by low - income households and vulnerable groups is imperative. while prices of phone sets continue to fall, the transition by financial service providers from unstructured supplementary service data ( ussd ) - based sms services to proprietary apps is not without concerns. consumers should also benefit from reduced marginal cost of additional digital financial services, as provided by the underlying technologies. however, it is also true that the reliability of the services provided is crucial for consumers. for instance, recent studies on enhancing access to clean water in informal settlements in kenya ( mathare and kibera ) indicate that low - income households are disposed to pay twice as much to water vendors for reliable water services. this may therefore be an opportune time to start a discussion of the cost of these digital financial services. bis central bankers ’ speeches secondly, we are seeing increased standardization of processes, structures, and rules, across technological platforms. but do common standards have an impact on innovation? are they synonymous with interoperability? technological standards support the production process and market penetration of products, and therefore have a significant collective effect on innovation, productivity, and market structure. however, the existing market dynamics with dominant leaders, coupled with standardization, are bound to have a considerable impact on switching costs and network effects. these would run counter to the long - term objective of enhancing market access with evolving technology. i believe that it is safe to say that the more an industry depends on interoperability, the more the standards will be evidenced. my fear is that standardization has the potential of creating an over reliance on certain technologies, thereby limiting the adoption of new and more efficient technologies. open digital platforms can improve interoperability and widen consumer choice by expanding the network of available access points for consumers and service providers. thirdly, the growing adoption of digital financial services also raises a number of consumer protection concerns. these include : a lack of safeguards for funds held by institutions outside the financial regulatory perimeter ; limited disclosure of fees, terms and conditions ; insufficient agent liquidity ; irresponsible lending through digital channels, and agent fraud ; system downtime that prevents access to funds ; and unclear or limited recourse systems. what is clear is that a sound consumer and data protection framework is essential, especially for vulnerable consumers with limited resources to absorb losses. questions of data privacy amidst the explosion of cybercrime are of particular concern. questions about ownership and control of the vast data that is generated through the digital financial services also need urgent attention. building

njuguna ndung ’ u : financial sector performance in kenya remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, on the occasion of the silver jubiliee celebrations for family bank limited, nairobi, 22 june 2009. * * * your excellency honourable mwai kibaki, president and commander - in - chief of the armed forces of the republic of kenya ; honourable uhuru kenyatta, deputy prime minister and minister for finance ; mr. titus muya, chairman, family bank ltd. ; mr. peter kinyanjui, chief executive, family bank ltd. ; distinguished guests ; ladies and gentlemen : i am delighted to be here this morning to join with family bank in celebrating twenty five years of providing financial services to kenyans. allow me at the onset to appreciate the presence of his excellency the president. i also wish to salute the board, management and staff of family bank for successfully serving kenyans for the last twenty five years. for most of the twenty five years of its ’ existence, family bank operated as a building society with a microfinance focus. in the last two years, the institution has operated as a commercial bank and has registered a commendable performance. in 2008, the institution recorded a profit before tax of kshs. 530. 7 million and opened 9 branches countrywide increasing its ’ branch network to 43. this is a sterling performance, but there still remains room for further expansion and improvement. your excellency the banking sector continues to exhibit resilience in the face of various local and global turbulences. the sector has also continued to grow and now consists of 43 commercial banks, 2 mortgage finance houses and 123 foreign exchange bureaus. the first deposit taking microfinance institution was also launched last week. allow me to mention some indicators of the financial sector performance that painted a rosy picture in the last 12 months to april 2009 : • the sector ’ s assets increased by 12 % from kshs. 1. 09 trillion in april 2008 to kshs. 1. 23 trillion at the end of april 2009 as banks continued to expand their lending portfolio. • deposits increased from kshs. 880bn in april 2008 to kshs. 940 bn on the back of 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