CENTRAL BANK OF KENYA
SPEECH
BY
PROF. NJUGUNA NDUNG’U
GOVERNOR
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Panafric Hotel, Nairobi
23rd November 2010

Mr. Stephen Mukweli, the Chairman of ASBEA;
Mr. Chris de Noose, Managing Director, World Savings Banks Institute
(WSBI);
Mr. Wilson Kinyua, Chairman, Kenya Post Office Savings Bank;
Mrs. Nyambura Koigi, Managing Director, Kenya Post Office Savings
Bank;
Chairpersons and Chief Executives of ASBEA Member Institutions here
present;
Distinguished Guests;
Ladies and Gentlemen:
It is my distinct pleasure to join ABSEA members at this important meeting. I am
grateful for the invitation to join you as you commence your deliberations. Allow
me to also welcome participants from our sister EAC states and those from beyond
the EAC. I urge you all to enjoy both the meeting and its content and above all, the
hospitality that Nairobi offers.
This meeting is indeed timely given the current global focus on financial inclusion.
One and half weeks ago, the G20 Leaders meeting in Seoul, Korea mainstreamed
financial inclusion in the G20 Agenda. The G20 adopted a financial inclusion
action plan; announced the establishment of the Global Partnership for Financial
Inclusion and an SME Finance Framework. These actions are expected to
significantly contribute to improving access to financial services and expanding
opportunities for poor households and small and medium enterprises. Last week, a
Global Savings Forum was convened in Seattle, USA by the Bill and Melinda
Gates Foundation. The Forum, at which Savings Banks Institutions were well
represented, focused on building a new financial infrastructure to bring financial
services to the poor.
Ladies and Gentlemen: One of the factors that sustains and drives poverty is
access to markets. Financial market access is important for the poor to support
savings, build up and accumulate assets. The poor need safe havens for their
savings that they can use to build assets, smoothen their consumption and protect
them from periodic shocks. Closer home in the EAC, a significant proportion of

the population, over 50% in most of the countries, lacks access to any form of
formal or informal financial services. We therefore face a considerable but
surmountable task of pushing forward the financial inclusion frontiers. Savings
Banks certainly have a critical role to play in this regard given their long history in
the region. Indeed, yesterday saw the centenary celebrations of the Kenya Post
Office Savings Bank. For most East Africans, the Postal Banks were their first
introduction to the world of financial services through the iconic “passbook”. Over
the years, the passbook has been phased out and replaced by “paperless”
transactions.
But against all odds, the EAC countries have set ambitious targets to move to new
development frontiers. For instance, Kenya in its Vision 2030 seeks to raise the
Savings to GDP ratio from 14 to 32%. To achieve this target, barriers to savings
need to be identified and addressed. These barriers include costs of operating
savings accounts and even distance to access financial services points. In this
regard, the Central Bank of Kenya continues to promote innovation, adoption of
new models and creation of new institutions to promote financial inclusion. But
above all, we need to reduce costs of doing business for financial institutions to
provide these services and the incentives they carry.
Ladies and Gentlemen: Innovation is a critical component of the Central Bank’s
reform agenda. The Bank has promoted the uptake of mobile financial services in
Kenya that have led to rapid and massive up-scaling of financial services in Kenya.
Well over 15 million Kenyans now enjoy mobile financial services that picked up in
2007 with the introduction of mobile money transfers. There is now a growing
integration of the platforms of telecommunication companies and banks. This year
has seen the launch of integrated and co-branded telecommunication and banking
savings products that have already recruited over 700,000 customers and
mobilized over 5 million US Dollars in deposits. In the category of micro accounts
in Kenya, we have seen in the last three years a great expansion; from about 4

million accounts to 11.25 million accounts currently. It means we are slowly
succeeding in our efforts on financial inclusion.
With regard to adoption of new models of financial inclusion, the Central Bank
rolled out the Agent Banking model for commercial banks in May of this year. This
model will enable banks to expand their outreach cost effectively through use of
third parties. We have so far approved over 8,000 agents. This model provides
opportunities for banks to also partner with Savings Banks who traditionally have
had extensive outreach particularly through the postal system.
Ladies and Gentlemen: To promote financial reach and access, particularly to
rural and peri-urban areas, the Central Bank has since 2009 licensed three Deposit
Taking Microfinance Institutions. Microfinance institutions target low income
segments of the population and operate close to where these market niches are
located. The three institutions have in their short period of existence already
mobilized over 90 million US Dollars in deposits.
The most recent institutional reform carried out by CBK was the introduction of
Credit Information Sharing in July of this year. This is intended to facilitate sharing
of credit information, initially by commercial banks and later by other financial and
non financial institutions. Credit Information Sharing is expected to facilitate access
to affordable credit through the building of information capital. This is particularly
pertinent to small and medium size enterprises and individuals in the informal
sector who lack physical collateral to access credit. We believe even in the EAC
region Credit Reference Bureaus will facilitate change and adoption of new
collateral technologies.
Ladies and Gentlemen, as I draw to a close, I challenge ABSEA members to rise
to the moment and reclaim their pride of place in the financial ecosystem. I note
your efforts to embrace technology, but more must be done if you are to stay
relevant in a fast evolving financial world. You must seek to grow partnerships with
other financial institutions and emerging market players like telecommunication

companies to survive in the new financial ecosystem. I am confident that Savings
Banks can leverage on their long standing history in the EAC and their extensive
delivery channel networks to play their role in promoting financial inclusion for the
benefit of the East African citizenry.
Ladies and Gentlemen: With these remarks, it is now my pleasure and honour
to declare the 8th Association of Savings Banks of East Africa Meeting officially
open and wish you fruitful deliberations.
Thank you.