njuguna ndung ’ u : the methodology of collection, compilation and analysis of international remittances statistics remarks by professor njuguna ndung ’ u, governor of the central bank of kenya, at the regional course on “ the methodology of collection, compilation and analysis of international remittances statistics ”, nairobi, 17 november 2014. * * * dr. sehliselo mpofu, director, macroeconomic management programme – mefmi ; distinguished facilitators and mefmi staff ; delegates ; ladies and gentlemen : it is a privilege for me to join you on this important occasion of the official opening of this regional course on “ methodology for collection, compilation and analysis of international remittances statistics ”. allow me from the onset, to extend a cordial welcome to you all on behalf of the government of kenya. we are indeed honoured and happy to host this important activity here in nairobi, kenya. i would like also to extend a very special welcome to the delegation from mefmi. we are honoured to host one of your capacity building events this year. as always this has attracted a high level of interest and attendance, an indication of the perceived need to bridge the existing capacity gaps in the compilation of remittances statistics. let me also thank the distinguished resource persons, dr. emmanuel kumah, who was formally of the imf statistics department, and mr. moris mpofu from the reserve bank of zimbabwe for accepting to bring their expertise to this course. i am confident that their vast knowledge will enable them to share experiences in this critical policy area and contribute immensely to the enhancement of skills in the mefmi region. as you are all aware, international remittances have grown to become significantly important in providing foreign exchange and financing. they, particularly, support millions of poor recipients. we cannot therefore afford to ignore the quality of data for such an important contributor to economic growth and development. until recently, unlike other countries with significant numbers in the diaspora, we in africa have paid little attention to the role of remittances in our development thinking. this must now change. there is increasing awareness of the importance of these remittances due to the fact that, unlike other financial flows, remittances mostly go directly to households, either for investment or consumption smoothing. therefore, they have important poverty alleviation benefits. the critical questions are therefore how much of this money is coming into

banking sector embraces risk management. the first challenge relates to the implementation cost, particularly amongst medium and small banks. human resource competences are also a constraint. the other key challenge we note from our regulatory seat is the view by some institutions of risk management from just a compliance perspective. these are not insurmountable challenges and market players should pool resources and efforts to address them. in this regard, the central bank will work with the banking sector to entrench risk management. the bank will also leverage on the kenya school of monetary studies ( ksms ) to provide capacity building programs on risk management for the sector. i would also urge banks not to view risk management just from a compliance perspective but also as a business imperative. entrenchment of risk management enables institutions to effectively price their products in line with their risk profile. this will not only enhance their competitiveness but also maximize shareholder value. but information must be available to provide assessment on the risk profile. the central bank of kenya will therefore continue with its efforts to enhance risk management in banks. this drive will be supplemented by initiatives to scale - up surveillance at the system - wide level. in this regard, the bank ’ s existing early warning system will be scaled up to incorporate both macro and micro prudential indicators of financial stability. other measures that the central bank will take to strengthen it ’ s supervisory tools include : • stepping up supervisory co - operation and co - ordination with domestic and foreign financial sector regulators. this is particularly pertinent as kenyan banks extend their reach locally and regionally and also as products developed encourage other regulators to come into the picture. • encouraging the adoption of forward looking techniques by banks in their risk management framework. this is particularly in regard to the use of stress testing. this measure will however be accompanied by “ market education ” to ensure that the results are not misinterpreted. my role this evening was just to set the stage for the lively interactions on risk management that will follow shortly. the central bank is certainly open to considering ideas that can push forward the risk management frontier. it now remains for me to wish you fruitful deliberations and a pleasant evening. thank you.