Institute for Development Studies, University of Nairobi

The paper analyses the performance of four parastatal financial institutions, including the KCB, NBK, HFCK and AFC. Performance is analysed in terms of the four potential beneficiary groups: depositors, borrowers, stockholders and employees. It is shown that the depository financial parastatals played an important role in the development of the Kenyan financial sector. They performed efficiently enough to compete successfully with the private sector, while remaining highly profitable. Since 1979 their performance relative to the private sector has suffered as they have been used to extend banking services into more remote rural areas. The positive performance of the depository institutions contrasts sharply with that of the Agricultural Finance Corporation. The AFC is shown to be inefficient, unprofitable and to serve mainly to transfer state funds to its rather elite clientele.