two are interdependent. the collapse of much of the banking system would aggravate the macroeconomic weaknesses, just as failure to stabilise the economy would accentuate the banking crisis. but here first is a brief account of the swedish crisis. the swedish crisis - what happened? the economic problems in sweden in the early 1990s should be seen in their historical context. for several reasons, economic growth in sweden has been relatively weak ever since about 1970. following the collapse of the bretton woods system the creation of a stable macroeconomic environment turned out to be difficult. wage formation functioned badly, fiscal policy was unduly weak and this was gradually compounded by structural problems. credit market deregulation in 1985, necessary in itself, meant that the monetary conditions became more expansionary. this coincided, moreover, with rising activity, relatively high inflation expectations, a tax system that favoured borrowing, and remaining exchange controls that restrained investment in foreign assets. in the absence of a more restrictive economic policy to parry all this, the freer credit market led to a rapidly growing stock of debt ( see fig. ). in the course of only five years the gdp ratio for private sector debt moved up from 85 to 135 per cent. the credit boom coincided with rising share and real estate prices. during the second half of the 1980s real aggregate asset prices increased by a total of over 125 per cent. a speculative bubble had been generated. the expansion of credit was also associated with increased real economic demand. private financial saving dropped by as much as 7 percentage points of gdp and turned negative. the economy became overheated and inflation accelerated. sizeable current - account deficits, accompanied by large outflows of direct - investment and other long - term capital ( once exchange control had been finally abandoned in the late 1980s ), led to a growing stock of private sector short - term debt in foreign currency. step by step the swedish economy became increasingly vulnerable to shocks. during 1990 matters came to a head. competitiveness had been eroded by the relatively high inflation in the late 1980s, resulting in an overvalued currency. this caused exports to weaken and meant that the fixed exchange rate policy began to be questioned, leading to periods with relatively high nominal interest rates. moreover, the tax system was reformed in order to reduce its harmful economic effects, but this also contributed to higher post - tax interest rates. asset prices began to fall and economic activity turned downwards. between the summers of 1990 and 1993

of kenya and the government in the development of this industry. i recommend that partnership should involve regular consultations towards seeking solutions to issues and challenges facing the industry with the objective of building a sustainable and sound microfinance industry. together, as a team, we can change the microfinance landscape, set the pace and ensure the development of a sound and stable microfinance industry in kenya as an integral part of the financial system. ladies and gentlemen ; let me take this opportunity to thank the organisers, strathmore university and the association of microfinance institutions ( amfi ), for organising this important conference. i look forward to seeing more collaboration amongst key microfinance industry stakeholders in fostering the growth and development of the microfinance industry. thank you.