the next 25 years. in order to contribute to the achievement of these aspirations, the financial sector has to play a clearly defined role, particularly in mobilising resources required to finance the 20 flagship projects worth ksh 500 billion that will be required over the next five years. this is a significant budget, equivalent to kenya ’ s annual budget and hence the need for a strong and vibrant financial sector that will help channelling these savings into the required investments. it is with this in mind that the government is requiring banks to double their efforts in building a solid capital base capable of supporting product innovation, savings mobilisation and expanded access of financial services to the kenyan public. let me add that the heavy infusion of public investment to attract and enhance private sector investment will be important to continue the economic growth acceleration. 5. although physical bank branch expansion programs play an important role in expanding access, it will be important for the banking sector to complement these programs with increased product innovation. the real challenge for all of us is how to enhance savings mobilisation, and effectively channel society ’ s savings to its most productive use. we, at the central bank would like to encourage banks to offer an expanded range of banking products in order to mobilise savings to support financing of economic activities in the country. this will also provide acceptable options to the investing public who are currently falling prey to schemes being touted by unscrupulous business people in the form of pyramid schemes. we need to guard our successes from these pyramid schemes menace. we will rely on the screening and monitoring roles of the commercial banks like yours to eradicate this menace and with the appropriate savings and investment products in place. 6. the banking sector in this country has, over the last few years, witnessed significant growth in consumer lending. this is evidenced by the growth in real private sector credit of 17. 7 % in the twelve months to may 2007. the resultant credit expansion has brought significant benefits to the economy, but the information asymmetry that is prevailing in the lending environment poses a real challenge in the form of credit risk for the banking sector in kenya. 7. in order to mitigate this risk and promote effective credit provision, consumer protection and strong institutions for these aspects, the central bank has been working towards the development of a credit information sharing mechanism in kenya. the banking act has recently been amended to make it mandatory for institutions licensed under the banking act to share credit information on nonperforming loans. in this regard

network effects ’, where a service becomes more valuable when it has more users. what is also worrying is the value that the market attach to these network effects. we have seen staggering valuations of tech - startups, the so called “ unicorn companies ”, that sometimes have not even realised any meaningful profits. however, their large user base and ability to scale up quickly have resulted in frenzied valuations. it is as if the world has forgotten the dot - com bubble crash of the early 2000s. for financial regulators, a winner takes all outcome is not ideal. it is associated with concentration risks and “ too - big - to - fail ” issues. concentration of risks and dependence on too few service providers never ends well. the only consolation i can think of is that “ network effects ” in the digital economy are not as durable as those found in traditional sectors such as railway networks and power grids. google and facebook may be at the top of their industry now, but remember there were yahoo, myspace and friendster. i am very sure somewhere in some garage, killer apps are being developed to rival current industry leaders. the fourth observation is that shifts in consumer needs and expectations will play a key part in the finance revolution. 91 % of malaysians today have a smartphone and 83 % will look on the internet to research new products and services. finance and business models will need to be redeveloped around changes in consumers ’ lifestyles and expectations. for example mobile banking in its traditional sense does not work anymore in this country as smartphone penetration is quite high and the public is generally receptive to new ideas and innovations. the transformation of finance and technology will also usher in an era of increasingly educated, empowered and activist consumers, who will scout for the best prices and services. globally, around a third of consumers would consider banking with a technology giant ( e. g. google, amazon or facebook ), potentially due to perceived personalisation and better customer experience. the fifth observation is that technology could be the catalyst to propel finance as a great social equaliser of the future. advancement in technology will enhance financial inclusion by addressing information asymmetry and reducing the cost of extending finance to previously underserved groups. this could grant access to around 2 billion people globally who remain unbanked today, enabling them to save, invest and uplift their livelihood. 2 / 5 bis central bankers'speeches however, the evolution of finance must also be managed appropriately to avoid displacement and exclusion. this