CBKF losses surge in Kenya’s banking sector as cybercrime rises, straining profitability amid digital banking growth.
Kenyan Banks Face Quadrupling CBKF Losses
Fraud-related losses in Kenya’s banking sector nearly quadrupled over 12 months, driven by escalating cyber threats as digital banking accelerates.
According to the Central Bank of Kenya (CBK) Financial Sector Stability Report, total CBKF losses surged 264% to KSh 1.5 billion ($11.1 million) from KSh 412 million ($3.1 million) in 2023, straining banks’ profitability and limiting their ability to bolster capital buffers.
Reported fraud cases have become very brazen, with a hacker arrested this August over an $87,000 fintech heist. Indeed, the cases have more than doubled to 353 from 153, with attempted fraud values climbing from KSh 680.9 million ($5 million) to KSh 1.9 billion ($14 million).
“Cyber risks have increased due to the digitalisation of payments and person-to-person transfers,” the report noted.
“Threats rose from 805 million in 2022/23 to 3.5 billion in 2023/24, signaling a significant rise in CBKF risk.”
System misconfigurations recorded the steepest growth, while web application attacks remained the least frequent.
Mobile Banking Fraud Surges 340%
Mobile banking emerged as the most targeted channel, with 146 cases causing CBKF losses of KSh 810.7 million ($6 million), up 340% from KSh 183.4 million ($1.3 million) in 2023. This surge left potential losses as high as KSh 981.7 million ($7.3 million) — the largest in the period.
Other channels also saw marked increases:
- Card fraud: KSh 263.3 million ($1.9 million)
- Computer-based fraud: KSh 203.8 million ($1.5 million)
- Identity theft: KSh 199.1 million ($1.4 million)
- Internet scams: KSh 6 million ($44,482)
Online banking losses were marginal, rising to KSh 111.8 million ($829,079) even as cases jumped 87.
Resilience Despite CBKF Threats
Despite rising operational risks and macroeconomic pressures, Kenya’s banking sector remained resilient. Core capital increased to KSh 989.2 billion ($7.3 billion), boosting banks’ capacity to absorb shocks. The capital adequacy ratio reached 19.6%, comfortably above the 14.5% regulatory minimum.
Profit before tax rose 18.71% to KSh 260.3 billion ($1.9 billion), supported by tighter lending standards and loan recoveries. However, total net assets contracted slightly by 1.6% to KSh 7.6 trillion ($56.3 billion) as net loans fell 2.7%.
Kenya’s economy slowed to 4.7% in 2024, down from 5.6% in 2023, affected by high energy costs, tight financial conditions, delayed government payments, and lack of fiscal support for vulnerable groups. Volatile exchange rates, peaking at KSh 162.7/$1 in January, added to pressures, though inflation remained within the CBK target range of 2.5–7.5%.
All local currency figures are converted using the 2024 average exchange rate of KSh 134.8/$1.
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