occasion goes a long way in showing your readiness to play your part in addressing the constraints noted. the study has indicted the collateral process in kenya ; the collateral process is flawed and as a result it is characterized with high costs. there are more than 20 applicable statutes relating to collateral creation and perfection. this makes the process cumbersome, expensive and complex. it is high time the statutes are looked at to not only ensure uniformity but also simplify the process. lenders have cited the slow and expensive judicial process as contributing to premiums they factor in their interest rates. a certain and reliable judicial process facilitates quick recovery by lenders when secured facilities are defaulted. good borrowers will thus not be penalized for a mistake that is not of their making. in addition, there are many manual and uncoordinated registries. ladies and gentlemen : what are the other complementing initiatives to this study : going forward the following two events will shape the outcome of the recommendations of the report. first, the licensing of credit reference bureaus has introduced a substitute to physical collateral, which is information capital and reputational capital as well as appropriate risk pricing. crb africa was launched early this month. it is expected that the credit information sharing mechanism will be fully operational by july this year and as a result we expect to subsequently see a reduction in costs of credit as banks pass the resultant benefits to their customers. similarly, it is high time that kenyans henceforth adhere to their credit contract terms in order to build favourable credit track records for use as information collateral. second, the cbk and kba have formed a committee to drive forward the recommendations of the study. the formation of the committee reflects the importance attached to the study by both kba and cbk. the implementation of the recommendations will not only be beneficial to the financial sector but the entire economy. this will happen at three levels : – first, through the supply of required credit in future. – second, through lengthening the maturity profile of term loans. – third, the appropriate definition of property rights and certainty in enforcement of contracts will be strong building blocks of a deepened financial sector. it is therefore important and complementing to explore the widening of the membership of the committee to include the various players represented here today. a broad based implementation committee will support the quick execution of the cross cutting recommendations contained in the report. ladies and gentlemen : as i conclude let me take this opportunity to thank fsd kenya, our development partner in several

indicators of financial sector performance for the quarter ended june 2009 to show not only its resilience but its source of strength : • the sector ’ s assets increased by 15 % from kshs. 1. 09 trillion in june 2008 to kshs. 1. 26 trillion at the end of june 2009 as banks continued to expand their lending portfolio. • deposits increased from kshs. 871bn in june 2008 to kshs. 954bn mainly due to deposit mobilization and expansion of branch networks by banks. • the capital adequacy ratio stood at 19. 8 % above the statutory minimum of 12 %. this is an indicator that the sector has a cushion against periodic shocks. • the sector ’ s average liquidity at end of june 2009 was 40. 9 % well above the statutory minimum of 20 %. • the number of people employed by the sector increased from 24, 435 at the end of june 2008 to 25, 766 at the end of june 2009. • the number of branches at the end of june 2009 stood at 930 an increase of 158 branches from the corresponding period in 2008. • the number of accounts has similarly increased to 6. 7m accounts from around 4 million accounts in the same period – shows we need to do more on this count. ladies and gentlemen, our appeal to the banking sector is to put up strategies that will support and stimulate the private sector. banks stand to benefit from a strong and vibrant private sector. the cbk has shown the industry the way by the recent successive reduction of the central bank rate and cash reserve ratio. it is good and encouraging for banks to post healthy profits, but also good in tandem with that to reduce the lending rates to encourage the private sector lending and financing both investments, working capital and reducing the risks of default. i would like to reiterate once more that the central bank welcomes initiatives and innovations by the banking sector in coming up with new products and is committed to the creation of an enabling regulatory environment towards this end. i would therefore urge the banking sector to seek diversification of their products in light of the dynamic banking environment to leverage on their growth and earnings. such diversification of financial services like the debit card we are launching today do help to reduce transactions costs. but the banks should let us know how we can help to reduce risks and costs if they are the ones sustaining higher lending rates – but also keeping deposit rates low! ladies and gentlemen ; it is now my honour and pleasure to