njuguna ndung ’ u : microfinance transparency remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at the african microfinance pricing transparency leadership forum, nairobi, 6 october 2011. * * * mr. ives terracol, regional director, agence francaise de developpment ; mr. chuck waterfield, chief executive officer, microfinance transparency ; distinguished guests ; ladies and gentlemen : it gives me great pleasure to be with you this morning during this important african microfinance pricing transparency leadership forum. before i make my opening remarks, let me take this opportunity to thank the organizers of this conference, microfinance transparency, for inviting me to share some thoughts on this pertinent topic. i would also like to extend a warm welcome to all the participants who have travelled from other countries to kenya and to say “ karibu sana ”. i hope you will take some time to enjoy our beautiful country with its rich culture and diverse tourist attractions. ladies and gentlemen, financial inclusion has been recognized now in development debates and action across the globe. this is more so in developing and emerging economies, which record the highest poverty levels and constitute majority of the world ’ s unbanked population. the drive to enhance financial inclusion is thus critical given that increasing evidence shows that it is key in reducing the economic vulnerability of households, promoting economic growth, alleviating poverty and sustainably improving the quality of peoples ’ lives. the push for financial inclusion is entrenched in government of kenya ’ s development blueprint, vision 2030 and lies at the core of the central bank of kenya ’ s strategic actions towards implementing this vision. it is in this regard that the central bank, together with market players, has embraced several initiatives and reforms aimed at enhancing the level of financial inclusion. these include licensing of deposit taking microfinance institutions ( dtms ) and credit reference bureaus ( crbs ) ; introduction of shariah compliant banking products, mobile phone money transfer services and the agency banking model. these measures and new institutions help in completing the financial infrastructure picture in kenya that reflects its market structures as well. ladies and gentlemen, in effect, we have seen a significant decline of barriers to entry into the financial sector, increased infrastructure distribution and innovative instruments targeting the lower segments of the population. these have resulted in tremendous increases in the levels, reach and depth of access to financial services. to highlight a few, bank accounts have grown

some difficulties emerged over the last year culminating in the placement under receivership of three banks ( dubai bank, imperial bank, and chase bank ). it is worth noting that none of these three banks was systemic, and the causes of the difficulties were unique to each of these banks. cbk, in liaison with kdic, has been working towards resolution of these banks. additionally, the cbk seized this opportunity to further strengthen the banking sector. these efforts have placed us in “ the new normal ” which is premised on three pillars : first, greater transparency on the part of banks. the cbk is requiring greater transparency on the part of banks to ensure public confidence. this entails among others ensuring that banks ’ financial statements are credible and reflect a true and fair view. transparency also extends to other disclosures by banks on their corporate governance and risk management structures. in this regard, cbk has enhanced the disclosures by banks on their significant shareholders. banks are now required to disclose details of significant shareholders who own 5 percent or more shareholding on their websites. bis central bankers ’ speeches shareholders are at the core of instilling corporate governance in banks. the disclosure of bank shareholders signals adherence to corporate governance as well as instilling confidence and stability in specific banks and the sector as a whole. at a minimum, the names, shareholding levels, composition of local and foreign ownership as well as group structures, for banking groups, should be disclosed. second, stronger governance with clearly demarcated responsibilities. it is only when all stakeholders of banks ( shareholders, board of directors, management and external auditors ) play their roles effectively that the performance of banks will continue on a positive trend. cbk has therefore insisted on clear demarcation of roles among bank stakeholders. on its part, cbk has been strengthening its supervisory practices including off - site surveillance to ensure that banks are truly practicing effective corporate governance. in 2015, cbk directed external auditors of banks to review the effectiveness of banks ’ ict infrastructure as well as insider lending practices. the feedback from these reviews has formed a good base for focused supervision on the sector. further, cbk will shortly be issuing a consultative paper for review and comments on proposals to limit tenures of non - executive directors and chief executive officers of banks. we all appreciate that unlimited tenures may breed complacency. we therefore encourage banks and all stakeholders to review our proposals when released, to ensure that the final guidelines are well - placed