CENTRAL BANK OF KENYA
“
TRANSFORMATION OF BANKS IN KENYA”
Address by
PROF. NJUGUNA NDUNG’U, CBS
GOVERNOR
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Hotel Tribe, Nairobi
April 28th, 2011
Distinguished Guests;

Governor’s Address the 11th Bank Human Resources Conference, 2011 – April 28, 2011
The Chief Executive Officer, Indian Institute of Banking and
Finance;
Members of the Institute;
All Protocols Observed;
Ladies and Gentlemen:
I am delighted and honoured to have been invited to preside over the opening
ceremony of this Conference organized by the Indian Institute of Banking and
Finance. At the onset, kindly allow me to extend a warm welcome to all
participants attending this important Conference.
The theme: ‘Managing Transformation for achieving Growth’ is
indeed compelling. Growth is driven by fundamental factors, but key among
them is the transformation of markets and institutions to guard the market and
define appropriate incentives. One such market is the financial market guided
and regulated by several institutions. Today, I will share my thoughts on how
the Central Bank has transformed the banking sub-sector as a means of
transforming and deepening the financial sector in line with Kenya’s
development goals. Let me parade at least seven of them:
1) Rollout of branch networks to provide financial services to
remote and lower income areas:
The expansion of branch networks in the financial services industry
has registered significant growth over the last 4 years and is well
distributed across all regions in both rural and urban centres.
Currently, we have 1064 branches from 740 in 2007.
2) Allowing mobile phone financial services to provide a new
technological platform:
This entails approval for banks to leverage on mobile phone
technology to present convenience and lower costs to their customers
without compromising quality of service. Through mobile phone
banking, customers are now able to perform their transactions
“anytime, anywhere’’. Mobile phone money transfer has evolved
from the initial concept of transferring money from one individual to

Governor’s Address the 11th Bank Human Resources Conference, 2011 – April 28, 2011
another to include other functions such as payment of utility bills,
disbursement and repayment of loans, payment of salaries and
deposit mobilization.
3) Introduction of Agent Banking mechanism:
This is the “banking beyond branches’’ model where commercial
banks are allowed to engage third parties to provide certain banking
services to increase outreach of the banks to the vast under-banked
and unbanked Kenyan populace. In a nutshell, Agency Banking
enables banks to leverage on additional cost effective distribution
channels to offer financial services. So far 5552 Agents have been
approved and are providing financial services.
4) Credit Reference Bureaus (CRBs):
Through licensing of Credit Reference Bureaus, the CBK has enabled
credit providers to collect, collate, analyse and disseminate credit
information. Credit information sharing provides an opportunity for
individuals and businesses to rely on their credit history (information
capital) to support the process of collateralization and even change
the collateral technology in the country.
Individuals will also be able to use their positive credit history to
negotiate for better terms and conditions from their banks. On the
other hand, banks will benefit from the mechanism since it will
address the problem of information asymmetry and by extension
the problem of non-performing loans which has in the past
threatened the stability of the banking sector. The traditional
challenges of the moral hazard and adverse selection can hinder
financial sector growth. As a result, credit appraisal by bank staff will
greatly benefit from credit information sharing. What staff need to do
is appreciate how the mechanism operates, its benefits and embrace
it as a tool to enhance relationship with their clients.
5) Lowering the cost of doing business through Currency
Centres:

Governor’s Address the 11th Bank Human Resources Conference, 2011 – April 28, 2011
CBK believes that through cost reduction, banks will be able to
extend credit to the productive sectors of the economy at reasonably
cheaper costs. Consequently, CBK has in partnership with the Kenya
Bankers Association, established currency centers in towns outside
the Central Bank branch networks.
6) Licensing Deposit Taking Microfinance Institutions
(DTMs): The Central Bank is also actively pursuing a policy of
licensing DTMs as a means of reaching out to all segments of the
market. DTMs are free to choose to be Nationwide or Community
Based.
7) Capacity Building through HR training and development:
CBK assists industry players empower their employees to embrace
strategies aimed at making the banking sector safe, efficient, effective
and all inclusive. The strategic initiatives include:
a) Playing a leading role in the Human Resources Subcommittee of the Monetary Affairs Committee of East
African Central Banks – Through this forum partner central
banks are addressing emerging HR issues by revising the
frameworks governing HR policies and strategies such as
recruitment, retention policy and succession plans among others,
in line with international best practice.
b) Facilitating capacity building through the Kenya School of
Monetary Studies (KSMS): - The KSMS was established to
provide capacity building programmes for the financial sector in
Kenya and the Region and I am happy to note that the School has
offered relevant programmes in Banking and IT at Certificate and
Diploma levels for over 10 years. We believe that by partnering
with the Indian Institute of Banking and Finance, new programs
and new initiatives can be developed in future.
c) Advanced Academic and Management Development
Programs: - The KSMS has responded to new demand-driven

Governor’s Address the 11th Bank Human Resources Conference, 2011 – April 28, 2011
capacity needs of the financial services sector by introducing
advanced academic and management development courses,
including the following programs :
(i) A Masters degree in Banking and Finance through a grant
from the African Capacity Building Foundation (ACBF);
(ii) Postgraduate Diploma in Financial Management in
collaboration with Moi University targeting the Eastern
and Southern Africa Region;
(iii) Academic programmes through a collaborative
agreement with the Jomo Kenyatta University of
Agriculture and Technology, targeting the financial
services and other related disciplines; and lastly,
(iv) A Multilingual Diploma in Business Sciences and Islamic
Financial Services approved by the Ministry of Higher
Education.
Ladies and Gentlemen: Moving forward, CBK and the industry players are
in the process of developing a national strategy for financial education and
consumer protection in Kenya as another avenue of taking financial inclusion to
the next frontier. The starting point for financial education is at the level of
individual players – the agents for disseminating the knowledge.
I would like to commend the Indian Institute of Banking and Finance for
organizing annual conferences like this which present an opportunity for banks
to not only share experiences but to also exchange ideas on innovations and
other emerging issues that require bank staff to prepare themselves to handle.
This is an important platform to also inform the regulators the emerging
challenges and opportunities not only for growth but further improvements on
capacity for growth.
I urge other similar institutes such as the Kenya Institute of Bankers to embrace
the idea as an avenue to bring together HR practitioners and policy makers in
the banking sector to share ideas on innovations that require proactive HR

Governor’s Address the 11th Bank Human Resources Conference, 2011 – April 28, 2011
training and development. This is an important avenue to transform
institutions and create capacity for growth. Successful banks are those that
proactively prepare their staff to cope with the ever evolving trends
in the global financial scene.
With these few remarks, let me wish all participants of the 11th Bank Human
Resources Conference, fruitful deliberations and a joyous stay in Kenya.
Thank you.