Njuguna Ndung'u: Financial inclusion through the agent banking model
and credit reference bureaus
Remarks by Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, at the official
opening of Fina Bank's, Ngong Road Branch, Nairobi, 17 June 2010.
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The Chairman and Board Members;
Group Chief Operating Officer;
Management and Staff;
Distinguished Guests;
Ladies and Gentlemen:
It gives me great pleasure to be with you today at the official opening of Fina Bank's, Ngong
Road Branch. As the regulator for the Banking Sector, the 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. This is
what Fina Bank is doing this evening.
It is evident that Fina Bank is focused on its programme of expansion and growth strategy,
having started its operations as Finance Institution of Africa in 1986 before converting to
the present day Fina Bank in 1996. With the opening of this branch, the bank will have a
network of 14 branches in the country. I also note that the bank has established its presence
regionally by opening subsidiaries in Uganda and Rwanda. This is encouraging indeed.
Mr. Chairman, let me take this opportunity to compliment the Board, Management and Staff
of Fina Bank for this great achievement. I note that as at April 2010, the bank commanded an
impressive asset portfolio of Ksh.13.5 billion and customer deposits of Ksh.11.5 billion, while
riding on a capital base of Ksh.1.3 billion. The Central Bank is particularly encouraged by the
bank's leading role as a lender in the Small and Medium Enterprise (SME) sector, a growth
sector in Kenya's economy which has been described as the "jewel" of Kenya's economic
growth.
This is indeed important following from the Budget proposals that created a revolving fund for
SME - It may well be the best policy in our times to support the growth pole provided by
SMEs.
Kenya's growth picked up in the last quarter of 2009, extending into
Ladies and Gentlemen,
2010 and on the back of good rainfall and a resurgence of tourism, we are optimistic that this
positive trend will continue, and therefore forecast that the economy will post a 4 to 5 percent
growth in 2010 on average.
Equally the banks have had a spectacular performance. For the period ended March 31,
2010, the Kenyan Banking sector registered an increase in asset base largely supported by
growth in deposits. Assets increased by 20.8 percent to stand at Ksh.1.5 trillion while
deposits increased by 22.8 percent to Ksh.1.1 trillion. This growth is by and large attributed
to the growth of our economy that increases opportunities for investment and demand for
credit.
The Central Bank is pleased to note that the banking sector has put up strategies that
support and stimulate the economy and responded positively to the successive reduction of
the Central Bank Rate and Cash Reserve Ratio. While it is noteworthy and encouraging for
banks to post healthy profits, this should also go in tandem with the reduction of lending rates
to stimulate private sector borrowing and financing of investments, working capital as well as
reducing the risks of default. At this juncture I want to register my compliments to Fina Bank
for having reduced its base lending rate to 14.75 percent. I am sure there is room to do more.
The continued lowering of base lending rates by commercial banks will not only stimulate our
economy but also reduce non-performing loans in the industry. However, lending rates
reduces the risk of default.
Ladies and Gentlemen, The Central Bank will endeavour to pursue prudent policies that
foster financial stability, increase financial inclusion and improve financial efficiency. Let me
at this juncture highlight two policy issues that are at the heart of the of financial inclusion;
 An amendment to the Banking Act through the Finance Act
Agent Banking Model:
2009 has enabled the banking industry embrace agent banking. Agent banking will
permit banks to contract third parties to provide certain banking services on their
behalf without having to put up brick and mortar. This model will therefore increase
financial inclusion to the majority of the unbanked Kenyans at an affordable cost to
both the bank and the customer. The Central Bank is pleased by the level of interest
and financial innovation the model has generated.

Credit Reference Bureaus: To ensure the growth of credit lending at affordable
and sustainable rates, the Central Bank has licensed the first Credit Reference
Bureau (CRB) and a few more are in the pipeline. A robust credit information
apparatus will enable the banking industry share critical customer information that
will lead to lowering the credit risk in the industry and hence the lowering of lending
rates in the banking industry. This policy aims at building information capital that will
allow the credit market to function properly and efficiently and change the collateral
technology and reduce the cost of collateralization.
The Central Bank of Kenya will continue to pursue policies that drive financial innovation,
build strong banks and partnerships in the banking industry to ensure a stable financial
sector in the country. Strong banks can weather shocks more easily. Strong banks will
support economic growth.
I wish to conclude by congratulating Fina Bank for opening the
Ladies and Gentlemen,
Ngong Road Branch and to assure the Board and Management of Fina Bank of the Central
Bank's support in your growth initiatives and progression.
With these few remarks Ladies and Gentlemen, it is now my honour and pleasure to
declare Fina Bank - Ngong Road Branch - officially open.
Thank You and God bless you all.