Global banking standards have been adopted unevenly by many developing countries even though these standards were not designed with developing countries in mind. This paper assesses the levels of adoption of Basel standards in Kenya. The country has adopted most of Basel I, many components of Basel II and several components of Basel III. I argue that Kenya is a high adopter of these standards as there were unique circumstances that allowed the alignment of donor, government and private sector from 2003 onwards. Kenya’s Basel adoption is driven by internationally oriented regulators. Its shows that in Kenya, the global agenda does drive the local regulation agenda as regulators are internationally oriented.
Kenya’s Basel incorporation is embedded in a government strategy that combines the goal of high financial inclusion and the promotion of Nairobi as an international financial hub. The local private banks that were keen to expand into the region viewed adoption of international standards positively. The paper shows that while Kenya is a high adopter of standards, enforcement of some components of these standards has been weak but there has been an increased effort at enforcement since 2015.
The paper argues that the case of Kenya shows that international financial standards are compatible with high financial depth and financial inclusion. However international standards and a financial sector that adopts these may not be useful for structural transformation as the level of savings in Kenya is very low and the level of lending to key sectors such as industry and agriculture is very low.