The total number of people working in the financial services sector dropped to 63,500 as most banks shifted from brick-and-mortar operations in favour of technology-based transactions, according to the Economic Survey 2018 that was published last week.
The survey found that the number of financial services (banking and insurance) employees dropped 2.3 per cent in 2017 from 65,000 the previous year, making it the fastest jobs shrinkage ever recorded in the sector.
The banking and insurance sector data is specifically captured under a new metric that was introduced in 2011.
Commercial banks deepened their automation of most services in the past year as they sought to improve efficiency and cut costs while profitability fell with the introduction of interest rate caps.
A number of lenders have since closed some branches and sent workers home as part of the cost-cutting effort that is expected to continue if the interest rate capping law is not repealed.
The number of financial services sector jobs rose progressively from 48,500 in 2011, 51,300(2012), 56,300(2013), 62,700 (2014), 65,000(2015) and 63,500(2016) before the 2017 drop.
Unionists, however, accuse the banks of employing old tactics such as outsourcing in the quest for bigger profits.
“Banks are unfairly sending workers home by outsourcing their positions in the chase for big profits,” said Tom Odero, the organising secretary of the Banking Insurance and Finance Union of Kenya (Bifu).
Wage employment in finance and insurance sectors
The number of workers declined by 2.3 per cent in 2017.
The Kenya Bankers Association (KBA) did not provide its own figures of the number of employees in the banking sector.
But despite the sluggish 4.9 per cent growth — the slowest in five years — the economy still created 65,000 more jobs than the previous year’s 832,100 according to Economic Survey 2018.
A recent financial sector report had put the layoffs slightly higher than the Economic Survey 2018’s.
Cytonn Investments said the banking sector sent home more than 1,620 employees after closing down 39 bank branches in a year.
Equity Bank topped the list of lenders that cut down their payrolls, having sent home 400 workers, followed by Barclays Bank, which let go of 301 employees.
Standard Chartered Bank of Kenya sent home 300 employees while KCB let go of 223, National Bank 15), First Community Bank 106, Sidian Bank 108 and NIC Bank 32.
Financial services group UAP Old Mutual has also announced plans to lay off about 100 employees as part of a cost management effort.
In March this year, another financial services group Britam revealed plans to lay off 100, signalling a possible continuation of the blood-letting this year.
Cytonn said in its report that the shedding of staff was necessitated by a tough operating environment brought about by the interest rates capping law and political heat that came with the General Election.
“The focus for the banking sector in 2017 was on adjusting business models to conform to the Banking (Amendment) Act 2015. To this effect, banks took proactive measures aimed at increasing operational efficiency such as laying off staff, closure of branches, reviewing operating hours for some branches, or outright sales in the case of struggling Tier III banks,” the report says.
Financial services sector employees, however, remained the best paid private sector workers despite the lay-offs.
Economic Survey 2018 found that financial and insurance services workers pocketed an average Sh146,630 per month, representing a growth of less than one per cent.
Slow profitability growth in the wake of interest rate caps has been linked to the reduced or slower growth in sector wages.
Citi Global Perspectives & Solutions (GPS) predicted the looming staff cutback in its 2016 report which said that banks were quickly approaching their “automation tipping point,” and could soon reduce headcount by as much as 30 per cent.
The report on how financial technology is disrupting banks, said the banks’ ‘Uber moment’ would mean a shift to the mobile phone as the main channel of interaction between customers and their banks.
“We believe that there could be another 30 per cent reduction in staff during 2015-2025 period,” the report said.