njuguna ndung ’ u : transformation of banks in kenya address by prof njuguna ndung ’ u, governor of the central bank of kenya, during the inaugural session of the 11th bank human resources conference 2011 of the indian institute of banking and finance, nairobi, 28 april 2011. * * * distinguished guests ; the chief executive officer, indian institute of banking and finance ; members of the institute ; all protocols observed ; ladies and gentlemen : i am delighted and honoured to have been invited to preside over the opening ceremony of this conference organized by the indian institute of banking and finance. at the onset, kindly allow me to extend a warm welcome to all participants attending this important conference. the theme : “ managing transformation for achieving growth ” is indeed compelling. growth is driven by fundamental factors, but key among them is the transformation of markets and institutions to guard the market and define appropriate incentives. one such market is the financial market guided and regulated by several institutions. today, i will share my thoughts on how the central bank has transformed the banking sub - sector as a means of transforming and deepening the financial sector in line with kenya ’ s development goals. let me parade at least seven of them : 1 ) rollout of branch networks to provide financial services to remote and lower income areas : the expansion of branch networks in the financial services industry has registered significant growth over the last 4 years and is well distributed across all regions in both rural and urban centres. currently, we have 1064 branches from 740 in 2007. 2 ) allowing mobile phone financial services to provide a new technological platform : this entails approval for banks to leverage on mobile phone technology to present convenience and lower costs to their customers without compromising quality of service. through mobile phone banking, customers are now able to perform their transactions “ anytime, anywhere ’ ’. mobile phone money transfer has evolved from the initial concept of transferring money from one individual to another to include other functions such as payment of utility bills, disbursement and repayment of loans, payment of salaries and deposit mobilization. 3 ) introduction of agent banking mechanism : this is the “ banking beyond branches ’ ’ model where commercial banks are allowed to engage third parties to provide certain banking services to increase outreach of the banks to the vast under - banked and unbanked kenyan populace. in a nutshell, agency banking enables banks to leverage on additional cost effective distribution channels to offer financial services. so far 5552 agents have been approved and are providing

to tap the market for long term funding through bond issuance. five infrastructure bonds worth ksh. 130. 85bn have so far been issued thereby increasing the range of products in the market for purposes of diversification. 4. creating more investment opportunities to spur national savings – the issuance of a 30 - year savings development bond in 2011 and the reduction of minimum entry into treasury bills market from ksh. 1, 000, 000 to ksh. 100, 000 in january 2009 were key milestones towards promoting a savings culture among the populace and in widening the investor base for the government securities market. bis central bankers ’ speeches 5. putting in place the automated trading system ( ats ) – the introduction of the ats at the nse in november 2009 was a great step towards achieving bond trading efficiency, effective pricing, increased market confidence and transparency as well as enhanced reliability and firming of the yield curve. ladies and gentlemen, a well - developed and functioning financial market is regarded as the lubricant for the economy. in order to further enhance the proper functioning of the financial market, the central bank together with other market stakeholders has been working on a number of initiatives to further enhance the bond market so as to support the country ’ s development agenda under vision 2030. these reforms include : • development of the over the counter trading platform, • introduction of online bidding for government securities, • implementation of government securities market makers. the step taken by the nairobi securities exchange to introduce the ftse nse government bond index is a welcome initiative for this market as the index will play a key role in providing a benchmark tool for measuring market performance. it will also facilitate diversification through emergence of new financial products and market participants thereby encouraging foreign investors. finally, it will have the benefit of opening up the market to the rest of the world and increasing kenya ’ s financial sector competitiveness in the region and across the world. it surely does set the pace for the regional market. i wish therefore to congratulate the nairobi securities exchange for the foresight of developing the bond index. with these remarks, ladies and gentlemen, i now declare the ftse nse kenya shilling government bond index formerly launched. thank you all for your listening bis central bankers ’ speeches