Title: PROMOTING FINANCIAL INCLUSIVENESS: THE KENYAN EXPERIENCE
1PROMOTING FINANCIAL INCLUSIVENESSTHE KENYAN
EXPERIENCE
- PRESENTED AT THE
- THE 2nd AFRACA CENTRAL BANKS FORUM
- HELD ON
- 23rd 25th SEPTEMBER 2008
- AT
- LUSAKA, ZAMBIA
- BY
- CENTRAL BANK OF KENYA
2PRESENTATION LAYOUT
- SELECTED SOCIO-ECONOMIC INDICATORS
- FINANCIAL SECTOR LANDSCAPE
- ACCESS (OUTREACH) INDICATORS
- FINANCIAL SECTOR POLICY AND DEVELOPMENT
- ENABLING ENVIRONMENT AND INCLUSIVITY
- PROMOTING ACCESS AND EFFICIENCY
3Area 582,650 Sq KmPopulation 37.2 million
4KENYA SELECTED ECONOMIC INDICATORS
Source Economic Survey and Central Bank
5KENYAS FINANCIAL SECTOR LANDSCAPE
6Republic of Kenya Economic Survey, 2007 and
Central Bank
FINANCIAL SECTOR LANDSCAPE
7FINANCIAL SECTOR LEGISLATION
- Legal Framework
- Banking Act
- Microfinance Act
- Co-operative Societies Act
- Capital Markets Act
- Retirement Benefits Act
- Insurance Act
- Building Societies Act
- Hire Purchase Act, among others
- Microfinance is practice by persons of various
institutional forms mainly companies, societies
and co-operatives
8FINANCIAL SECTOR OUTREACH INDICATORS, DEC. 2007
Source Central Bank of Kenya
9MICROFINANCE INDUSTRY
- Diverse institutional forms offering a variety of
financial services and products to low-income
households and SMEs using innovative delivery
channels - The umbrella body (AMFI) has 35 member
institutions - Out of these, 26, 2, 4, 2 and 1 are retailers,
wholesalers, banks, DFIs and insurance company,
respectively - AMFI members by December 2007, collectively had
841 outlets, 2,073,363 and 493, 682 active savers
and borrowers with KSh.16.589 billion loans (US
260 million) disbursed and outstanding loan
portfolio of KSh.16,007 billion (US 250
million)
10SAVINGS AND CREDIT CO-OPERATIVE SOCIETIES
SACCOS (CREDIT UNIONS)
- Over 5,122 registered SACCOs and about 3,900
active SACCOs - SACCOs assets is estimated at over KSh.167 bn.
(US 2.2 bn.) - Types of SACCOs Salary based, jua kali,
transport, community based, rural and traders
common bond SACCOs - Savings amounted to about KSh.160bn (US 2.46bn)
or 35 of the national savings and loans
outstanding amounted to about KSh.110 bn. (US
1.7bn) - 3.3 million ( approx. 11) of the adult Kenyan
population are members of a SACCO - SACCO Societies Bill, 2008 awaiting enactment by
Parliament
11INFORMAL MICROFINANCE
- A number of poor and low-income households and
MSEs depend on informal microfinance providers of
different institutional forms - The informal segment of the Microfinance
landscape is dominated by numerous Rotating and
Accumulating Savings and Credit Associations
(ROSCAs and ASCAs), money lenders, etc. - ASCAs and ROSCAs as user-owned and managed models
that offer additional features that appeal to the
community - The number and size of this informal microfinance
market is yet to be ascertained
12Financial Access Strand
Financially Included - 62
Banked 19
Financially Excluded
38
19
8
35
0
10
20
30
40
50
60
70
80
90
100
Unbanked No formal or informal financial products
used
Informal ASCA (Accumulating Savings and Credit
Associations) and ROSCAs
Formal Regulated banks, building societies or
Kenya Post Office Savings Bank
Formal Other SACCOs and MFIs (microfinance
institutions)
13FACTORS LIMITING ACCESS
- The main reasons advanced for low usage of formal
financial services include - Low Incomes
- About 50 are classified as poor have no
incomes worth banking - Cost of financial services
- Access barriers (opening/minimum balances)
- High transaction costs (account operating cost,
physical time) - Availability of informal (cheaper) alternatives
- Shopkeepers/suppliers credit
- Friends/family saving, credit, insurance,
remittances - Matatus/buses remittances
- Unavailability of financial services in some
regions e.g. North Eastern region
14FINANCIAL SECTOR DEVELOPMENT VISION 2030
- According to the Government, the Financial Sector
Development is based on three key pillars- - Ensure STABILITY Through policy and
infrastructure development - Foster EFFICIENCY By encouraging increased
competition and technological development (Least
cost) - Promote ACCESS By providing an enabling
environment for enhance outreach
15Enabling Policy Environment
Macro-level the enabling environment Meso-lev
el industry/sector supports Micro-level
retail providers TRANSACTIONS e.g. banks,
MFIs,insurers CLIENTS e.g. credit
reference, business services, research e.g.
