indicators of financial sector performance for the quarter ended june 2009 to show not only its resilience but its source of strength : • the sector ’ s assets increased by 15 % from kshs. 1. 09 trillion in june 2008 to kshs. 1. 26 trillion at the end of june 2009 as banks continued to expand their lending portfolio. • deposits increased from kshs. 871bn in june 2008 to kshs. 954bn mainly due to 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 a cushion against periodic shocks. • the sector ’ s average liquidity at end of june 2009 was 40. 9 % well above the statutory minimum of 20 %. • the number of people employed by the sector increased from 24, 435 at the end of june 2008 to 25, 766 at the end of june 2009. • the number of branches at the end of june 2009 stood at 930 an increase of 158 branches from the corresponding period in 2008. • the number of accounts has similarly increased to 6. 7m accounts from around 4 million accounts in the same period – shows we need to do more on this count. ladies and gentlemen, our appeal to the banking sector is to put up strategies that will support and stimulate the private sector. banks stand to benefit from a strong and vibrant private sector. the cbk has shown the industry the way by the recent successive reduction of the central bank rate and cash reserve ratio. it is good and encouraging for banks to post healthy profits, but also good in tandem with that to reduce the lending rates to encourage the private sector lending and financing both investments, working capital and reducing the risks of default. i would like to reiterate once more that the central bank welcomes initiatives and innovations by the banking sector in coming up with new products and is committed to the creation of an enabling regulatory environment towards this end. i would therefore urge the banking sector to seek diversification of their products in light of the dynamic banking environment to leverage on their growth and earnings. such diversification of financial services like the debit card we are launching today do help to reduce transactions costs. but the banks should let us know how we can help to reduce risks and costs if they are the ones sustaining higher lending rates – but also keeping deposit rates low! ladies and gentlemen ; it is now my honour and pleasure to

by formal financial sector, namely commercial banks and the kenya post office savings bank, while 8 per cent are served by semi - formal financial service providers such as microfinance institutions ( mfis ) and savings and credit co - operatives societies ( saccos ) and the remaining 35 per cent are served by informal financial service providers ranging from accumulating and rotating savings and credit associations ( ascas and roscas ) to shopkeepers and money lenders. this indicates a big gap in access to financial services by kenyans that i expect deposittaking microfinance institutions ( mfis ) to play a major role in filling it by expanding access. given this scenario the microfinance deposit taking institutions will be playing a major role in narrowing the service gap. ladies and gentlemen, the former un secretary - general, kofi annan stated that “ sustainable access to microfinance helps alleviate poverty by generating income and wealth, creating jobs, allowing children to go to school, enabling families to obtain health care and empowering people to make the choices that best serve their needs. … the great challenge before us is to address the constraints that exclude people from full participation in the financial sector. ” i couldn ’ t agree more and this is the challenge before us. a financial system that serves only a minority of a country ’ s people is biased and unacceptable. all inclusive financial system that provides access for the majority is the central goal of the development of our financial system as envisaged by vision 2030. the government, as envisaged in vision 2030, will strengthen alternative financial service providers including mfis and saccos, among others, to play a major role in savings mobilization and wealth creation, thus contributing to poverty reduction and economic growth. ladies and gentlemen, we expect that when the act and regulations are fully implemented, it will bring, in the not too distant future, a new breed of microfinance institutions, the deposittaking mfis, which will enable these institutions to mobilise savings from the general public. thus, the act and regulations will set in a new era in the growth and development of the microfinance industry by integrating the industry to the formal financial sector, thereby promoting competition, efficiency and access. through this, we expect the microfinance industry to play a pivotal role in deepening financial markets by expanding access of affordable, appropriate and innovative financial services and products to majority of kenyans. these include cellular phone banking, alternative, low cost