CENTRAL BANK OF KENYA
INTRODUCTORY REMARKS
PROF. NJUGUNA NDUNG’U
GOVERNOR
OFFICIAL OPENING OF THE AFRICA-MIDDLE EAST
MICROCREDIT SUMMIT
Kenyatta International Conference Centre, Nairobi
April 07, 2010

Your Excellency Hon. Mwai Kibaki, President and Commander-InChief of the Armed Forces of the Republic of Kenya;
Your Majesty Queen Sofia Margret Victoria Frederica of Spain;
Your Royal Highness Princess Maxima of the Netherlands;
Hon. Uhuru Kenyatta, Deputy Prime Minister and Minister for
Finance of the Republic of Kenya;
Prof. Muhammad Yunus, Nobel Peace Laureate and Managing
Director of Grameen Bank;
Mr. Sam Daley-Harris, Director Microcredit Summit Campaign;
Mrs. Lydia Koros, Chairperson, Association of Microfinance
Institutions;
Delegates, Distinguished Guests and Participants;
Ladies and Gentlemen:
The Central Bank of Kenya is happy to be part of this very important Summit.
So let me extend a warm welcome to all the delegates who have come to this
Summit. It is indeed an honour for Kenya to host the 14th Africa-Middle
East Microcredit Summit. The Summit will focus on strategies for ensuring
that the vast majority of the world’s poorest households can access markets for
affordable credit.
This Summit comes at an opportune time when the microfinance industry in
Kenya is experiencing rapid changes and legislative support following the
enactment of the Microfinance Act, 2006 which became operational in May
2008. The major challenge prior to the enactment of the Act had been lack of a
specific legal and regulatory framework as well as appropriate regulatory
oversight to guide the specific operations of deposit taking microfinance
business in Kenya.
I should also point out that it was the microfinance practitioners who helped to
initiate the process of developing Kenya’s microfinance legal and regulatory
framework through a consultative process.

Your Excellency; The MFI sector is now transforming to deposit taking
institutions. The Central Bank of Kenya has so far issued two licences to Faulu
Kenya DTM and Kenya Women Finance Trust DTM to conduct nationwide
deposit taking microfinance business. Further, a total of eight applications for
deposit taking microfinance licences have been received and are in different
stages of review and appraisal. The Central Bank has also approved 34
business names, which is the first step in the licensing process of DTMs.
While considerable progress has been made in licensing two DTMs, the Central
Bank is concerned at the slow uptake of this new avenue for Microfinance
Institutions to be mainstreamed into the financial sector. We are therefore
engaging the microfinance industry through its umbrella body the Association
of Microfinance Institutions (AMFI). This engagement aims at identifying the
bottlenecks for Microfinance Institutions some of which include:-
• Costs associated with roll out of branch networks and ICT infrastructure.
• Restructuring of shareholding of Microfinance Institutions to comply with
shareholding restrictions specified in the Microfinance Act. The Act restricts
shareholding by an individual or entity to 25% of the institution’s share
capital.
• MFIs are constituted in various forms including Non Governmental
Organisations and Trusts. Under the Act, transforming MFIs are required to
be incorporated as limited liability companies registered under the
Companies Act. The incorporation process takes considerable time and
expense and may deter some MFIs from applying for a DTM license.
• Anecdotal evidence also seems to suggest a “wait and see” approach by a
number of potential deposit taking MFIs as they assess the experience and
performance of the pioneer regulated DTMs. The Central Bank would like
to take upon itself the task of dislodging the “waiting option” from this
sector of the market.

The Central Bank of Kenya is currently drawing up proposals for review of the
microfinance legal and regulatory framework. I should stress that the Bank will
continue to consult with market players as this process moves forward. We
therefore, look forward to drawing valuable lessons from this Summit to
enhance Kenya’s microfinance legal and regulatory framework.
We stand ready to advice, cultivate partnership and only regulate when rules
are flouted.
With these few remarks, Ladies and Gentlemen, it is now my honour to
welcome the Deputy Prime Minister and Minister for Finance, Hon. Uhuru
Kenyatta to make some remarks to this Summit and to invite His Excellency
the President of the Republic of Kenya to officially open the Africa-Middle East
Microcredit Summit.
THANK YOU