CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
Kenya School of Monetary Studies
Thursday, February 24, 2011
9.30 am

The Directors and Principal Officers of Forex Bureaus;
Distinguished Guests;
Ladies and Gentlemen:
1. It gives me great pleasure to be here today to officially open this consultative
workshop that will comprehensively review the Forex Bureau Guidelines. At the
outset, I would like to take this early opportunity to express my sincere appreciation to
all forex bureaus represented here and to those that took time to study the proposals
made and submitted comments on the guidelines. This has allowed the Central Bank
of Kenya team to revise them considerably.
2. Ladies and Gentlemen, forex bureaus were first licensed in January 1995 to foster
competition in the foreign exchange market and to narrow the exchange rate spread
through this micro-structure of the market. As you are aware, the forex bureau sub
sector has experienced rapid growth since it was first established with the number of
operating bureaus having increased from 48 in 1998 to 126 as at December 2010. This
rapid growth has to do with units in the market and also the volume of their trading.
But this has also come with challenges. While the initial objectives have largely been
met, it has become necessary to take stock of achievements and challenges so far.
3. Ladies and Gentlemen: in the last few years, the Central Bank has carried out
comprehensive on-site and off-site review of the operations of forex bureaus. The
review exercises have revealed major weaknesses in the operations of some of the
bureaus that include;
• Engaging in unauthorized business activities;
• Non-compliance with the legal and regulatory requirements such as the Central
Bank of Kenya Act and the laws that govern taxation; and
• Limited understanding of regulations and weak capacity in management of the
bureaus.
It is in light of this that Central Bank embarked on the process of identifying gaps in the
regulatory framework and reviewing the guidelines in order to streamline the sub-sector,
facilitate growth and ensure that all the players operate in accordance with the law.
4. The revised guidelines also seek to deal with the various challenges; strengthen the
corporate governance structure and financial position of the bureaus; enhance
competition in the foreign exchange market and more importantly re-define the basic

tenets of this market. From the comments and discussions we have held, we know that
forex bureaus in line with the market dynamism, would like to expand their sphere of
operations by offering more services and more products. In this regard and like any
other good investment, the desire calls for enhancement of capital to be employed. In
addition, the guidelines must be reviewed to align them with the provisions of the
existing laws, like the Proceeds of Crime and Anti-Money Laundering Act 2009, which
came into operation on June 28, 2010. This law together with the guidelines define the
reporting methods of transactions by institutions.
5. Ladies and Gentlemen, despite the numerous challenges experienced in the forex
bureau sub-sector in the recent past, the Central Bank recognizes the important role
the sector plays in the economy by offering foreign exchange at competitive rates and
providing employment to many Kenyans. But the market can only expand and thrive if
rules and guidelines are followed. In this case, only those investors who are ready and
willing to conduct their business within the set rules will be allowed to remain in the
market. As we align ourselves with the dynamics of the market, adherence to the rules
of the game become more important and critical for the survival of the market.
6. To enhance market discipline and encourage constructive engagement with the
regulator and so develop the market, I urge the owners of forex bureaus to strengthen
the Kenya Forex Bureaus Association (KFBA). This will entail reviewing the
constitution of the association, putting in place a code of conduct and allocating more
resources to the secretariat. The main objective of the initiative is to develop a vibrant
market, to promote and uphold professionalism, enhance high ethical standards,
foster self-regulation and above all keep the line of engagement with the regulator
alive so that market vulnerabilities or any challenges can be addressed. For these
reasons, membership to the KFBA has been made mandatory and a pre-requisite for
license renewal.
7. Ladies and Gentlemen, the workshop has been organized with one major objective
of facilitating a consultative process. I therefore urge you all to actively participate
fully and build consensus on the content of the guidelines before they are finalized.
The Central Bank believes that this approach will foster an inclusive enabling
environment for the growth and development of the forex bureau sub- sector.

8. Finally, let me once again reiterate that the Central Bank of Kenya as a financial
regulator of this market and as an agent of developing this market will continue to
pursue policies and guidelines that create a conducive environment for growth of the
financial sector, encourage provision of financial services to the majority of the
population at affordable cost and enhance the safety and soundness of the financial
system.
9. With these few remarks, ladies and gentlemen, it is now my honour and pleasure
to declare this workshop officially open and presuppose a fruitful engagement.
Thank You and God bless you all.