CENTRAL BANK OF KENYA
IMPACT INVESTMENT FORUM: AFRICAN RURAL AND AGRICULTURAL CREDIT
ASSOCIATION (AFRACA) 4OTH ANNIVERSARY
Kenya School of Monetary Studies, Nairobi
Keynote Address by Dr. Patrick Njoroge
Governor of the Central Bank of Kenya
November 21, 2017
As Prepared for Delivery
Ladies and Gentlemen,
Good morning! Forty years is a milestone. Some argue that it is when middle age
begins – you look back fondly at the things of your youth, but also look forward to
using your experience and wisdom to achieve long-held goals. I am thus glad that you
welcomed me to your birthday celebrations, and allowed me to share in such a
significant moment.
In 1977 the African Rural and Agricultural Credit Association (AFRACA) was created
in response to a request made to the United Nations Food and Agriculture Organisation
(FAO), during the 1975 World Food Conference. This request, was that FAO assist
developing member countries establish Regional Agricultural Credit Associations
(RACAs). The purpose of this RACAs was to promote cooperation and facilitate
mutual exchange of information and expertise in the field of rural finance.
Some background research into AFRACA unearths a number of gems that indicate that
you have been at the forefront in driving the Rural and Agricultural Finance Agenda in
Africa. You have had, and continue to have, a strong desire to turn regional diversity
into a powerful driving force and catalyst for exchange, capacity building and
cooperation to promote rural finance. I am deeply honoured to be part of this campaign
to revolutionize finance for African Agriculture. And we have something in common,
for we at the Central Bank of Kenya, share a similar vision, “of a rural Africa where
everyone has access to sustainable financial services that support economic
development, while maintaining social and environmental balance”. That said, the task
is enormous—nearly two-thirds of Africa’s population depend on agriculture for their
livelihood and the sector contributes over 40 percent of the continent’s GDP.

I am very pleased today to be part of this first Impact Investment Forum
commemorating AFRACA’s 40th anniversary. The theme of the conference “unlocking
private sector capital to scale up impact investments in African agriculture” promises
to be a story of shifting the reality of agricultural finance as we know it today. Africa
has in the past relied largely on Official Development Assistance and domestic public
funding to address socio-economic challenges, many of which have few market-based
solutions. We all know that these traditional funding flows have been on the decline
over the last decade; and this is at a time when huge resources are required for
implementation of the Sustainable Development Goals (SDGs) as well as the African
Union Commission’s 2063 agenda and individual national goals. But as these
traditional public funding decline, private financial flows have grown —from 63
percent of total external resources in 2002-06 to over 70 percent in 2010-14. For the
African governments to achieve the noble aspirations enshrined in the SDGs, and the
AU agenda into realities on the ground, they will need to adopt innovative ways to
leverage on the rising private investment to fill the large projected financing gap.
This Forum’s focus is on Impact Investment in the context of the agricultural sector;
and this is a sector whose importance in our economies cannot be over-emphasized.
Apart from its GDP contribution, critical is the high concentration of the poor and
those who are financially excluded in rural areas. Many of us engage in agriculture
even as we live our lives in the city. Most of us, let’s be honest, plan to retire to a life
of agriculture, as many have done before us. The efficiency of agriculture is thus of
vital, and personal, importance to us. Of more importance to central banks is managing
the volatility of food prices. Concerns about price volatility have a huge effect on
business decisions and investments. Modernizing agriculture is critical to managing
this risk and finance is at the centre.
Despite the great strides made by the African banking sector in digital financial
services, the typical offer for financial products and services for the actors in the
agricultural sector has been limited. Most agricultural investments, and impact
enterprises, in particular, find it challenging to obtain capital from the commercial
banking sector due to a number of constraints.

Although Impact Investments are identified today as constituting one of the more
promising approaches to the funding of inclusive and green businesses, the field of
impact investing is also relatively young. As such, many undertakings have not had
time to mature and demonstrate results. There is also a lack of awareness and
understanding among banking practitioners on the peculiarities of impact businesses.
So, what strides has Kenya made towards developing market-based solutions to
addressing environmental and social challenges? The Kenya Bankers Association
(KBA) and the Nairobi Securities Exchange (NSE) partnered with market players to
fast-track the Kenya Green Bonds programme. Kenya’s green finance initiative was
strengthened during the United Nations Conference on Trade and Development
(UNCTAD) that took place in Nairobi in July 2016. To progress the initiative, KBANSE organized a banking industry engagement where the Climate Bonds Initiative
(CBI) shared global experiences and a Green Bond Working Group (GBWG)
comprising of market players was formed. The Kenya Green Bond guidelines are
being finalized in line with international best practice.
These efforts towards actualising the green finance market in Kenya come in the
background of progress in development of the domestic debt market, which I believe is
important to catapult the green bond market in the country. The measures we have
undertaken are aimed at lengthening the maturity of the debt, diversifying the investor
base and developing a vibrant secondary market to achieve a reliable benchmark yield
curve. Developing the capital markets has been a dynamic process that has involved
regulatory reform, strengthening financial sector regulators and improvements to the
market infrastructure including payment and settlement systems.
Kenya is ripe for green investments. The stable macroeconomic and market
environment coupled with economic diversification and stability of the currency are
just but a few strengths that demonstrate our capacity. Capital market investors can
leverage on the digital transformation story and success in financial inclusion to enter
the market.

As I conclude, ladies and gentlemen, I would like to thank AFRACA and the WorldWide Fund for Nature (WWF) who have convened this first Impact Investment Forum
targeting financial institutions in Africa. I am glad to learn that one of the main
objectives of the conference is to leverage on the knowledge of the great minds
gathered here to create more awareness and understanding on the concept, with the
overall goal of shifting Impact Investment Funds to agriculture.
We are very keen to encourage practices that promote inclusive and sustainable
businesses. This discussion is supportive of this. I wish you a very fruitful Conference
and look forward to the action points for moving this topic forward as AFRACA
marches on.
I thank you for your attention, and wish you a happy birthday.