CENTRAL BANK OF KENYA
Remarks By
PROF. NJUGUNA NDUNG’U
GOVERNOR
Hotel Intercontinental, Nairobi
5th April, 2011
Mr. Gabriel Kivuti, Chairman, SMEP DTM Ltd;

Governor’s Speech at the Launch of SMEP DTM, April 5, 2011
Board of Directors, Management and Staff of SMEP DTM Ltd;
Representatives from National Council of Churches of Kenya here present;
Distinguished Guests;
Ladies and Gentlemen:
It gives me great pleasure to be here today to witness the launch of the Small and Micro
Enterprises Programme Deposit Taking Microfinance Limited (SMEP DTM Ltd). I join
you in celebrating this milestone that SMEP DTM Ltd has achieved by being the fourth
deposit taking microfinance institution to be licensed by the Central Bank of Kenya
under the Microfinance Act. It is important to note that the Central Bank has to date
licensed five deposit taking microfinance institutions; approved 26 business names; and
is processing six applications for licence which are at various stages of review. The
launch today provides us with an opportune moment to review the progress made since
the operationalisation of the Microfinance Act in 2008. More specifically, today’s
launch is a great achievement for SMEP DTM Ltd and provides an opportunity for the
institution to provide to its clientele more diverse financial products, including savings.
Ladies and Gentlemen: The SMEP DTM’s commitment to offering financial services
to the unbanked populace dates back to 1975 when it started as a small project of the
National Council of Churches of Kenya (NCCK) under the name Small Scale Business
Enterprise (SSBE). The project was aimed at providing the poor in a number of slum
areas with food and later small business grants. The project was then modified,
developed and evolved into a microcredit company that was registered as a company
limited by guarantee in 1999. Today, the institution boasts of 87,500 clients and an
outstanding loan balance of approximately Ksh.1.1 billion. The transformation into a
deposit-taking microfinance institution will enable SMEP DTM offer savings products
to its clients in addition to the loan products as well as enlarge its resource base due to
the build up of deposits base. This will undoubtedly position SMEP DTM Ltd to
enhance financial outreach towards becoming a major player in the microfinance subsector in the years ahead.

Governor’s Speech at the Launch of SMEP DTM, April 5, 2011
The microfinance sub-sector has achieved rapid growth. The sector has opened a
branch network of 44 branches which had mobilised 0.8 million deposit accounts
valued at Ksh.8.59 billion and advanced loans amounting to Ksh.16.6 billion as at 28th
February 2011. The licensing of SMEP DTM is therefore another milestone towards the
development of an all inclusive financial system in Kenya as envisaged by Kenya’s
economic blue print Vision 2030.
Ladies and Gentlemen: Over the past few years, the Central Bank of Kenya in
addition to licensing and regulating Deposit Taking Microfinance Institutions has
embraced policy reforms to build an adequate financial infrastructure to support the
development and deepening of the financial sector. Innovative models such as agent
banking and credit information sharing aimed at scaling up financial inclusion are some
recent examples. These initiatives are guided by CBK’s resolve as a regulator to advise,
form partnerships, develop and regulate the market with an aim of enhancing access
and reducing the cost of doing business in financial services.
I am happy to note that according to the FinAccess Report of 2009, access to financial
services improved with access to MFIs service doubling from 1.7% in 2006 to 3.4% in
2009, the picture has changed drastically by now. These improvements, however small,
are an indication that financial sector transformations and reforms being undertaken
based on the three pillars of stability, efficiency and access are translating into
increased financial inclusion and consequently spreading financial services to the poor.
Financial inclusion actors globally, like CBK, believe that poverty can be reduced
sustainably and consistently with access to finance. Access to finance allows the poor to
develop a savings base and enlarge their asset base that supports them to ride over
shocks and escape poverty.
Ladies and Gentlemen: The licensing of SMEP DTM progresses the financial
inclusion initiatives. The Central Bank is focused on addressing entry barriers for
unbanked and under-banked Kenyans to access financial services. It is our belief that
we will scale up financial inclusion through reducing barriers to entry and lowering
transaction costs through these initiatives. In turn, these initiatives continue to support
a rolling out of financial services and products as well as increasing the delivery
channels. It is expected that Microfinance Institutions will address any entry barriers by

Governor’s Speech at the Launch of SMEP DTM, April 5, 2011
focusing on areas that have not been well served by mainstream financial institutions by
offering demand-driven, affordable and convenient products.
Ladies and Gentlemen: I am happy to assure the microfinance industry that the
Central Bank will continue to initiate key reforms and structural changes that are
necessary in the sector’s legal, regulatory and supervisory frameworks. As you are
aware, key among these legislative changes was the specific amendment to the
Microfinance Act in January 2011 that introduced agency definition. The amendment
anchored agency business in the law and, the Central Bank is in the process of designing
guidelines to facilitate the contracting of agents to provide financial services on behalf
of deposit taking microfinance institutions. The move will undoubtedly allow
microfinance institutions to leverage on additional cost effective distribution channels
to offer financial services. This initiative is informed by the need to leapfrog access to
financial services to Kenya’s bankable who remain totally outside the orbit of these
services at affordable cost.
Ladies and Gentlemen: Another remarkable initiative in the pipeline is in the area of
credit information sharing (CIS) for Microfinance Institutions. As you are aware, the
CIS mechanism is already in place for commercial banks. The Central Bank is currently
working on modalities of incorporating the Deposit Taking Microfinance Institutions
into the CIS mechanism. Indeed, it is the Government’s intention to create a framework
whereby all financial institutions such as banks, Deposit-Taking Microfinance
Institutions, SACCO’s and other licensed credit providers will have access to and
exchange credit information across the board. It is hoped that the merging of credit
information from these various players will provide for a stronger credit market that
will improve the pool of credible borrowers, decrease defaults, reduce credit costs and
ultimately result in a stable financial sector.
Before I conclude, Ladies and Gentlemen, I would like to once again congratulate
SMEP DTM for its achievement as a Deposit Taking Microfinance Institution. On its
part, the Central Bank would like to assure SMEP and the industry and all the
stakeholders of its continued support in the development of the Microfinance Industry
and look forward to working collaboratively with the market to increase access to
financial services in the country. The Central Bank is out to create strong financial

Governor’s Speech at the Launch of SMEP DTM, April 5, 2011
institutions. Indeed, the New Constitution has provided us the wonderful space to
create strong institutions. Strong institutions both from the regulator and the regulated
will support the market, define appropriate incentives (and for a regulator, define
appropriate penalties as well) to encourage prudent behavior in the market. That is the
way we can develop and deepen the financial market.
With those few remarks, Ladies and Gentlemen, it is now my pleasure to declare
SMEP DTM Limited officially launched.
Thank you.