets. The US dollar continues to dominate this cycle due to its depth, convertibility, and role in global trade settlement.

This dynamic has a direct effect on emerging markets such as Kenya, where import pricing, debt servicing, and cross-border transactions are often dollar-denominated.

As a result, even moderate global shocks can quickly translate into local currency risk pressures.

Corporate Strategy Shifts in Kenya’s FX Market

Within Kenya’s corporate sector, there is a visible shift from reactive currency management to structured risk strategy.

Businesses are now:

Building FX risk into annual financial planning cycles
Increasing treasury sophistication
Using multi-layered hedging structures instead of single instruments
Prioritizing execution certainty over speculative positioning

This evolution reflects a broader maturing of East Africa’s financial markets, where risk management is becoming a core operational function rather than a defensive response.

Regional Spillover Across East Africa

Although Kenya is currently at the centre of this hedging cycle, similar patterns are emerging across East Africa.

Uganda, Tanzania, and Rwanda — economies with strong import dependence and external financing exposure — are also experiencing rising demand for FX protection tools.

However, Kenya’s deeper financial markets and more developed banking infrastructure position it as a regional pricing hub for FX risk products.

This gives institutions like Standard Chartered Kenya a structural advantage in structuring and distributing complex hedging solutions across the region.

Structural Risk Remains the Core Constraint

Despite the growing sophistication of FX markets, several structural challenges continue to shape outcomes.

First, currency volatility remains closely tied to global commodity cycles, particularly oil prices. Second, external debt servicing obligations in US dollars create persistent demand pressure on local currencies. Third, global interest rate cycles continue to influence capital inflows and outflows.

Together, these factors ensure that FX risk will remain a structural feature of Kenya’s financial landscape rather than a temporary condition.

Intelligence Takeaway

The rise in FX hedging demand at Standard Chartered Kenya signals more than a short-term response to geopolitical shocks.

It reflects a deeper structural shift in how African corporates and investors manage currency exposure in an increasingly uncertain global environment.

As the US dollar reasserts its safe-haven role, and as geopolitical risk cycles intensify, FX risk management is becoming a permanent pillar of corporate finance strategy across Kenya and the wider East African region.

In this evolving environment, financial institutions are not just intermediaries — they are becoming critical infrastructure in managing global volatility at a local level.

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Stanbic’s $1bn Green Finance Push Reshapes EA

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