CENTRAL BANK OF KENYA
Keynote Address
by
PROF. NJUGUNA NDUNG’U
GOVERNOR
TTOOWWAARRDDSS VVIISSIIOONN 22003300 GGOOAALLSS

Serena Hotel, Nairobi
Thursday, 20th November 2014

Mr. Joseph Onsando, Chief Executive Officer, AON Sub-Saharan
Africa;
Directors and Management of AON Kenya Insurance Brokers
Limited here present;
Distinguished Participants;
Ladies and Gentlemen;
It gives me great pleasure to be part of this important seminar
themed “Financial Sector Contribution Towards Vision 2030
Goals”. Before I make my remarks, let me take this opportunity to
thank AON Kenya Insurance Brokers Limited, for organising this
important seminar to highlight the achievements of the financial
sector under Kenya’s long term development blueprint, Vision
2030. This seminar provides an excellent platform to examine
our successes, challenges and map the way forward to increase
the financial sector’s contribution to Kenya’s economic
development.
As you are aware, the financial sector, the world over, plays a
vital role in the socio-economic development process of a nation.
In recent years, there has been increasing evidence showing that
financial sector development is important not only for economic
growth and development, but also for poverty reduction. Inclusive
finance is good for sustainable inclusive growth. The financial
sector intermediates between savers and borrowers by providing a
wide range of financial services essential for productive economic

activities. The financial sector also offers a wide range of products
for risk mitigation, whose absence would impede
entrepreneurship. The financial sector therefore allows for
mobilization and allocation of financial resources for investment
and wealth creation. The development of a well-diversified and
accessible financial sector is imperative to meet the varied
financial needs within the economy.
Ladies and Gentlemen: The anchor Vision 2030 is to transform
Kenya into an industrialized middle-income country that
provides high quality of life to its citizenry. Vision 2030 defines
the financial sector as vibrant and globally competitive that will
promote high level of savings to finance Kenya’s investment needs.
The key objectives for the financial sector in Vision 2030 are to
enhance financial stability, efficient transformation and
accessibility to all Kenyans.
Ladies and Gentlemen: The long-term policy objectives of the
financial sector in Vision 2030 include:-
i. Improved access and deepening of financial services and
products for a much larger number of Kenyan households
and small businesses;
ii. Mobilising higher levels of savings to support higher
investment rates;
iii. Greater efficiency in the delivery of financial services to
ensure that the cost of mobilising resources and allocating

these resources becomes increasingly affordable and that the
range and quality of services better caters to the needs of
both savers and investors;
iv. Enhanced stability in the system to ensure that all banks
and other deposit-taking financial institutions can safely
handle the public’s savings and ensure that the chances of a
financial crisis – with all the costs that this would imply –
are kept to a minimum; and
v. To make Kenya one of the ranked financial centres in
“emerging markets” by 2030.
Ladies and Gentlemen: In the first five years of Vision 2030,
2008 – 2013, the major reforms and initiatives undertaken in
the financial sector to enhance financial stability, efficiency and
access include:-
Licensing of deposit taking microfinance banks;
Introduction of agency banking to increase reach with least
cost;
Automation of bond trading and lengthening the maturity of
Treasury bonds to 30 years;
Development of a capital markets master plan to chart the
development of Kenya’s securities markets for 10 years;
Introduction of credit information sharing and licensing of
two credit reference bureaus;
Introduction of bancassurance products;

Enactment of the Proceeds of Crime and Anti-Money
Laundering Act in 2009 and the establishment of the AntiMoney Laundering Board in June 2011;
The development of a regulatory framework for deposit taking
savings and credit cooperatives (SACCOs); and
Strengthened oversight of the insurance sector following the
adoption of risk based supervision by the Insurance
Regulatory Authority (IRA).
Ladies and Gentlemen: The financial sector has started to register
significant achievements out of the outlined reforms and
initiatives among others. Allow me to briefly mention some of
these achievements.
The contribution of the financial services sector to Kenya’s
economic growth has been on an upward trend from 3.7% of GDP
in 2009 to 9.2% of GDP in 2013. Over the same period, the sector
grew faster than the economy. The financial sector grew by 9.3%
in 2013 as compared to the economy which grew by 5.7%. This
was an improvement from 4.9% growth by the sector in 2008
compared to the GDP growth of 0.2%. As a result, the financial
services sector is one of the main drivers of Kenya’s economic
growth.
The national financial access surveys conducted in 2006, 2009
and 2013 revealed that the level of adult Kenyans accessing

