shilling appreciated following increased capital inflows for the safaricom ipo and depreciated as investors took profits and exited the stock market – a management failure in the ipo process. we have detailed this in the press release of the monetary policy committee ( mpc ) of november 2008. we provide monetary policy committee press releases to share information and even show how to process the information. b. monetary policy decisions inflation continues to be a challenge but expectations are that it will come down to its target level in 2009 of 5 percent. it seems likely that there will be some disinflation in the upcoming months. the cpi computation has been revised, so is the basket of goods using the 2005 / 06 household budget survey. the government is taking adequate steps to address the supply constraints. there were indications of a liquidity crunch towards the end of 2008 with short term interest rates moving upwards. money demand rises in the festive season and so we used our liquidity management tools to increase liquidity in order to stabilize the interest rates in the short term and also hope to sustain a low interest rate regime that would support investment and growth revival to the pre - crises period. you are aware the mpc reduced the statutory cash ratio from 6 percent to 5 percent at the beginning of december. to support this, it also lowered the central bank rate from 9 percent to 8. 5 percent to enhance liquidity in the banking system and to nurture the economic recovery process. so far repo and interbank interest rates have declined to 4. 8 percent and 5. 8 percent respectively. cbk desires to have a low, stable interest rate environment that encourages private investment. this will support faster economic recovery from the 2008 shocks. the kenya shilling was volatile and followed global developments ; appreciating against the us dollar and the sterling pound but depreciating against the euro and the japanese yen. against the us dollar, the shilling has lately been oscillating around ksh78 to the dollar. but most spectacular were the effects the dollar had on the pound and euro. between september 2, 2008 and january 12, 2009, the us dollar has appreciated by 7. 7 percent and 16. 5 percent against the euro and pound respectively. there were also “ flight - to - safety ” concerns in the wake of the global financial crisis as banks dumped asset backed securities and preferred us bills and bonds. the global liquidity is increasingly being measured in us dollars and so scar

of national strategies that promote financial inclusion are critical to enhancing access to a diverse range of financial products to the unbanked in kenya, the mandate of the government to enhance the deepening of financial markets by fostering access, efficiency and stability is captured under kenya ’ s vision 2030. the central bank ’ s approach to achieving its role under vision 2030, is centered on the promotion of an enabling legal and regulatory framework that fosters the development of a diverse range of financial service providers, while guaranteeing its dual mandate of financial stability and financial integrity. central to this objective has been the licensing and regulation of microfinance banks. the first microfinance bank in kenya was licensed in may, 2009. this paved the way for 11 other microfinance banks which have been licenced to date. the 12 licenced microfinance banks have made a significant contribution to financial inclusion in kenya. this is evidenced by the number of active deposit and loan accounts as at december 2015 which was 931, 585 and 342, 481 respectively. in value terms, this represented bis central bankers ’ speeches ksh. 40. 5 billion in deposits and ksh. 46. 9 billion in advances. further, microfinance banks had a footprint of 109 branches and 1, 154 agents as at december 2015. while commendable achievements have been made in the past 6 years, the microfinance sector in kenya still has considerable opportunities and challenges that institutions need to tackle in order to realize their full potential. key amongst these challenges include the high cost of credit, inadequate products and services, and weak consumer protection frameworks. microfinance institutions must be willing to make a difference if the full benefits of microfinance and financial inclusion are to be realized. microfinance institutions must be prepared to employ innovative delivery channels to reduce their operational costs, and thereby enhance their reach and efficiency. an essential element in this process is recognizing the characteristics of the customers of these institutions and tailoring lending mechanisms to meet their situations. policymakers, on their part, should support the development of appropriate support infrastructure to facilitate the last mile delivery of suitable financial services. therefore, the development of proportionate, risk - based, regulations by policymakers is critical to guaranteeing the development of a dynamic, robust and sustainable microfinance framework for a country. the starting point towards this collaborative structure is a consultative process to developing a forward - looking framework for regulation and supervision of microfinance institutions. developing