NAIROBI, Kenya Oct 29 – The Ministry of Finance said on Thursday that it was fast tracking the implementation of a law that would see commercial banks use microfinance institutions as banking agents.
Speaking during the opening of the 16th Microfinance Network Conference, Finance Minister Uhuru Kenyatta said Kenya’s financial sector was relatively advanced compared to other countries in the region, but the low level of banking intermediation had locked out many from accessing financial services.
Mr Kenyatta said with the right policy in place, commercial banks could enhance penetration of services, especially in the rural areas where access to financial services has been low.
The Finance Minister noted that a recent survey found that only 27 percent of the active population have access to formal financial services with 35 percent were receiving informal financial access.
“However 38 percent are still excluded from accessing any form of financial services hence the urgent need for the financial sector to serve more people to become financially included,” he said adding the government had set a target of increasing the number to 67 percent by 2030.
When implemented, commercial banks would be able to use third party agents such as Saccos, MFI’s, retail outlets and petrol stations.
“We are working closely with the central bank and other stakeholders on the legal framework that will enable branchless banking ensure this is realized.”
Microfinance Network Chairman Carlos Labarthe said branchless banking would reduce the cost of banking; a factor he said would attract more people into formal channels of accessing financial services.
“It makes a lot of sense because with the segment we are targeting, it would be very costly for them to move around to visit a traditional bank branch. With this in place they can go to the nearest corner store and access some money,” Mr Labarthe said.
The Finance Minister noted that there was potential to increase the depth of the financial sector through micro-finance institutions to make Kenya a competitive economy in the provision of financial services.
With that in mind, he said the government would undertake improve the regulatory environment for the development of the micro-finance institutions.
Already, the micro-finance Act 2006 is operational, and Central Bank has dedicated an entire division to govern micro finance.
Equity Bank Managing Director Dr James Mwangi noted Kenya had not fully felt the effects of the economic crisis but expressed concern over increased regulations for MFI’s.
“Stiff regulations would only work towards stifling the progress that is already being made in the sector,” Dr Mwangi said.
He argued that instead of imposing new regulations, the regulator should focus on addressing challenges that arise.