NAIROBI, Kenya, Jan 14 – The Central Bank of Kenya (CBK) has said the introduction of the proposed agent banking model will serve to strengthen the role played by existing financial sector players and thus bring services closer to the populace.
While allaying fears that the model will kill Micro Finance Institutions (MFIs) and Savings and Credit Cooperatives (Saccos) in the country, CBK Governor Prof Njuguna Ndung’u said it will instead help support the activities of Micro Finance sector.
“What I draw from this is that each market player will develop their own market niches in line with their relative comparative advantages and strengths,” he said.
Last year, the CBK licensed one MFI and indicated its intention of giving the green light to more institutions that want to become deposit-taking organisations as a way of increasing access to financial reach in the country.
The proposal to use third party agents and which was part of the amendments made to the Banking Act through the Finance Act of 2009 was thus seen as a direct competition to the MFIs and Saccos that mainly serve people in the middle and low income segment of the society.
However the community-based institutions, the Governor said, would come in handy particularly where banks want to establish a presence in the rural or remote areas of the country.
“The framework will play a complementary role for all players in the market. So these fears are misplaced,” he assured adding that the move was well in line with the objectives envisaged in the Vision 2030 of having an inclusive financial system.
A National Finance Access Survey of 2009 showed that 32 percent of Kenya’s bankable population lacks any access to formal financial services while many others are served by informal systems. These are the people who are targeted by such innovations which would not only support savings but boost investment growth.
For banks, the concept which doesn’t require them to have a physical presence in the areas where they are providing their services, means reduced operational costs and the provision of cost-effective services.
“The motivation is double-edged. For us it’s developmental because we want financial reach and inclusion and for banks they want to enlarge their reach at least cost and,” he added.
Mr Ndung’u said the model would be rolled out as soon as stakeholders reach consensus on how the model would be implemented.
He said agents that will be picked by banks to deliver financial services on their behalf, will have to conform to the set regulatory framework.
“Agents will not seek licenses from the Central Bank. We have our rules and regulations and we regulate commercial banks who will be appointing agents on the basis of the rules that we are going to agree on,” the Governor added.