CENTRAL BANK OF KENYA
Keynote Speech by
PROF. NJUGUNA NDUNG’U, CBS
GOVERNOR
GG2200 IINNCCLLUUSSIIVVEE BBUUSSIINNEESSSS WWOORRKKSSHHOOPP IINN AAFFRRIICCAA
Hilton Hotel, Nairobi
30th October, 2013

Representatives of the German and Saudi Arabian Governments
who are the Co-Facilitators;
The G20 Challenge Partners;
Distinguished Guests;
Ladies and Gentlemen:
It is my honour and pleasure to join you this morning at this very
important Workshop where we reflect on Inclusive Business in Africa.
Before making my remarks, let me express my gratitude to the G20
Challenge Partners, the Conveners of this workshop, for the invitation
and choice of Nairobi as the venue for the Workshop. May I also take
this early opportunity to welcome our distinguished guests from all
over the world to this beautiful land of Kenya, which enjoys a
diversity of stunning and captivating landscape, wildlife and culture.
I kindly urge you to take part of your time during your stay to enjoy
this diversity and to always come back to enjoy it.
Ladies and Gentlemen: The timing of this workshop could not have
come at a better time for our continent. Africa is composed of
developing economies with untapped wealth, a youthful population
and low volume of trade with itself due to infrastructure gaps. The
binding constraints that the infrastructure gaps have created has not
turned around the rich potential that exists in Africa. But most of its
economies are developing into a class of frontier and emerging
economies.

The G20 Challenge on Inclusive Business Innovation is a global entity
that promotes employment through innovative, scalable and
commercially viable ways of working with low-income people in
developing countries. This development should be appreciated in this
region.
Ladies and Gentlemen: Building inclusive businesses holds the key to
unlocking Africa’s potential. This will integrate the poor into the
businesses value chains in various capacities whether as producers,
distributors, suppliers or employees. When the challenges of scaling
and replicating the businesses are overcome, profitable and sustainable
ways of engaging with the low-income segments of the population
create sustainable livelihoods and contribute to sustainable poverty
reduction. Inclusive business models, as is said, aim to “do well by
doing good” through creation of more stable jobs that provide
sustainable income flows, build technical skills and local capacity at
the bottom of the pyramid. If we achieve this we will not only have
created inclusive businesses, but also inclusive growth and shared
prosperity. This is the dream for Africa on shared growth that will
support endogenous growth and strong institutions.
Ladies and Gentlemen: Kenya’s Vision 2030 development plan and the
new Constitution aim to promote shared growth for the youthful
population. The Government recognizes that her youthful population
is a resource and has therefore been implementing various targeted
interventions to harness this resource. These initiatives include:

Basic primary education – free and mandatory: To boost school
enrollment and literacy levels and continue to lay proper ground
for skills and local capacity development for inclusive businesses.
Targeted interventions: Funds like the Women Enterprise Fund
and Youth Enterprise Fund to enable the youth and women
engage in profitable business ventures.
Policy on Procurement: The Government has reserved 30% of
public procurement for small enterprises owned by the youth,
women and the disadvantaged to include them as suppliers of
businesses.
Development and promotion of financial inclusion and use of
mobile phones and Agency banking has created a market and
reduced costs of doing business. This has created a favourable
environment and enhanced access in the financial sector as well
as creating opportunities for the youth who are more versatile
with technology.
Ladies and gentlemen: Let me share with you some of the initiatives we
have undertaken to tap the potential of the bottom pyramid by
developing a market and creating market access:
Innovative delivery channels for financial products beyond
traditional brick and mortar models, e.g. mobile-phone financial
services (MFS). The number of mobile phone money agents has
increased from 307 when M-Pesa was launched in March 2007 to
a network of small business units of more than 50,000. These

businesses have become more inclusive and created thousands of
stable formal sector jobs that pay regular incomes to Kenyans.
Agency Banking Model, which has turned non-bank outlets into
financial service providers, using technology to enable third parties
to offer limited financial services. It is a low-cost delivery channel
that reduces both the fixed costs of setting up and maintaining
bank branches and the high variable costs of small transactions
and enables financial institutions to reach the unbanked and
underserved segments of the population. Since its inception in 2010,
nearly 20,000 agents have been appointed. Not only has financial
inclusion been expanded through this model to capture the
excluded, most of who are poor, but new and sustainable formal
sector jobs created paying sustainable incomes making banking
business more inclusive. A principal Agent Model gives the regulator
less challenges and encourages growth.
Credit Reference Bureaus have been introduced to enhance access to
credit based on financial identity through building information
capital, which has benefited many low-income households and
enterprises that lack traditional tangible collateral. Demand for
tangible assets to secure loans has for many years locked out the
bottom pyramid from the more affordable credit market. Opening up
this market to them enables them join the formal sector and engage
in more inclusive businesses that generate better and sustainable
incomes and benefit from inclusive growth.

Expansion of bank branches and MFIs to reach the lower pyramid
due to lower barriers to entry, enhanced competition and declining
costs of maintaining accounts. The numbers of branches have
consequently increased exponentially from 534 in 2005 to 1272 in
2012. The expansion in bank branches is not only enhancing
financial inclusion, but also funding more inclusive businesses.
Ladies and gentlemen: the innovation that spurred most of these
developments has ensured increased financial inclusion, which is a
sure way of tapping potential in the lower pyramid into inclusive
businesses through creation of stable formal sector employment
opportunities that pay sustainable incomes, reduce cost of operations,
enhance inclusive growth and reduce poverty sustainably. The Bank
will therefore continue to work with market players and stakeholders,
including the G20 Challenge Partners to enhance financial inclusion
and build inclusive businesses that employ the poor.
Thank you very much for your kind attention.