Njuguna Ndung'u: Development of efficient and cost effective payment
systems in Kenya
Address by Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, at the "Emerging
Payment Systems Technical Capacity Building Workshop 2012", Kenya School of Monetary
Studies, Nairobi, 14 November 2012.
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Dr. Eliawony Kisanga; Executive Secretary; ESAAMLG;
Ms. Maria C. Stephens; Senior Technical Adviser; USAID;
Representatives of USAID and US Treasury;
Representatives of Central Banks present;
Distinguished Guests and Participants;
Ladies and Gentlemen:
Let me begin by extending a very warm welcome to all the workshop participants. To the
participants who are drawn from beyond our borders, it is my sincere hope that your stay with
us shall be enjoyable and that you will carry with you pleasant memories of Kenya when you
return to your respective countries.
This workshop is about the development of efficient and cost
Ladies and Gentlemen:
effective payment systems. The workshop will offer the pertinent issues of financial integrity
which completes the architecture of financial inclusion. The importance of financial inclusion
is now critically clear. Indeed, there has been mounting evidence that access to financial
services is a tool to fight poverty sustainably. Access to affordable and sustainable financial
services enables the poor to save and accumulate capital for investment. This is important
for generating self- employment opportunities, smooth consumption, reduce vulnerability to
economic shocks, raise productivity, obtain higher returns on investments and ultimately
improve the quality of their lives.
However, approximately 2.5 billion adults globally, representing over half of the world's adult
population, have no access to formal financial services to increase their incomes and
improve their lives. Among them, 1.1 billion live on less than one dollar a day. These
numbers are a representation of the great demand and need for increased access to income
generating activities and to appropriate financial services for the large un-banked populace
across the globe. This is particularly true of developing economies in Africa, Asia and Latin
America where nearly 90% of the world's unbanked adults reside. The expansion of financial
inclusion has thus become a critical topic in development agendas for policy makers and
regulators globally, with considerable energy and resources having been devoted towards its
enhancement. The testament to this is the G20 Global Partnership for Financial Inclusion
(GPFI) where non-G20 members participate. The Central Bank of Kenya, and indeed Kenya
has been represented by the Governor. At this point therefore, allow me to underscore the
importance of emerging payment systems to promoting financial inclusion agenda.
Ladies and Gentlemen: The rapid growth of the mobile phone-based money transfer
service in Kenya beginning with M-Pesa, in 2007 has been seen by many as having
produced a tectonic shift in Kenya's financial landscape with a great impact on financial
inclusion. Indeed, the rapid adoption and use of mobile money transfer services by some
70% of the adult population has suggested that there is huge potential for the development of
inclusive formal financial services through mobile phones. Equally complementing this was
banks integration with it and also payments of goods functionality raising in acceptance and
reception. Notably, the development of innovative and easy-to-use payment systems by
financial institutions and other businesses such as mobile phone operators has helped to
support rapid growth in e- commerce, in many cases providing consumers with more
effective, convenient, and secure ways to purchase an expanding variety of products.
Ladies and Gentlemen: We all know that in the business world, the customer is King. In this
regard, I wish to highlight at this point key issues that policy makers may need to address to
strengthen consumer confidence in new and emerging payment systems and which may be
categorized into five broad areas including: clarity, transparency and completeness in
information disclosure; variability in regulatory and protection regimes; fraudulent, misleading
and deceptive commercial practices; dispute resolution and redress and security and
interoperability.
Ladies and Gentlemen: Any success in financial inclusion has to go hand in hand with
financial integrity. In this regard, the Central Bank of Kenya has continuously sought to
enhance the regulation and supervision of the financial system in order to improve its
integrity. Indeed, as part of our efforts in ensuring appropriate and effective oversight, we first
issued AML Guidelines in 2000. These Guidelines were later revised in 2006 and are
currently in the process of being reviewed to reflect the prevailing international best practice
and to align them with the Proceeds of Crime and Anti-Money Laundering Act, 2009
(POCAMLA) as amended and the new Act on combating terrorism financing.
It is true that over the last 2 years, the Central Bank has issued regular AML/CFT guidelines
to financial institutions to further support and enhance the implementation of the Proceeds of
Crime and Anti-Money Laundering Act (POCAMLA), 2009. The guidelines have covered the
operationalization of the AML Act, Suspicious Transactions Reporting, and measures to be
adopted by financial institutions to combat the financing of terrorism. The Central Bank has
also revised the Forex Bureau Guidelines so as to align them with the AML Act and is
currently sharing with stakeholders the Hawala guidelines.
Ladies and Gentlemen: The creation of the Financial Reporting Centre early in the year and
the passing of the Anti-Terrorism Law is a clear signal of the Kenya Government's
commitment in protecting the integrity of our country's financial system. In fact I wish to
inform you that following the creation of the FRC, all financial institutions in Kenya including
banks, forex bureaus and mobile phone financial service providers will be required to report
all suspicious transactions to the Financial Reporting Centre. I have expounded on these
issues and updates whenever I represent Kenya in FATF evaluation meetings. That is why in
the current standing, FATF has commended Kenya for its tremendous effort in AML/CFT
Laws enactment and how we are on implementation.
Ladies and Gentlemen: In conclusion, it is my hope, that this workshop will help enhance
our technical capacity on emerging payment systems as we share our own country
experiences on these systems. Let me also once again take this opportunity to assure all of
you of the Central Bank's continued commitment, collaboration and partnership in the
development of robust and secure payment systems. But this is where capacity is urgently
needed and support by USAID and the US Treasury arising from their experience is most
welcome.
Finally, it is a pleasure and honour to now declare the Emerging Payment Systems
Technical Capacity Building Workshop officially open and wish you fruitful deliberations.
Thank you.