Habil Olaka: My 14-year journey in building the bankers' lobby

 Kenya Bankers Association CEO Habil Olaka. [File, Standard]

Habil Olaka is in a pensive mood. He smiles even as he furrows his brow to remember the highlights of his 14 years at the helm of the bankers’ lobby, Kenya Bankers Association (KBA).

As he stops to take stock of his achievements as the prime advocate of the banking sector, he says there is one thing he regrets and one that has far far-reaching consequences; overlooking the possibility of the interest capping law going through in the year 2016.

The industry had discounted it as a remote possibility with Kenya being a free market economy, and with the Parliament never having shown signs of any controlled economic tendencies.

Its passing caught most of industry captains flatfooted and many paid over the next few years with reduced profits from decreased lending. But in his estimation, it is the market that suffered the most from reduced credit supply.

Once, it became law, efforts began in earnest to reverse it. During his 14-year stint at the helm of the sector, there were four attempts to revise the interest-capping law, two of which went through.

“There were things that we did not quite get as well as we should have gotten, there would have been better ways of doing it,” Dr Olaka says.

“The interest-capping law presented by Jude Njomo (then Kiambu town MP) almost caught us by surprise because we did not think it would go through, but it eventually did because of the mood in the country, especially with the legislature was such that ‘teach them a lesson.”

Dr Olaka says the effect of that law was significant on the economy as ‘the Central Bank was not able to conduct its monetary policy effectively’. People meant to benefit from the law like SMEs were the ones who suffered most.

“I think we could have been more proactive and tried to ensure that we do a bit more to try to dissuade the MPs with facts and reasoning from the fact that going that route would have generated the challenges that we finally met,” Olaka says.

Looking back, he says, the bankers were not as aggressive as they ought to have been in trying to reach out to Members of the National Assembly and persuade them that, that was not the right way to go. 

In 2016, the Donde Bill which had been crafted 16 years before cap interest rates, finally sailed through Parliament.

The Bill was tabled by economist and MP Joe Donde.

In his remarks then, Donde said high interest rates had a huge impact on the savings culture in the country. The Bill had earlier in the year 2000 been rejected on the grounds of having anomalies.

Key moments

Even as this dark cloud of regret hovers over his delivery at KBA, Dr Olaka looks back at his service as an advocate for Kenya’s entire  banking sector with economic jingoism. 

He is an achiever with a strict schedule. I also, learned that despite studying electrical engineering, the closest he has come to an electrical wire was during his months-long industrial training stint.  

At the time of joining the banking lobby as chief executive, Olaka says there were only three employees; a personal assistant an accountant and a messenger.

“One of the challenges I faced when I came in, was that the mandate had been widened and I therefore had to put in place a staff structure that could help me deliver on the mandate of the association,” he said.

“Looking back, we managed to wade through the interest rate capping debate. We supported the industry during Covid-19 challenges and supported the industry through the foreign exchange challenges, and a few others,”

Dr Olaka says that the association prides itself in bringing in sustainable financing initiatives for the sector. “We went on to think about people with disability, most service providers do not think of people with disability as people who are going to contribute to the products”.

The father two lauds the cheque truncation system that eased transactions and saved time. “I am most proud of the cheque truncation system. Cheques were initially manual, and the cheque truncation project automated cheque systems to same-day effects. This was one of the very first projects we brought on. The impact was quite clear in terms of time saved and safety introduced into the system. This system cut down fraud significantly, hence a project we are very proud to have delivered at KBA,” he noted.

He also led the introduction of sustainable financing for banks. “Profit is important, but that is not all. The environment matters and we need to be concerned about the future generations, and the social benefits of the people we interact with and affect through our economic activities,” Olaka said.

As he retires from the banker’s association, Olaka says it is time to give back to other spaces in different capacities. Retirement for him, he says, is something that he has been thinking about for quite a bit of time.

Expert’s take

Kenya’s economy has been hard hit by the high cost of energy, unpredictable taxes and weakening of the shilling consequently driving up the cost of living.

According to Dr Habil Olaka, most of the shocks that have hit the Kenyan economy are externally driven.

“I think that the critical thing will be for the managers of our economy to be more alert to the fact that it is not just the domestic factors that are within your control, but there are factors that will come as shocks,” he said, calling for the need for the development of buffers against those shocks.

Pan African banking

Dr Olaka lauds the expansion of Kenyan banks across Africa, noting that many lenders are going beyond the East African Community.

They are eyeing West African economies as well.

The banks are also looking to facilitate trade within Africa. “Kenyan banks are well placed to play in that Pan-African banking space, and can be leaders because they have the capacity, right structure, leadership structure and capacity, and the right size in terms of capitalisation, asset base and expertise within the region, he noted.

“We don’t need to go outside of the country to get most of the goods we go to get because we don’t have the right currency.”

When barriers are fully addressed, He says there won’t be any need to export raw materials to get finished goods.

He also vouches for one currency within the region to facilitate intra-Africa trade. “I think it is a good idea to have one currency, the problem is the actualisation because there are several hiccups that need to be overcome, like the convergence of economic parameters within the region,” Dr Olaka said.

Money laundering

Kenya, one of Africa’s biggest economies, and currently on the grey list by the Financial Actions Task Force, for the second time since its lifting from the grey list around 2014, is yet to counter money laundering.

Before being grey-listed, Dr Olaka says there were very strategic deficiencies that the actions task was concerned about.

“One of the concerns was the lack of a Financial Reporting Centre, which required political will to be put in place,” he observed.

He said Kenya then risked being blacklisted, which, would have greatly impacted the banking industry as they would not be able to transact with corresponding banks.

Following this crisis in 2009, the Financial Reporting Centre and Asset Recovery Agency were put in place and Kenya was removed from the grey list in 2014.

“So much can achieved when there is political will. Right now, we are on the grey list again. It is a very tedious, painful process going there trying to defend and explain what you have done in each of the deficiencies, normally, this is done at a very high level” he said.

“One of the deficiencies in the anti-money laundering framework was that lawyers were not reporting entity, making them a weak link in the whole framework,” he noted, adding that Kenya has what it takes to counter money laundering.

To address greenwashing, he says there is a need to come up with standards in terms of taxonomy.