ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2015 KENYA DEPOSIT INSURANCE CORPORATION protecting your deposits VISION To be a best-practice deposit insurance scheme MISSION :e promote and contribute to pubOic conÀdence in the stabiOit\ oI the nation·s ÀnanciaO s\stem b\ proYidinJ a sound saIet\ net Ior depositors oI member institutions. STRATEGIC OBJECTIVES ʌ 3romote an eIIectiYe and eIÀcient deposit insurance scheme ʌ (nhance operationaO eIÀcienc\ ʌ Promote best practice STRATEGIC PILLARS ʌ 6tronJ superYision and reJuOation ʌ PubOic conÀdence ʌ Prompt problem resolutions ʌ Public awareness ʌ (IIectiYe coordination OUR CORPORATE VALUES ʌ ,nteJrit\ ʌ ProIessionalism ʌ Team work ʌ Transparenc\ and accountabilit\ ʌ 5ule oI /aw Kenya Deposit Insurance Corporation (KDIC)Annual Report 2015 iii protecting your deposits CORPORATE INFORMATION .en\a 'eposit ,nsurance &orporation &%. Pension +ouse +arambee $Yenue P. 2. %o[ - 1airobi .en\a Tel - - (mail kdiccommunications#depositinsurance.Jo.ke :ebsite www.depositinsurance.Jo.ke BANKERS &entral %ank oI .en\a 1airobi +aile 6elassie $Yenue P. 2. %o[ - Nairobi AUDITORS .P0* .en\a th )loor /onrho +ouse Standard Street P. 2. %o[ - Nairobi GPO On behalI oI The $uditor-General .en\a National $udit OIÀce $nniYersar\ Towers 8niYersit\ :a\ P. O. %o[ - Nairobi GPO iv Kenya Deposit Insurance Corporation (KDIC)Annual Report 2015 TABLE OF CONTENTS Statement from the Chairman of Board ........................................................................................................................................ 6 Taarifa ya Mwenyekiti wa Bodi ...................................................................................................................................................... 8 Board of Directors............................................................................................................................................................................ 10 Senior Management ....................................................................................................................................................................... 11 0HVVDJHIURPWKH$FWLQJ&KLHI([HFXWLYH2IÀFHU Ujumbe kutoka kwa Mkurugenzi Mkuu .................................................................................................................................... 14 THE YEAR UNDER REVIEW Performance of the Economy .............................................................................................................................................. 16 BANKING SECTOR PERFORMANCE AND DEVELOPMENTS DURING THE YEAR ENDED 30TH JUNE 2015 Overview, Structure of the Balance Sheet, Loans and Advances, Deposit Liabilities ................................................ 18 &DSLWDODQG5HVHUYHV$VVHW4XDOLW\3URÀWDELOLW\/LTXLGLW\ FINANCIAL INCLUSION INITIATIVES &UHGLW,QIRUPDWLRQ6KDULQJ0HFKDQLVP$JHQF\%DQNLQJ0LFURÀQDQFH%DQNV 5HSUHVHQWDWLYH2IÀFHV0RQH\5HPLWWDQFH3URYLGHUV.HQ\D%DQNV5HIHUHQFH5DWH .%55 CORPORATE GOVERNANCE Mandate and Responsibilities, Organization Structure .................................................................................................. 22 Corporate Governance Approach, Human Resources .................................................................................................... 23 Strategic Planning ................................................................................................................................................................. 24 Corporate Social Responsibilty ........................................................................................................................................... 26 DEPOSIT INSURANCE ACTIVITIES ,QWURGXFWLRQ'HSRVLW,QVXUDQFH&RYHUDJH Member Institutions Contributions .................................................................................................................................... 31 Relationship with IADI and ARC ....................................................................................................................................... 32 LIQUIDATION ACTIVITIES Payment of Protected Deposits ........................................................................................................................................... 33 Debt Recovery ....................................................................................................................................................................... 34 Declaration of Dividends ..................................................................................................................................................... 35 TRANSFORMATION FROM DPFB TO KDIC Historical Background, Transition to Kenya Deposit Insurance Corporation ............................................................. 