formal financial services has increased tremendously. This is
from 27.4% in 2006 to 41.3% in 2009 and 66.7% in 2013. It is
also worth noting that the level of Kenyans who access informal
financial services has declined from 35.2% in 2006 to 26.8% in
2009 and to 7.8% in 2013. The increase in the level of financial
access in Kenya is testimony to the success of the reforms and
initiatives implemented by the players in the financial sector.
Ladies and Gentlemen: In 2013, Geospatial Surveys to map
financial access points were undertaken in Kenya, Nigeria,
Uganda and Tanzania. The survey results indicate that Kenya is
ahead of the other countries in terms of financial access.
76.7% of the Kenyan population is now within 5 kilometres of
a financial service touch point as compared to 47.3%, 42.7%
and 35.1% in Nigeria, Uganda and Tanzania, respectively.
Kenya has 65,353 financial service touch points as compared
to 21,206; 20,229 and 17,212 financial touch points in
Uganda, Tanzania and Nigeria respectively.
Kenya has 161.9 financial access touch points serving
100,000 people as compared to 63.1, 48.9 and 11.4 financial
access touch points serving 100,000 people in Uganda,
Tanzania and Nigeria, respectively.
Ladies and Gentlemen: The automation of bond trading and
lengthening of maturity profiles has enabled the country to

mobilise substantial resources for the desired infrastructure
projects. Several infrastructure bonds, which have all recorded
unprecedented oversubscription levels, have demonstrated the
Kenya financial sector’s capacity to finance longer term public
investment projects, but more importantly, has deepened the
financial sector.
Kenya also successfully issued a debut Sovereign Bond in 2014 to
finance infrastructure projects, ease pressure on domestic interest
rates and establish a benchmark for Kenyan issuers to tap into
the international capital markets. The overwhelming
oversubscription recorded in the Sovereign Bond demonstrates the
confidence that foreign investors have on Kenya’s economy. The
10-year and 5-year tranches of the Sovereign Bond were issued
at very competitive interest rates.
Kenya’s aspiration of becoming an international financial centre
is on course. Following Cabinet approval of a broad policy
proposal for establishment of the Nairobi International Financial
Centre in 2013, H.E. the President through an Executive Order
set up the Nairobi International Financial Centre Authority
(NIFCA). NIFCA will drive the process of establishing Nairobi
International Financial Centre (NIFC). Consequently, an interim
Secretariat for Nairobi International Financial Centre Authority
(NIFCA) was established at the National Treasury. The Secretariat

is currently engaging public and private sector players to inform
the development of a comprehensive legal and regulatory
framework for NIFC. This is one of the pillars making Kenya the
Financial Hub of Eastern Africa.
These successes notwithstanding, there remain challenges for us to
address. First, 25% of adult Kenyans are still excluded from
financial services. As a result, we need to re-energise our efforts
to address any remaining barriers for the majority of Kenyans to
access financial services. The main barriers are the cost of
financial services and the use and quality of financial services.
The use and quality challenges pinpoint the need for enhanced
consumer protection, financial education and above all
information symmetry across the divide.
Ladies and Gentlemen: In order to address the existing challenges
in the financial sector, the Vision 2030’s Medium Term Plan for
2013-2017 has outlined the following flagship projects:-
i. Establishment of the Nairobi International Financial Centre to
raise funds for projects and tap into new investments coming to
Africa.
ii. Deepening of Capital Markets through a robust policy and
regulatory framework to stimulate long-term savings to finance
investments by the Government and private sector.

iii. Promoting East African Community financial services
integration to facilitate trade, enable cross-border operations
and movement of capital.
iv. Facilitating the expansion of electronic payments to
significantly reduce transaction costs across the financial
system, especially in the provision of retail financial services.
v. Development of a national financial education and consumer
protection strategy and framework to enhance usage and
quality of financial services.
Given that most of you are from the insurance sector, you
appreciate its importance in raising long-term funds to support
economic development. This is particularly important in the
capital markets that provide suitable long-term investment
vehicles for insurance products. Kenya’s insurance sector has
played a pivotal role in development of the domestic bonds
market. It is therefore important that we upscale the insurance
penetration to mobilise additional long-term funds. The
FinAccess Survey for 2013 indicated that just about 7% of adult
Kenyans access insurance products. There is hence a huge market
in Kenya waiting to be discovered by insurance players. The
challenge is to design suitable, affordable and accessible products
to tap this nascent market.

Ladies and Gentlemen: As the financial sector players, we have
our work cut out to meet the needs of Kenyan households and
businesses. We must put our best foot forward to understand the
needs of our customers and offer suitably tailored products. Only
then will Kenya meet its aspirations of being a middle income
industrialized country that provides a high quality of life to its
citizenry. I have championed financial inclusion in Kenya and
beyond and I am sure that this seminar will provide some
solutions and I therefore look forward to your proposals.
With these few remarks, Ladies and Gentlemen, I wish you all
fruitful deliberations in this worthwhile seminar.
THANK YOU