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Kenya moves to fast track access to financial services

Kenyan President Mwai Kibaki on Monday underscored his g overnment’s commitment to formulating and implementing policies that will lead t o the development of a stable, efficient, safe and accessible financial sector.

The President said the government was working towards increasing access to finan cial services and products to all Kenyans, particularly the poor, low income hou s eholds and micro and small scale enterprises.

Kibaki, who was speaking during the Family Bank’s Silver Jubilee celebrations at Kenyatta International Conference Centre, noted that a vibrant financial sector

was vital to a country’s social and economic development since it provided the f i nancial resources needed for growth.

“In Kenya this is one sector that has helped in the attainment of our developmen t aspirations and will continue to play a pivotal role in the realisation of VIS I ON TWENTY THIRTY,” he said.

In this regard, Kibaki directed the Central Bank of Kenya to enhance its efforts to provide information on the cost of banking services to Kenyans.

He said the information should be delivered in formats that can be easily unders tood and used for comparison of the pricing of different banking products and se r vices to enable Kenyans shop for competitive banking services.

Besides improving access to financial services, Kibaki said the government would implement measures aimed at bringing down the cost of credit which had remained

beyond the reach of many Kenyans.

These measures will include the implementation of credit information sharing, he said.

He observed that following the implementation of regulations to facilitate credi t information sharing in February this year, the Central Bank of Kenya would lic e nse Credit Reference Bureaux.

“The Bureaux will gather credit information from banks that will facilitate lend ing decisions. This information will also be extremely helpful for borrowers who

may not have physical collateral. In cases such as this, an individual’s credit h istory will serve as the collateral for loans,” Kibaki said.

The President also urged banks to exploit technology to reach more Kenyans in a cost- effective way, noting that the Financial Access National Survey for 2009 i n dicated that the banking sector still served only 22 per cent of the bankable po p ulation.

He cited mobile phone technology as an example of channels that banks could use to reach more Kenyans, saying the success of mobile money transfer services unde r scored the potential of mobile phone financial services.

“Kenyans continue to show a strong affinity to mobile phones that can be tapped to provide financial services. I, therefore, encourage banks to scale up their u s e of mobile phone banking as a delivery channel to offer cost effective banking s ervices,” Kibaki said.

He commended Family Bank for adopting a banking business model that focuses on m illions of the un-banked Kenyans at the lower end of the society, saying despite

the significant growth in the number of commercial banks witnessed over the year s , a majority of Kenyans are still un-banked.

Kibaki noted that the Family Bank was one of the only two building societies tha t successfully became banks, but dealing mainly in microfinance.

The President said over the last decade, microfinance had developed significantl y and had now assumed a central role as one of the key drivers of the country’s e conomic growth and efforts to fight poverty.

Saying the deposit base in Kenya’s banking sector had increased to 940 billion s hillings, 69 per cent of which had been extended as loans, Kibaki, he said the c o mmendable increase created a strong base for banks to lend to enterprises.

“This phenomenal growth in the banking sectors’ deposit base has been backed by an exponential growth in the number of bank accounts. The number of bank account s has increased from 2.6 million at the end of 2005 to 6.4 million at the end of l ast year,” Kibaki said.

He said in providing small business enterprises with appropriate financial produ cts and services, such banking institutions had been contributing in the deliver y of the social benefits often associated with such businesses.

According to him, “Experience the world over has taught us that the micro-enterp rises are key to sustainable economic development and in particular to the elimi n ation of poverty.”

The Head of State pointed out that micro-enterprises provided a path to economic self-reliance for owners and entrepreneurs while benefiting their local communi t ies.

“Indeed, as a channel of intermediation, the financial sector has continued to p lay an immensely crucial role in the development of our economy,” the President s aid.

He expressed satisfaction that a Financial Access National Survey for 2009 indic ated that various policy actions formulated by the government to foster access t o financial services by Kenyans had begun to bear fruit.

Kibaki, however, said much more needed to be done in ensuring that more Kenyans had access to the financial services.

In this regard, Kibaki said the recent budget proposals by the Minister for Fina nce on branchless banking and principal-agent models of financial service delive r y would go a long way in facilitating strategic alliances between banks and non- b ank financial institutions such as SACCOs and microfinance institutions.

He said such alliances would serve to ensure that more Kenyans could access safe , efficient and affordable financial services.

The President also expressed satisfaction that the first Nationwide Deposit Taki ng Microfinance Institution was officially launched by the central bank recently

after the Microfinance Act of 2008, which provides for both National and Communi t y Deposit Taking Microfinance Institutions, became operational.

“The government and, indeed, the public expect these institutions to serve espec ially the rural and peri-urban areas that have previously been inadequately serv e d by the banking sector. More particularly, they have a unique capacity to direc t financing to small-scale enterprises that lie at the heart of Kenya’s economic d evelopment,” said the President.

Speaking during the same occasion, Deputy Prime Minister and Minister for Financ e Uhuru Kenyatta said with the improved environment for doing business in the co u ntry, it is possible for the country’s economic growth to attain the targeted 10

per cent mark but cautioned that political climate must be conducive too.

Central of Bank of Kenya Governor Prof. Njuguna Ndungu commended local banks for expanding their services to the East African region, noting that the region’s c e ntral banks have signed a memorandum of understanding for sharing information an d supervisory cooperation.

“This phenomenal growth in the banking sectors’ deposit base has been backed by an exponential growth in the number of bank accounts. The number of bank account s has increased from 2.6 million at the end of 2005 to 6.4 million at the end of l ast year,” Kibaki said.

Njuguna also urged local banks to reduce barriers of acquiring banking services and account maintenance costs to reach more of the Kenyans who do not have acces s to banks.

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