Njuguna Ndung'u: Regulation and supervision of the forex bureau
industry in Kenya
Talking notes of Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, for the
meeting with the Kenya Forex Bureaus Association (KFBA), Nairobi, 22 August 2007.
* * *
The chairman, KFBA;
Distinguished Guests;
Ladies and Gentlemen;
1. Let me take this opportunity to invite you all to the CBK during this very important occasion
to meet the forex bureau industry representatives as part of our partnership and to discuss
and share experiences on industry matters.
2. Before I proceed, let me thank the association for honouring our invitation and my staff for
the presentation, which has clearly laid down the industry landscape and set the stage for
our meeting. I hope this does form a platform through which we share experiences as well as
challenges.
3. Ladies and Gentlemen, first and foremost, let me emphasize the role of regulation and
supervision of the forex bureaus in Kenya, which aims to:
•
develop a strong, stable and viable forex bureau industry;
•
inculcate good corporate governance practices in forex bureaus;
•
ensure there is adequate internal control and management information systems in
forex bureaus; and
•
ensure forex bureaus to comply with the Act and Guidelines.
All these factors enhance healthy developments for any firm in business.
But since bureaus are special, we shall continue to attach a lot of importance to compliance
and enforce the Act and Guidelines including suspension and revocation of licences.
4. However, we expect forex bureaus to cooperate and partner with the Central Bank in the
development of the forex bureau industry.
5. Let me now turn to specific matters that touches on certain specific issues on the industry.
These include:
a) Moratorium: As you are aware, the Central Bank had in the past imposed a
moratorium on licensing new forex bureaus. This was done in order to:
•
allow newly established forex bureau industry to grow and individual
bureaus to consolidate
•
ensure market discipline in the foreign exchange market by developing
appropriate frameworks for regulation and supervision; and
•
enforce Government concerns on money laundering and related financial
crimes.
After a careful assessment, the Central Bank has lifted the moratorium on licensing
of new forex bureaus including those to be located in the Nairobi and Mombasa
Central Business Districts.
b) Industry image: The continued existence of the moratorium can have negative
implications on the industry image and the Bank, including creating opportunities for
"rent seeking" and corrupt practices. This has tended to create a screen between
the licensing authority and potential investors in this market.
c) Licensing procedures: On licensing of new bureaus, you note that the Bank has
introduced new licensing procedures that involve a two stage process, which
include:
i) In the first stage, applicants are expected to submit application documents
including:
•
Certified copy of Certificate of Incorporation and Memorandum and
Articles of Association;
•
A feasibility study of the proposed forex bureau;
•
Particulars and "fit and proper forms" of proposed shareholders
and directors;
•
Declaration and confirmation that no shareholder and/or director
has a similar position or role in any other forex bureau in Kenya;
and
•
Provide evidence of non-interest bearing deposit of US$ 30,000
and core capital of US$ 30,000.
ii) In the second stage, the Central Bank will issue a Letter of Intent to
prospective bureaus to enable them commit funds by paying the requisite
fees and deposits, and prepare premises for inspection before issuance of
licence and approval to commence operations.
The Central Bank has cleaned up the process and I do promise you an efficient
licensing procedure.
d) Compliance: let me take this opportunity to once again urge the industry to ensure
that they have sound and effective internal control and management information
systems to enable prompt and accurate submission of returns.
6. In conclusion, Ladies and Gentlemen, let me take this opportunity to invite the industry
association chairman/ representative to make some remarks. Thereafter, we shall have a
short discussion on industry concerns. I also urge you to continue to work together with my
staff in development of the industry and in seeking solutions to the various challenges that
will arise from time to time.
Thank you.