NAIROBI, November 12 – The government has called on all financial services sector experts to guide legislators in putting in place regulatory framework that can spur the growth of the industry.
Deputy Prime Minister and Minister for Local Government Musalia Mudavadi said on Tuesday that the input of the sector was crucial as the country seek to have a well regulated industry.
“We are a small economy and we therefore need to get it right from the beginning. If we fall into the trap of not managing our financial sector properly, we do not have the capacity to make interventions like those that are being made by the bigger economies,” he warned.
He observed that the current global meltdown has been proof that a weak regime that is not in tandem with the growth of the sector can wreck havoc on not only the economy but on many people’s lives.
“Let us be clear that the process of seeking profits and making money also goes with responsibility to your clients and to yourself. But do not be afraid to lobby the Parliamentarians to make sure that we take collective action at the earliest possible time,” he added.
Mr Mudavadi pointed out that a functioning and efficient financial system was crucial in enabling the country to increase its savings levels and build up other areas that are vital in rejuvenating the economy as envisaged in the development blue print, Vision 2030.
The Minister spoke during the official launch of Alexander Forbes new products that will be rolled out under the financial service, risk and insurance brokering and healthcare divisions where he challenged the insurance industry to explore the opportunities that exist in untapped areas such as agriculture and bank assurance.
For instance, he pointed out that nearly 80 percent of the Kenyan population depends directly or indirectly on the agricultural sector but the perennial adverse climatic conditions remain a major impediment on the sector.
“This calls on players to venture into this sector to provide products which could benefit those engaged in agricultural activities,” he advised adding that local banks offer a high potential through which insurance can sell life and pensions schemes over the (bank) counters.
Mr Mudavadi also urged the players to exercise responsibility and strive to provide professional services to their clients to restore confidence in the industry.
The lack of adequate information, he added, had led to negative perceptions regarding the products offered which translates into the low insurance penetration levels in the country.
Currently, total insurance premiums account for only three percent of the country’s GDP compared to South Africa and Zimbabwe where the figures are 15.9 percent and 4.1 percent respectively.
On its part, Mudavadi said the government had taken note of the challenges facing the insurance industry and that’s why the Insurance Regulatory Authority was formed to improve efficiency and governance in the sector.
During the same function, Alexander Forbes Managing Director James Olubayi disclosed that they would soon be launching an individual personal pension plan that will be primarily targeted at the self-employed people.
“With this plan, a client does not have to pay a fixed amount every month. He’ll pay what he has and then this is build up as a fund after which we’ll advise him on the various options for retirement,” he explained.
Mr Olubayi expressed confidence that the uptake of this product would be good adding that they expected to have over 240, 000 clients by the end of three years.
He added that the ongoing plans to merge the East African Community, Southern African Development Community and COMESA trading blocs would provide a platform on which the company could offer financial and healthcare products and services to over 560 million people.