NAIROBI, Kenya, May 18 – Reduction in base lending rates by commercial banks should translate to lower lending rates and not be a mere advertising tool to attract new customers, President Mwai Kibaki has said.
President Kibaki emphasised that the move should also lead to a higher uptake of loans by deserving firms and households to support investments, jobs and wealth creation in the economy.
The President was speaking on Tuesday at Kenyatta International Conference Centre (KICC) where he launched M-KESHO, an Equity Bank M-PESA banking product.
He expresed confidence that lending rates can go down further in the country, adding that for the economy to flourish, affordable credit must be provided to both large and small scale businesses and individuals to enable them invest in productive activities that will create wealth and uplift the living standards of Kenyans.
Said the President: “That is why the emphasis on affordable credit is so important to our economy and to our industrialization drive.”
To further facilitate the delivery of cost effective financial services, President Kibaki said Kenya has to embrace emerging technology like the mobile phone to reduce the cost of delivering financial services and improve access to financial services.
The Head of State, at the same time, said his Government would continue to work closely with financial sector players to remove barriers that curtail the expansion of financial reach and depth in Kenya.
The President underscored the Government’s commitment to creating an enabling environment for innovations in the financial sector and other sectors of the economy to enable more Kenyans access financial services.
“I am confident that the inclusion of more Kenyans in the financial services arena will greatly facilitate the achievement of VISION 2030,” President Kibaki said.
Noting that it was only through innovation that Kenya can improve access to financial services for wananchi, President Kibaki urged financial sector players to continue exploring innovative ways of delivering their products more cost effectively.
The Head of State, therefore, expressed the need to explore alternative cost effective ways of expanding the outreach of formal financial services, saying the coverage of conventional financial services delivery points such as bank branches remains limited.
Said the President: “Some Kenyans still have to travel long distances incurring significant transaction costs to access banking services.”
Emphasising the importance of the rapid expansion of mobile transfer services through use of third party agents, the President said he was pleased that the Central Bank of Kenya has formulated a regulatory framework for use of third party agents by banks to reduce the transaction costs that act as a barrier to accessing financial services.
In this connection, President Kibaki directed the Central Bank to continue implementing monetary policies that will increase the supply of affordable credit.
He pointed out that the launch of M-KESHO is a landmark event that is integrating the banking and telecommuncation sectors to push Kenya’s financial services to another level.
The product will enable those with mobile phone M-PESA accounts to open savings accounts where they will be able to transfer as little as a Sh100 to their accounts at no cost.
President Kibaki said such savings accounts will attract several benefits including interest, micro credit, micro insurance, deposit and withdrawal facilities.
“This product will play an important role in enabling more Kenyans to access financial services. Indeed, the product is one good example of lowering barriers to entry for the poor in the financial markets and encouraging them to save and access credit,” the President said.
He commended Equity Bank and Safaricom for introducing the innovative product, saying access to financial services by a country’s population is a prerequisite for investment geared towards wealth and employment creation as well as poverty alleviation.
The President emphasised that it was through access to financial markets that the poor could build their assets through savings and affordable credit hence the need to bring on board a significant proportion of Kenyans in formal financial services.
“The National Financial Access Survey carried out last year, for example, showed that 32 percent of Kenya’s bankable population is excluded from any formal or informal financial services,” the President noted.
In this regard, President Kibaki said the Equity Bank M-Pesa Banking product is a milestone in achieving the country’s development targets as it will accelerate the progress in expanding the reach of formal financial services in the country.
Noting that the number of bank accounts in the country have increased from just over one million in 2003 to 8.4 million accounts to-date, the President said with innovative products such as the Equity Bank M-Pesa product, the proportion of the bankable population will be increased substantially.
Speaking during the launch, Prime Minister Raila Odinga affirmed that the Government’s development blueprint Vision 2030 is designed to enpower women and youth to engage in activities that mitigate against poverty in the country.
While appreciating the new financial product, the Prime Minister said its implementation would break the vicous cycle of poverty and stimulate economic growth.
The Prime Minister also commended Safaricom and Equity Bank for the innovative financial product which, he said, would enable more Kenyans to access banking services even from their homes.
On his part, Deputy Prime Minister and Minister for Finance Uhuru Kenyatta said microfinance is the way to go if the country targets liberating the many Kenyans suffering from abject poverty.
“Indeed there is ample evidence globally that when poor people have access to financial servces, they can change their lives and build stronger, more prosperous and cohesive communities,” the Minister for Finance said.