Njuguna Ndung'u: The importance of the banking sector in the Kenyan
economy
Remarks by Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, at the Bank of
India, Kenya Branch, Diamond Jubilee Celebrations, Nairobi, 12 April 2013.
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Mrs. V.R. Iyer, the Chairperson and Managing Director of Bank of India;
Dr. Manu Chandaria, Chairman, Bank of India Local Advisory Committee;
Mr. R.K. Verma, Chief Executive, Bank of India, Kenya;
The Local Advisory Committee Members;
Management and Staff of Bank of India, Kenya;
Distinguished guests;
Ladies and gentlemen: I am delighted to join you on this auspicious occasion to celebrate
the Diamond Jubilee of Bank of India's operations in Kenya. As the regulator for the banking
sector, Central Bank is pleased to be associated with the achievements of the banks we
regulate, particularly where these developments lead to increased access to banking
services for the Kenyan public. In this regard, Bank of India, Kenya certainly has made its
mark on the Kenyan market.
Ladies and gentlemen: Bank of India, Kenya Branch, was established in Mombasa in 1953,
it has four branches. With regard to its performance, I note that as at February 2013, the
bank had a total asset base of Ksh.27 billion. Net Loans and Advances stood at
Ksh.11.5 billion while customer deposits were Ksh.20.8 billion, supported by a core capital
base of Ksh.3.9 billion. The bank returned a profit before tax of Ksh.568.4 million for the year
ended December 2012. This impressive performance of Bank of India is consistent with the
continued commendable performance of Kenya's banking industry.
Ladies and gentlemen: The banking sector and the totality of the financial sector is very
important to the economy. Let me share with you some key highlights of the Banking
Industry's performance for the last 10 years that is the period 2002 to December 2012 to
consolidate the importance of the banking sector in the Kenyan economy:
•
Assets grew from Ksh.456.7 billion to Ksh.2.35 trillion;
•
Total deposits grew from Ksh.360.6 billion to Ksh.1.76 trillion.
•
Net advances increased from Ksh.222.8 billion to Ksh.1.27 trillion,
•
Profit before tax of Ksh.5.8 billion increased to Ksh.107 billion.
• The number of bank accounts has increased from 1.9 million accounts to
17.6 million.
• Deposit insurance has evolved to cover fully 94% of the total deposit accounts.
This phenomenal growth has been supported by the expansion of banks into new market
segments, prudent risk management and enhanced economic prospects underpinned by a
stable macroeconomic environment. The Central Bank expects the banking sector to
continue on this growth trajectory. Ongoing reforms and initiatives by the Government and
CBK will serve to further propel the banking sector to new frontiers of financial inclusion for
more Kenyans to access these services.
Ladies and gentlemen: Kenya's financial industry is currently one of the fastest growing not
only in the East African region but in the continent. The Government is committed to the
implementation of sound policies towards financial deepening and overall economic
development of this country as captured in Vision 2030. It goes without saying that the
banking industry is and will remain a major player towards this end.
We need now to concentrate on reducing costs of doing business
Ladies and gentlemen:
for banks so that we can bring down costs of financial services. For example, the recently
introduced credit information sharing platform has enabled banks via reduced risk, to extend
more credit to productive sectors boosting wealth and employment creation. The information
sharing platform will support development of Information Capital as a new collateral
technology in the market and reduce the information search costs and hence the risk
premium over-load in the lending rates. In addition, the introduction of positive information
sharing with Credit Reference Bureaus will allow good debtors to leverage on this and
bargain for lower costs of borrowing.
The second area in reducing cost of doing business is the cost of rolling out branch networks
to reach Kenyans cost-effectively. This has worked and will continue to work well with the
introduction of Agent Banking. The CBK has so far licensed 16,333 Agents since the roll out
in May 2010. The third area that has lowered the cost of doing business is banks introducing
innovative products to the market by leveraging on advanced technology and the mobile
phone financial services platform. Lower cost on these products has ensured uptake and
volumes have grown. Finally, the currency centres have helped to de-congest services at the
branch and headquarters of CBK and physical distances, lowering costs for banks.
In addition, the Central Bank will continue more forcefully with its four dimensional approach:
Advise; Cultivate Partnership; Agent of Development, but also a Regulator. This
approach will ensure innovative policies that work for the market and ensure financial
inclusion for all Kenyans, lower unit cost of financial services and also ensure the market
stability.
Ladies and gentlemen: In conclusion, I would like to assure the banking sector and other
market players that the Central Bank will continue to support the market development by
providing an enabling environment for growth in the banking sector. We shall continue to
ensure that the sector operates efficiently, effectively and soundly, supported by the following
three pillars:-
•
First, strengthening Financial Stability, through a robust Supervisory and Regulatory
Framework. In this regard, the Central Bank has adopted a consolidated supervision
approach to take cognizance of the growing pan-African nature of the Kenyan
banking sector - and where applicable, supervisory colleges will be used.
•
Second, enhancing Financial Integrity in the Banking Sector so as to ensure that the
financial systems are safeguarded against money laundering and financing of
terrorism in line with international best practice.
•
Third, promoting Financial Inclusion for financial deepening and development in line
with the aspirations under the Kenyan Vision 2030.
We expect banks to strengthen their screening and monitoring role of their clients, new or
potential ones for market development. The Kenyan Bank of India should take advantage of
the market vibrancy as well as initiatives put forth by the Central Bank to grow its market
share even further in the coming years.
Ladies and gentlemen: with these few remarks, let me once again applaud the Kenyan
Bank of India, as you celebrate your Diamond Jubilee and wish the bank continued
prosperity in the years to come - not only in Kenya but also in the East African Community
region.
Thank You and God bless you all.