NAIROBI， Feb. 13 (Xinhua) -- Kenyan banks are laying off workers and closing branches as they pursue a digital strategy to cut costs following the capping of interest rates.
Interest on loans were last September capped at 4 percent above the Central Bank of Kenya (CBK) benchmark rate currently standing at 10 percent.
Consequently， at least 10 financial institutions out of the 42 that operate in Kenya have responded by announcing job cuts and closure of branches， with over 970 workers having been axed and at least 21 branches closed.
The sackings are not only affecting branches in the country but even those in other East African nations where the financial institutions operate subsidiaries.
Equity Bank， Kenya's biggest bank by customer bank， has send home some 400 workers in the past months， industry data showed.
Standard Chartered Bank follows closely with 300 workers while First Community and Sidian Bank follow with 106 and 108 workers.
Kenya Commercial Bank， similarly， announced last week that it would lay off 28 workers at its Rwandan branches as the bank undergoes restructuring.
On the other hand， Bank of Africa and Eco Bank， have announced they would close 12 and nine branches respectively in the past months as they said they are pursuing a digital strategy that include launching of financial apps which their customers can use to transact and working with agents.
"Cost rationalization measures in the banking sector， such as laying off staff and closing branches continues. Some 10 banks have announced downsizing plans since the implementation of the interest rate cap in September，" Cytonn， a Nairobi based investment firm in Nairobi， said Monday in a statement.
Analysts said that Kenyan banks are at a crossroad， and have no choice but to go digital， with the capping of interest rates having worsened their plight as they were already facing tough competition from telecoms， which are offering financial services， reaching out to millions.
"The banks tried to fight mobile money when it was being introduced and they failed miserably. Having realised that is where majority of Kenyans are transacting their financial services， they started partnering with the telecoms to launch loan products， which are doing well，" said Henry Wandera， an economics lecturer in Nairobi， adding that the current squeeze in the industry was mainly as a result of the interest capping law.
Their quest to unseat the telecoms， however， is still alive. Six commercial banks last week received regulatory approval to implement the Real Time Interbank Switch System on their banking platforms.
The system will facilitate the real time transfer of cash from one bank account to another and will enable mobile phone users to send and receive money without relying on mobile money transfer services such as M-pesa， Airtel Money and Orange Money as intermediaries.
However， the pressure on the banks seems it would not be over soon， according to Cytonn. Starting January 1， 2018， the banks would be compelled to adhere to the International Financial Reporting Standards (IFRS) 9， which requires them to increase their loan loss provisioning.
"The new standard stipulates that banks should implement a forward looking approach to estimate credit losses， compared to the current International Accounting Standards (IAS) 39 standards that only requires banks to provide for loans after they have become non-performing，" said the Cytonn statement.
The new approach would， therefore， result in banks' loan loss provisions increasing up to 50 percent across all loan asset classes.
"We are of the opinion that the new rules will lead to a more stable and safe banking sector， however the increased provisioning will put pressure on capital ratios and may lead to capital raisings，" said the investment firm.
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