njuguna ndung ’ u : increasing access to credit keynote address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the official launch of the first licensed credit reference bureau – crb africa limited, nairobi, 4 march 2010. * * * chairman, crb africa – mr. michael karanja ; chief executive officer, crb africa – mr. wachira ndege ; board members, crb africa, here present ; chair, kba – mr. martin oduor - otieno ; executive director, kba – mr. john wanyela ; chair, vision 2030 delivery board – dr. james mwangi ; distinguished guests ; ladies and gentlemen : i am pleased to join crb africa and the banking fraternity in the launch of the first ever licensed credit reference bureau in kenya. the launch marks a new dawn in the kenyan banking sector. it is the first and most important step towards building information capital. the second step will be for the banks and the public to share this information ; and the third step will be to use the information to develop the market and to make appropriate decisions. i would like to commend the board and management of crb africa for their enterprising efforts culminating in their being licensed as the pioneering credit reference bureau in kenya. this is a landmark achievement worthy of congratulations from each one of us. ladies and gentlemen : the main objective is to increase access to credit. we know the benefits of credit access and cost effectiveness of that credit to development at the firm level and at the household level. allow me to focus briefly on the benefits which cbk sees as accruing from the adoption of credit information sharing in kenya. first, credit information sharing will facilitate the development of information capital. the risk premium associated with information asymmetry will henceforth be eroded. this will allow cost of credit to decline substantially. second, information capital will change the current collateral technology. credit by the banking sector in kenya has to a large extent been underwritten by physical collateral such as land and buildings and costs of evaluating that collateral – with inappropriate definition of property rights. borrowers without access to such collateral have been constrained from accessing credit. credit information sharing will thus enable borrowers to build a track record ( reputational capital ) that they can use to access credit. this will especially be pertinent to those borrowers in the informal and small and medium enterprises ( sm

market for borrowers and lenders. borrowers will be able to access enhanced facilities at competitive prices, as they grow their credit histories and track records. conversely credit providers will be able to develop new and competitive products that will tap into previously unserved and underserved market niches with the power of available information. this can only impact positively on the banking sector and the kenyan economy as a whole. the vibrancy of the credit market implies availability of resources for the productive sectors of the economy to exploit the otherwise moribund opportunities. but we should also not forget it is the end of the road for serial defaulters who took advantage of information search costs and information asymmetry to defraud banks and individuals – including bouncing cheques for lack of funds. having said all that – ladies and gentlemen : let me now take this opportunity to thank our development partners and donors, in particular, the financial and legal sector technical assistance project ( flstap ), financial sector deepening ( fsd ) kenya and the international finance corporation ( ifc ), for their unwavering support over the more than 4 years we have committed our efforts to developing an appropriate credit reporting mechanism for kenya. i would also wish to recognise the efforts put forward by the market players led by kba who unreservedly partnered with cbk in developing the regulatory framework and in hosting the kenya credit information sharing initiative ( kcisi ) which has put in place the modalities of operationalising the initiative. i urge all banks to support the ongoing pilot run by kcisi aimed at ensuring that all banks are fully prepared to as seamlessly as possible participate in the sharing of their credit information. the ability of all banks to participate in the initiative is the only way they will reap maximum benefits. the project manager and his team at the kcisi have assured me that they are ready and available to assist all banks to ensure compliance. ladies and gentlemen : the role of easily accessible and affordable credit in economic development need not be overemphasized. however, most banks finance their credit with short term deposits which constrains their credit structures to mainly short term. this is even more punishing because the overdraft facilities for working capital are also short - term and very costly. we thought with a vibrant bond market, this traditional mismatch would go away! in an effort to address the mismatch, a technical committee has been formed by the cbk to look at proposals for development