policy, legislation, regulation, supervision
16MACRO - POLICIES TO IMPROVE INCLUSIVENESS
- Policy level - Vision for the financial sector
- Kenya Vision 2030
- Different types of institutions to serve
different market segments - Enabling Legal, Regulatory and Supervisory
Framework - Review of the Banking Act
- Enactment of the Microfinance Act
- SACCO Societies Bill, 2008
- National Payments Bill, 2008
- Credit Reference Bureau Regulations
- Improve Lending Environment
- Macro-economic framework
- Commercial justice system
- Appropriate regulation for business (e.g. licence
and permits) - Consumer protection and rights
- Branchless Banking (Mobile banking and agency)
- Money transfer e.g. M-PESA and Sokotele
17SPECIFIC POLICIES FOR THE MICROFINANCE INDUSTRY
- Human resource development
- Organisational framework for skills development
- Curriculum development and professional
qualifications - Training, recruitment
- Specialist business services
- Credit reference services, bad debt recovery and
workout, legal services - Auditing, ratings
- Information and communications technology systems
development - Market research, product development, management
consultancy - Market linkages
- Financial market integration investment,
re-financing and liquidity mgmt - Business linkages for service delivery e.g.
insurance, money transmission - Sector information and knowledge generation
- Market information
- Research and innovations
18POLICIES TO DEVELOP INDIVIDUAL INSTITUTIONS
- institutional diversity to address diverse
markets is allowed - from ROSCAs and through
- SACCOs and MFIs to.
- banks, pensions and capital market institutions
- Improved payment systems
- Building core financial capital of institutions
- Investing in institutionally embedded capacity
and infrastructure - Supporting innovations in product development and
delivery channels - Lower capital requirements
- Building basic industry capacity and entry
- Demonstration effect of profitability of untapped
market segments - Encourage competition and efficiency
19 THE POLICY ON REGULATION AND SUPERVISION OF
MFIs IN KENYA
- A Tiered approach to regulation supervision
- Tier 1 ROSCAs and ASCAs No regulation
- Tier 2 Credit-only/ Non Deposit-taking MFIs
MOF or Self-regulated by umbrella body - Tier 3 Deposit-taking MFIs Regulated and
supervised by CBK) - The Microfinance Act covers
- Deposit-Taking MFIs (to be regulated by CBK)
KSh.60M (US 860,000) and KSh.20M (US 300,000) - Credit-Only MFIs - the Minister to prescribe
regulations to regulate their conduct - SACCO Societies Bill, 2008 Covers both SACCOs
with Back Office Service Activities and/or Front
Office Service Activities
20EMERGING KEY POLICY ISSUES AND PROGRAMS 2012
- Kenya aims to be a regional financial hub
- Consolidation of the banking industry
- Strengthening quasi-banking institutions mainly
SACCOs and MFIs Legal and regulatory frameworks - Increased access to financial services (outreach)
- Enhance stability and efficiency
- Development of an efficient national payment
system - Consumer protection and rights including credit
reporting system (credit reference bureaus)
21PROMOTING ACCESS ACROSS DIFFERENT SEGMENTS OF THE
POPULATION
- Branch network expansion (Coverage)
- Use of technology ATMs, E-banking, M-PESA and
Sokotele - Agency arrangement such as supermarkets
- Strenthening of alternative financial service
providers targeting different population segments
banks, microfinance institutions, SACCOs and
informal providers - Enabling environment and suitable legal,
regulatory and supervisory framework
Microfinance Act and SACCO Societies Bill, 2008 - National Payment System (NPS) money transfer,
payments and sttlement (National Payments Systems
Bill) - Consumer Protection and Credit Reporting Systems
22- Infrastructure development
- Population density
- Urbanisation
- Climatic zones and agricultural activities
- Socio-cultural factors
- INNOVATIONS
- Agency arrangement
- Technology driven delivery channels
- M-PESA by Safaricom
- Sokotele by Zain
23CONTACT Ms. Rose Detho Director, Bank Supervision
Department Central Bank of Kenya P. O. Box
60000- 00200, Nairobi, Kenya. E-Mail
fin_at_centralbank.go.ke Tel 254 020 2863005 Fax
254 020 2217940 www.centralbank.go.ke