36 Membership ........................................................................................................................................................................... 37 Sources of Income ................................................................................................................................................................. 38 6WDNHKROGHU5HIRUPV FINANCIAL STATEMENTS Directors and Statutory Information, Directors, Board Audit Committee ................................................................... 41 Senior Management, Principal Place of Business, Auditors, Bankers .......................................................................... 42 REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2015 Change of Name, Incorporation, Principal Activities, Results, Directors .................................................................... 43 Auditors, Approval of Financial Statements .................................................................................................................... 44 STATEMENT OF DIRECTORS’ RESPONSIBILITIES FOR THE YEAR ENDED 30 JUNE 2014 Approval of the Financial Statements ................................................................................................................................ 46 Statement of Corporate Governance, Board of Directors, Board Meetings, Audit Committee ................................ 47 Management Structure, Director’s Emoluments and Loans, Code of Ethics, Internal Controls, Authorizations ....................................................................................................................................... 48 ,QWHUQDO$XGLWDQG5LVN0DQDJHPHQW7UDQVSDUHQF\ REPORT OF THE INDEPENDENT AUDITORS Directors’ Responsibilities for the Financial Statements, Authorised Auditor’s Responsibility, Auditor-General’s Responsibility, Basis of Opinion ................................................................................................................. 50 Opinion ............................................................................................................................................................................................ 51 6WDWHPHQWRI3URÀWRU/RVVDQGRWKHU&RPSUHKHQVLYH,QFRPHIRUWKH<HDU(QGHG-XQH 6WDWHPHQWRI)LQDQFLDO3RVLWLRQDVDW-XQH 6WDWHPHQWRIFKDQJHVLQ)XQG%DODQFHIRUWKH<HDU(QGHG-XQH 6WDWHPHQWRI&DVK)ORZVIRUWKH<HDU(QGHG-XQH 1RWHVWRWKH)LQDQFLDO6WDWHPHQWVIRUWKH<HDU(QGHG-XQH APPENDICES Appendix I: Commercial Banks .................................................................................................................................................... 85 Appendix II: Micro Finance Institutions ..................................................................................................................................... 87 Appendix III: Banking Institutions Directors and Approved Auditors ................................................................................. 88 'HSRVLW7DNLQJ0LFUR)LQDQFH'LUHFWRUVDQG$SSURYHG$XGLWRUV protecting your deposits CHAIRMAN’S FOREWORD STATEMENT FROM THE ACTING CHAIRMAN OF BOARD ,t is with Jreat honour that , present the Àrst $nnual 5eport oI the .en\a 'eposit ,nsurance &orporation .',& Ior the Ànancial \ear endinJ -une on behalI oI the %oard oI 'irectors 0anaJement and StaII oI the &orporation. The period under reYiew reJistered satisIactor\ perIormance as the &orporation·s )und closed the \ear at .Shm haYinJ Jrown b\ . Irom .Shm in the preYious \ear. This Jrowth was boosted b\ a net surplus oI .Shs m reJistered durinJ the \ear. The Jrowth oI the bankinJ sector Irom which the &orporation deriYes its reYenue and prudent manaJement oI the &orporation·s )und contributed to this IaYourable perIormance. Net surplus earned b\ the &orporation durinJ the period under reYiew rose b\ Irom a leYel oI .Sh m in to .Sh m in .This Jrowth in net surplus stemmed Irom a siJniÀcant increase in the &orporation·s reYenue that rose b\ . to .Sh m in Irom the leYel oI .Sh m reJistered in that was mostl\ inYested in GoYernment Securities which is the &orporations· maMor source oI inYestment income. The &orporation·s operatinJ e[penses increased b\ .Sh m Irom .Sh m to .Sh m in an increase oI owinJ to transitional actiYities includinJ a maMor upJrade oI the &orporation·s ,&T s\stems. Total assets oI the &orporation rose b\ . percent to .Sh m in Irom the leYel oI .Sh m in . This Jrowth arose mainl\ Irom the &orporation·s re-inYestments in GoYernment Securities and Premium contributions b\ member institutions which Jrew b\ . and . to stand at .Sh m and .Sh m respectiYel\. The bankinJ sector·s asset Tualit\ earninJs and liTuidit\ were all rated stronJ with e[ception oI capital adeTuac\ that was rated satisIactor\