Njuguna Ndung'u: Enhancing the reach and coverage of financial
services to Kenyans
Keynote speech by Prof Njuguna Ndung'u, Governor of the Central Bank of Kenya, during
the launch of the FinAccess Survey Report 2013, Nairobi, 31 October 2013.
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Hon. Henry Rotich, the Cabinet Secretary to the National Treasury;
Hon. Aden Mohamed, the Cabinet Secretary to the Ministry of Industrialization and
Enterprise development;
The Chief Executive Officers of the Domestic Financial Sector Regulators;
Distinguished Ladies and Gentlemen:
It is my honour and pleasure to join you this morning to formally launch the results of our
third national survey on access to financial services in Kenya. Before making my remarks, let
me take this opportunity to thank all the collaborating partners under the Financial Access
Partnership (FAP), FinAccess Management comprising of Central Bank of Kenya (CBK) and
the Financial Sector Deepening (FSD) Kenya as well as the FinAccess Secretariat based at
the Research and Policy Analysis Department of the Central Bank of Kenya for making
today's launch possible. Let me also appreciate our technical partner, the Kenya National
Bureau of Statistics (KNBS), for providing critical support to the initiative.
On a solemn note, we recall the loss of Mr. Ravindra Ramrattan of FSD Kenya, following
the terrorist attack at the West Gate Mall on 21st September 2013. Ravi was a devoted
member of the FinAccess Secretariat and contributed immensely to the survey. Let us
observe a minute of silence in honour of those we lost in the West Gate Mall Tragedy.
Ladies and Gentlemen: The Government recognizes the vital role the financial system plays
in the economy. In this regard Kenya's development blue print, Vision 2030, covering the
period 2008-2030, envisages the financial services sector being transformed into a vibrant
and globally competitive sector that will drive high levels of savings to finance the country's
investment needs. The transformation entails doubling deposits mobilization from 44% to
80% of GDP and enhancing growth of savings channelled into productive investments from
14% to over 30%. This goal can be achieved by addressing the Vision's three core
objectives, namely: enhancing financial system stability, efficiency, and expanding
financial access and usage.
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Regarding the objective of Expanding Access to Financial Services, which is our
main theme this morning, there would be no meaningful financial sector
development, if it is not accessible. There is, therefore, a case for expanding access
of quality and affordable financial services and products to majority of the
population. Access to finance will encourage savings and credit. This will effect
savings/investments cycle, allowing for capital accumulation and asset building
which enables the poor to escape poverty. Safe havens for savings by the poor
reduce their vulnerability to periodic economic and social shocks. Access to finance
will expand the level of participants and so lower unit costs.
Ladies and Gentlemen: Our efforts to ensure expanded financial access have been
measured by three national financial access surveys for 2006, 2009 and 2013.
These surveys have clearly demonstrated that Kenya's financial landscape has
considerably changed over the period 2006-2013. The financial system is now
offering a wider range of financial services and products to more Kenyans, covering
a wider geographical spread, and even going beyond Kenyan borders. This has
strengthened the banks and created a wider market. These developments are a
testimony to the strength and vibrancy of our banking sector it has contributed to
Kenya's financial development.
• of the financial system has an immediate impact on the
Enhancing the Efficiency
welfare of its customers and the wider real economy through the consequent
reduction of costs of financial services. Competition is essential in ensuring that
financial institutions are incentivised to invest in improving productivity, efficiency
and cost effectiveness. The CBK has acted to encourage greater transparency in
pricing of financial services and products to foster effective competition and delivery
of services to majority of Kenyans.
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On the Financial Stability Front, the Government has continued to implement
necessary reforms designed to strengthen the legal, regulatory and supervisory
framework in to ensure stability of the financial system. Lessons from the 2008-2009
global financial crisis call for regulators to invest in better regulation. Better
regulations is characterised by a regulatory framework with ability to:
-
readily identify weaknesses and emerging vulnerabilities;
-
analyse and price risks;
- provide appropriate incentives (and penalties) to induce prudent behaviour
in the market place; and
- encourage innovations and develop strong institutions of the regulators and
the regulated - strong institutions enforce the rules of the game and define
appropriate incentives.
Ladies and Gentlemen: I am delighted to note that the FinAccess Survey, 2013 results
bears witness to the above gains made in enhancing the reach and coverage of financial
services to Kenyans. It shows that the proportion of the adult population using formal
financial services rose to 66.7% in 2013 from 27.4% and 41.3% in 2006 and 2009,
respectively. The proportion of the financially excluded on the other hand has been falling
steadily from 39.3% in 2006 to 31.4% in 2009 and now stands at 25.4% of the adult
population. Equally and more striking, the proportion of the population using informed
financial services has declined to 7.8% from 35.2% in 2006 and 26.8% in 2009. These
findings demonstrate impressive achievements and vindicate policy strategies and reforms
undertaken by Government and initiatives and innovations by the financial sector players' as
having helped expand financial inclusion. It is even more interesting to note from the results
that many more people are now accessing and using financial services and products
supplied by diverse providers. This shows that people are now moving towards using a
broader portfolio of financial services and products to satisfy their needs. The use of
combinations of all formal prudential, formal non-prudential, other formal and informal
financial services except the excluded has been rising from 16% in 2006 to 25% in 2009 and
to 29% in 2013. These patterns demonstrate that financial sector participants require choices
and therefore the need to maintain diversity and encourage competition amongst providers of
the different financial products in different market segments.
Ladies and Gentlemen: The survey results we are releasing today are as a result of
developments in the wider economy, policy and regulatory reforms, increased competition
and innovation and advances in information and communication technology. These
developments have set off a dramatic shift away from the traditional delivery of financial
services. In the banking industry, the introduction of Automatic Teller Machines (ATM) a few
years ago already moved customers out of the physical branches. And now more than ever,
access through point-of-sale (POS) devices, the internet and mostly through mobile phones
platforms have accelerated and are still poised to accelerate the swing to branchless
banking. We, however, still have some ground to cover in expanding access to financial
services, given that about 25% of the population remains totally excluded.
The information generated by the past three FinAccess surveys will
Ladies and Gentlemen:
help financial service providers identify where opportunities exist. I am delighted that the
sector now has such useful information resource at its disposal.
In conclusion, Ladies and Gentlemen, let me also observe that the FinAccess studies have
been championed and driven by a partnership between public and private institutions. I
commend and support such initiatives and hope that this lays the foundation for a deeper
and sustained partnership between the public and private sector in tackling the challenges
and taking advantage of opportunities that arise. In this regard, I thank all the institutions
under the FAP that have contributed in various ways towards these FinAccess surveys,
particularly the 2013 survey - notably the FSD, Kenya, Kenya National Bureau of Statistics
(KNBS), Kenya Bankers Association, the research house TNS-RMS, Kenya Institute for
Public Policy Research and Analysis (KIPPRA), Kenya Commercial Bank (KCB),
Development Alternative International (DAI) and the CBK.
Ladies and Gentlemen: Beside the FinAccess studies that provide us all with valuable
information as to where we should focus our efforts most in order to achieve our goal of
providing affordable and accessible financial services and products to majority Kenyans. I
wish to inform you that FAP is also working with CBK, FSD, Kenya and Bill and Melinda
Gates Foundation on the spatial mapping of all financial access touch points, the findings of
which will improve our understanding on how to enhance financial inclusion.
With these few remarks, Ladies and Gentlemen, I welcome you to this breakfast event and
look forward to the Launch.
THANK YOU.