2016 AFRICAN RURAL AND AGRICULTURAL CREDIT ASSOCIATION
(AFRACA) INTERNATIONAL EXPOSURE VISIT TO KENYA ON MOBILE
AND AGENCY BANKING
Opening Remarks by Dr. Patrick Njoroge
Governor of the Central Bank of Kenya
February 22, 2016
Kenya School of Monetary Studies, Nairobi
As Prepared for Delivery
Good Morning!
It is my pleasure to officially open this knowledge exchange programme on Mobile
Banking and Agency Banking in Kenya. Let me extend a warm welcome to you all to
Kenya and in particular to the Kenya School of Monetary Studies (KSMS).
At the outset, I would like to commend AFRACA for its continued efforts towards
improving the agricultural and rural financing environment in Africa. Forums such as
these allow AFRACA members not only to learn from each other’s experiences but also
to challenge each other on possible policy solutions to increase agricultural and rural
financing.
As you are aware, financial inclusion has recently assumed a central place in
complementing financial regulators’ mandates. In this regard, AFRACA’s vision of
achieving a rural Africa where people have access to sustainable financial services for
economic development is very relevant to the financial inclusion objectives of
AFRACA’s members, and more generally, achieving the global goal of universal
financial access by 2020.
The task before you is immense but will be rewarding. Four-fifths of the world's poor
live in rural areas. In Africa, over 600 million people live in rural areas, and more than
70 percent of the continent’s poor depend on agriculture for food and livelihood. Despite
the high poverty levels in the continent, it is noteworthy that Africa has nearly half of the
world’s unused agricultural land. Even with this massive unrealized potential, agriculture
and agribusiness still fuel the livelihoods of 70 percent of the population of Africa and
contribute over 40 percent of the continent’s GDP.

However, it is surprising that only about 10 percent of Africa’s commercial bank
lending goes to agriculture and agro-industries. More surprisingly, less than 5 percent, on
average, of national budgets are allocated to the agricultural sector, a fraction of which
makes its way into rural communities. It is also estimated that agricultural output in
Africa could more than triple from USD280 billion to USD880 billion by 2030 if farmers
were able to access the finance they need to expand both the quality and quantity of their
produce.
Concerted efforts to agricultural and rural development must play a central role in
fighting poverty. To this end, a multifaceted approach must be employed to capture the
synergies between technologies (seeds, fertilizer, livestock breeds), institutional services
(financial services and extension), human capital development (education, health), and
infrastructure development (markets). In this regard, the provision of, and access to,
financial services and products plays a critical role in expanding the income earning
opportunities for rural populaces in order to promote development.
It is evident that Africa’s rural populations are largely facing financial exclusion, a
phenomenon that limits their ability to increase their own wealth and to contribute to the
growth of the African agricultural sector as a whole. It is also clear that financial
inclusion for rural areas and agriculture is critical to achieving sustainable and inclusive
growth in Africa. In this regard, addressing the funding gap for rural areas and
agriculture in Africa requires us to overcome barriers faced by traditional financial
models such as affordability, availability, and accessibility which will tremendously
reduce the rate of financial exclusion. That is why innovative channels for development
like mobile financial services (MFS) and agency banking are important to us.
The potential of mobile phone technology to bridge the financial access barriers of
distance and cost seems unparalleled in Africa. Africa over the last few years
experienced the highest mobile phone penetration rates—with an average penetration
rate of 76 percent in 2012. Mobile phones have gained widespread use, providing an
effective and convenient communication channel. The rapid adoption of this technology
has made Africa the second largest mobile phone market in the world and the rapid
growth is expected to continue.

In Kenya, financial inclusion is entrenched in our development blueprint, Vision 2030,
and is enshrined in the mandate of the Central Bank of Kenya (CBK). In fact the CBK
has played a critical role in propelling financial inclusion through mobile phone financial
services. Specifically, CBK supported the rollout of innovative products driven by
mobile phone technological platforms using a test-and-learn approach that allowed
innovations to take place while ensuring that the necessary safeguards are in place to
mitigate the potential risks. This approach has allowed CBK to engage with both
financial service providers and telecommunication providers as they seek to introduce in
the market innovative solutions or products. This approach has yielded the following
achievements:
a) Increase in mobile phone participants in the financial system. Mobile financial
services has propelled the low-income and rural segments of the population who had
limited formal financial services access into the formal financial system. The
fraction of population that is financially excluded has declined from 38 percent in
2006 to 25 percent in 2013. More significantly, 2 in 3 Kenyans have access to formal
financial services.
b) Introduction of Agency Banking by both commercial banks and microfinance
banks. Agency banking was introduced with the aim of increasing the level of
formal financial inclusion in un-served and underserved areas. This has led to over
36,000 approved bank agents facilitating over 221.6 million transactions valued at
over USD11.7 billion as at December 2015, mainly leveraging on mobile phone
technology.
c) Evolution of the mobile phone money transfer system to include other services.
This includes: bill payments, savings/deposit mobilization, and credit application, all
operated on the same platform with lower costs to the public.
d) Adoption of mobile phone technology by other sub-sectors. The attractive
possibility of providing customers with more efficient services in a convenient
manner has lead other financial institutions (e.g., pensions, insurance, and the capital
markets) to adopt this technology. It is also clear that the information base relating to
mobile phones would be of keen interest to credit reference bureaus and, the credit
market more generally.

Finally, it is important to note that the development of the financial sector and,
particularly the enhancement of financial inclusion, cannot be realized without
collaborative efforts of both public and private sector players. AFRACA, has, and
continues to play a crucial role in providing international events such as this one bringing
together public and private sector players to catalyse interactions on how to leverage the
successes and identify the pitfalls.
Having seen the diversity of activities in the agenda of your visit, I note that you will not
only gain extensive knowledge on how Kenya has utilized both Mobile Financial
Services and Agency Banking to enhance financial inclusion, but you will also be able to
get first-hand experience, from your field visits, on how Kenya is promoting rural and
agricultural finance. It is my expectation that this programme shall provide participants
with key lessons on how to achieve a rural Africa where people have access to affordable
financial services for economic development and thereby allow them to escape poverty.
Ladies and Gentlemen, it is now my pleasure and honour to declare the 2016 AFRACA
Technical Cooperation among Countries Programme on Mobile Banking and Agency
Banking officially open. I wish you all fruitful deliberations.
Thank you.