In Kenya, Banks Explore Blockchain For Payments

Bloomberg reports that banks in Kenya are pursuing regulatory approval to use distributed ledger technologies (DLT) to help facilitate payments and create credit scoring models.

The attractiveness of blockchain as a distribution method has been well documented, with the immutability of recording transactions and the relative anonymity of the parties as big selling points. But, Kenya’s central bank has sounded a note of caution.

In a report from the bank, blockchain may hold risk if it is misused. “There is thus the need to ensure that robust controls are in place to ensure that the risks and opportunities associated with emerging technologies are balanced,” wrote the bank.  There still is no move to recognize cryptocurrencies, where such offerings “are associated with anonymity and commonly used by criminals.”

It might be the case that the move to take on blockchain and spur new services exists as a way to stimulate the trading activity of those banks and generate traction on the top and bottom lines. The newswire stated that earnings within the sector have fallen, with caps imposed via banking regulators on interest rates. Against those curbs, lending activity has dropped, as gross loans and advances slipped 5.7 percent last year to 2.2 trillion shillings. In addition, profits slipped nearly 10 percent to 133 billion shillings.

In one recent example of how blockchain might be used in linkups between banks and between financial institutions, it was reported that the World Bank will offer bonds via blockchain, via Australia’s Commonwealth Bank, which already has a blockchain system.  The debt to be offered is to be known as bond-I. Also, earlier this summer, BBVA floated a $117 million loan across the blockchain.