daniel mminele : macro policy priorities during an extended period of global sub - par growth address by mr daniel mminele, deputy governor of the south african reserve bank, at the jp morgan investor seminar, tokyo, 14 october 2012. * * * introduction good morning ladies and gentlemen and thank you to jp morgan for inviting me to share some thoughts with you on what is indeed a very pertinent subject. the topic chosen for my contribution to this seminar, “ macro policy priorities in an extended period of global sub - par growth ”, has indeed become a very real challenge for most policymakers around the world. not surprisingly, your debates and discussions over the past two and a half days highlight just how much of a challenge it is to generate the kind of growth needed in the pursuit of development in an environment where previous engines of global expansion have almost “ stalled ”. this is particularly so in emerging economies. the fact is, the global financial crisis is now running into its fifth year and yet normalization still looks a long way away. projections of economic growth made in the years prior to 2008, when increasingly stable price and policy expectations fostered hopes of stronger expansion on a sustainable basis, now look exceedingly optimistic. between 2008 and 2012, if we take into account the latest projections of the international monetary fund, the world economy will have grown by an average of 2. 9 per cent a year, contrasting with 4. 8 per cent in the preceding five years. few countries have been immune to this pattern. in south africa, based on the latest reserve bank projections, the 2008 – 12 average growth is expected to be around 2. 1 per cent, down from 4. 8 per cent in the previous five years. the typical policy responses to slowing growth economic cycles have been present for as long as economic historians can remember, and even the policymaker equipped with the best knowledge and intentions would struggle to neutralize their impact. nevertheless, macro policy should aim at smoothing out the potential variations of economic activity over the cycle, and in so doing, limiting the risk of these variations causing unnecessary, permanent damage to different sectors of the economy. the shallower the recession, the lower the risk is that normally - productive employees will be forced into a long period of unemployment that can lead to a permanent loss of skills. the milder the downturn, the lower the risk is that fundamentally sound, yet temporarily illiquid companies may be forced into bankruptcy. both sides of macroeconomic policy can play

six mainstream institutions involved in microfinance, namely equity bank ltd, cooperative bank, k - rep bank, family bank and kenya commercial bank as well as the kenya post office savings bank ( kposb ). these models have had far reaching impact while influencing the microfinance practices and outreach modalities of similar microfinance institutions within the eastern african region. this steady growth in kenya ’ s microfinance portfolio indicates that prudentially regulated and supervised institutions are more able to mobilize savings on a viable and sustainable basis. this is to say, in other words, that appropriate and effective supervision with necessary and appropriate prudential rules provides a conducive and enabling environment for microfinance business to grow and thrive. this is also an indication that microfinance institutions that will opt to be licensed and regulated under the microfinance act will be in a better position with regard to improved efficiency, effectiveness ( increased outreach ) and long - term sustainability. this will further enable these institutions to establish sufficient and effective linkages to commercial banks and payment systems. ladies and gentlemen ; the central bank acknowledges that prudential regulation and supervision of microfinance institutions is not only intrusive, but has cost implications, not only to the regulator, but also for the regulated institutions. the regulation and supervision of institutions is anchored on a legal and regulatory framework that requires, first and foremost, the assessment of the adequacy of the institutions ’ capital to meet their business requirements to match their risk profiles and to protect the interests of their depositors. although prudential regulations, which subscribe minimum corporate governance standards, capital adequacy levels, liquidity requirements and adequate provisioning for loan losses etc, create a stringent regime, it is essentially necessary for deposit - taking microfinance institutions. this is to ensure the protection of their financial soundness in order to protect depositors'funds and uphold confidence in the financial system. the central bank also acknowledges that although prudential regulation is considered necessary when there are depositors to protect, it is not appropriate for credit - only mfis which fund themselves from donors ’ funds or commercial loans. the bank asserts that such mfis require relatively non - intrusive, non - prudential regulation, involving, for example, screening out unsuitable owners / managers or requiring transparent reporting and disclosures. to this end, the microfinance act, section 3 makes appropriate provisions for the deposit