CENTRAL BANK OF KENYA
Opening Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
3RD JOINT CMA/CBK/RBA/IRA BOARD MEMBERS
SEMINAR ON COLLABORATION AMONG DOMESTIC
FINANCIAL SECTOR REGULATORS
Diani Beach Hotel, Mombasa
Thursday, March 25, 2010

Joint CMA/CBK/RBA/IRA Seminar, March 25 2010
Board Members;
Colleagues;
Ladies and Gentlemen:
1. I am delighted and honoured to be here this evening at the commencement
of this important retreat.
2. To start with, let me extend my congratulations to the Board Members and
Management of Insurance Regulatory Authority (IRA) for hosting the 3rd
Joint Retreat for Board Members of Domestic Financial Sector Regulators.
3. Allow me to take this opportunity and touch briefly on the achievements of
CBK since we last met in Naivasha in July 2009.
4. The Monetary Policy Committee (MPC) for instance, has since September
2009 been implementing decisions aimed at signaling to the market the
need to expand credit to the private sector at affordable interest rates. In an
effort to make credit cost effective we have several policy initiatives:
• Agent Banking: Central Bank has been pursuing a policy of
broadening financial inclusion to the majority of Kenyans at lower
costs through innovations. To this end, The Finance Act, 2009
amended the Banking Act to enable banks to use third party agents.
This will enable them to leverage on additional cost effective
distribution channels to offer financial services. Similarly, the model
will enable banks to enhance delivery of financial services by use of
third parties that include some of the entities that are regulated by the
other domestic regulators.
• Credit Reference Bureau: To improve the living standards of the
majority of Kenyans, higher economic growth is required. Economic
growth cannot be achieved without enhanced private sector lending.
In this regard and to ensure access to credit at affordable rates, a
robust credit information mechanism is key. To this end, CBK
licensed the first ever Credit Reference Bureau which has already

Joint CMA/CBK/RBA/IRA Seminar, March 25 2010
commenced operations. It is our hope that this move will positively
alter the Kenyan banking sector landscape and facilitate the lowering
of the cost of credit. It is our belief that the experience from the
banking sector credit information sharing initiative will sooner rather
than later be expanded to include other lenders and utility service
providers to hasten the elimination of information asymmetry and
hence promote efficiency in the market.
• Cost of Collateral: Institutions have on several occasions cited the
cost of collateral as one of the major components contributing to high
interest rates. To gain an understanding of the underlying factors in
the collateral process, Central Bank, Kenya Bankers Association
(KBA) and Financial Sector Deepening (FSD) Kenya commissioned a
study aimed at reviewing the cost associated with collateral in the
credit granting process. The study brought forward some invaluable
insights on the intricacies surrounding the collateral process and
recommendations which when implemented will result in both cost
and time reduction.
• Provision of Long-Term Finance: A small committee to look into
development banking products was formed in February 2010 to
explore avenues through which development banking products, also
referred to as ‘Long Term Financing Products’, can be introduced
into the market. This was necessitated by several reasons, among
them; the commercial banks credit market structure that focuses more
on short term loan maturities; the moribund development financial
institutions; the opening opportunities with flow of international funds
that are intermediated by local institutions; and the need to develop
the bonds market. The basic question: how can we lengthen the
maturity profile of term loans to 5-10 years for SMEs?

Joint CMA/CBK/RBA/IRA Seminar, March 25 2010
• Interactions with Market Players: Since September 2009, the
MPC has been holding regular meetings with the Chief Executive
Officers of commercial banks to brief them on the background to its
decisions in the bi-monthly meetings. The meetings are part of a
wider strategy to enhance the transmission of monetary policy
decisions to the real sector through feedback, sensitization of the
market on the activities of the MPC, as well as engaging banks on the
need to lower the cost of credit in order to support economic growth.
5. On the market front, the Central Bank of Kenya, the Capital Markets
Authority and the Nairobi Stock Exchange undertook significant reforms in
the domestic bond market. These reforms included introduction of an
Automated Trading System aimed at enhancing the safety and efficiency in
the processing of secondary trading of government securities as well as
corporate bonds in the market. The move is also expected to improve
market liquidity thereby encouraging more investors to participate in the
bond market. This development fits in very well with the aspirations of the
capital markets development as envisaged in Vision 2030.
6. We have accomplished much since we last met, but a lot more remains to
be done to expand the depth and breadth of the financial sector. I am sure
that together as the financial sector regulators we shall seek the necessary
synergies to foster a safe, sound, efficient and inclusive financial system.
But more demands as the EAC Monetary Union shapes up will be coming
to us.
7. Being cognisant of the onerous task ahead of us, I shall not extend my
remarks any further. I look forward to the fruitful deliberations which I am
sure we shall have.
THANK YOU FOR YOUR ATTENTION