CBK boss details his plans for Kenyans

March 30, 2011

, NAIROBI, Kenya, Mar 30 – A month after his tenure was extended for another four years, Central Bank of Kenya (CBK) Governor Prof Njuguna Ndung\’u has pledged to ensure that more Kenyans have access to formal financial services.

After helping to effect many changes in the financial sector, Prof Ndung\’u says his main focus in his second four-year term will be to develop policies that will bridge the financial inclusion gap in the country and ensure that more Kenyans can participate in further development of the sector.

"We have seen the financial sector deepen and maybe… it is its role now to pull the economic growth with it and therefore my next objective will be to scale up the financial inclusion," said the Governor.

According to a survey conducted in 2009, the number of the Kenyan population aged 18 and over who were financially excluded declined from 38.4 percent in 2006 to 32.7 percent.

This was largely attributed to the increased usage of innovative technological products such as mobile money transfer services which rose from 7.5 percent to 17.9 percent during the same period.

Since then, a number of initiatives such as the licensing of microfinance institutions to take deposits has further served to bring the unbanked into the formal system and also created new frontiers of financial reach through which resources can be easily mobilised.

"We have also worked very hard to make sure that we reduce the cost of doing business. We have included in a large way financial infrastructure but we now need to make it operational," Prof Ndung\’u added in reference to initiatives such as the credit reference bureaus and agency banking establishment.

Upon the implementation of the regulations establishing them, the bureaus are expected to facilitate credit information sharing among all credit providers licensed under the Banking Act, with the view to curtailing the number of serial defaulters and thus lead to the reduction of non-performing loans.          

The governor has been credited with helping to create the enabling legal and regulatory environment that has supported the performance of the sector which has been identified as one of the six key industries expected to enable the country attain its development goals envisaged in Vision 2030.

The industry has not disappointed either as seen in the Bank Supervision Annual Report of 2009 which showed that the industry\’s asset base increased from Sh1.18 trillion in December 2008 to Sh1.35 trillion in December 2009 while pre-tax profit also rose by 13 percent to stand at Sh48.9billion in 2009.

But while his main focus will be on financial inclusion, the Governor acknowledges that he will need to keep an eye to the country\’s macroeconomic environment.

Under his first tenure, the CBK was lauded for implementing good monetary policies that have helped to spur economic growth and in some cases enabled the country to recovery quickly from shocks such as global recession, drought and the effects of the post election violence.

Recently, however with the economy under threat from shocks such as high international oil prices and drought that were driving up inflation and weakening the local currency, the Monetary Policy Committee which he chairs raised the Central Bank Rate by 25 basis point to six percent, which was a surprise move.

Prof Ndung\’u defended the decision saying the committee wanted to ensure that it contains any inflationary pressure that might have a long term negative effect on economic growth.

The policy stance was also meant to protect the volatile shilling from depreciating further given that economic activities are guided by stable and predictable prices.

"We have seen that economic recovery was supported by credit supply and we want to make sure that this continues so that the gains that we have made are not jeopardised by the events that we are seeing," he said.

This is will go hand in hand with measures to ensure that excess liquidity that can pressure consumer prices.

Going forward, it is likely that during his tenure, country will continue to witness major developments such as the proposed integrated commercial centre that offers a broad range of financial services to both domestic and international investors.

He\’s on the steering committee that is mandated with driving forward the process which will enhance Kenya\’s position as a regional services hub and a gateway for capital into the East African Community and has pledged to ensure that the centre is established within the next few years.

Naturally, the Governor should be supported in all these endeavours by a board which has not yet been named by Finance Minister Uhuru Kenyatta, a month after he promised to do so.

Prof Ndung\’u however remains tight lipped about the announcement saying work at the Central Bank will continue until the appointing authority names the people who\’ll assist him.

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