njuguna ndung ’ u : promoting private sector credit and mortgage finance in kenya keynote address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the launch of metropol consumer and sme bureau scores, nairobi, 24 july 2014. * * * mr. peter kebati, chairman, board of directors, metropol credit reference bureau ; mr. sam omukoko, managing director, metropol credit reference bureau ; board members ; representatives of commercial banks, microfinance banks and other financial institutions ; distinguished ladies and gentlemen : it is a great honour for me to join you this morning to witness the roll - out of another innovative financial product, metropol ’ s consumer and sme bureau scores. at the outset, i wish to express my gratitude to the directors and management of metropol credit reference bureau ( crb ) for inviting me to this auspicious occasion. ladies and gentlemen : the roll - out of full file banking sector credit information sharing effective february 2014 is already yielding positive results. we are gathered here today for the inauguration of consumer and sme bureau scores, which has been made possible by the expanded credit information sharing ( cis ) mechanism. i take this opportunity to congratulate metropol crb for quickly seizing the opportunity to develop a customer ’ s scoring mechanism, that will contribute to the growth of the credit market in kenya. introduction of credit scoring by metropol crb will not only enrich the value of its credit reports to the lenders but will greatly improve the lenders credit risk management. ladies and gentlemen : when the cis mechanism was launched in 2010, the viability of the licensed crbs hinged primarily on the volume of credit reports accessed by the lenders. however, with the introduction of full file credit information sharing, crbs are now well positioned to introduce value add products such as credit scoring that will not only propel their success but will contribute to the development of the financial sector ; especially the dynamic and changing profile of collateral technology and pricing credit in our financial market. as you are aware, a high level committee was established under the leadership of the cabinet secretary to the national treasury in january 2014 to explore ways of increasing private sector credit and mortgage finance in kenya. the formation of the committee that comprised of representatives from the national treasury, central bank of kenya, kenya bankers association and other private sector representatives and market players, was informed by the government ’ s desire pursuant to vision 203

revision. a consequence of this is that the official cash rate ( ocr ) may be less predictable simply because the world in which we are making our decisions is less predictable. another challenge of uncertainty and low investment both globally and domestically is the downward pressure this creates on the global and domestic neutral interest rate. as a small open economy, our neutral interest rate is heavily driven by the global rate and we cannot escape this. a falling neutral interest rate will increasingly push the reserve bank to the limits of conventional monetary policy space, as we need to lower rates by a greater degree in order to achieve the same amount of stimulus as when the neutral rate was higher. so, what can monetary policy do to offset the effects of global uncertainty and support our long - term prosperity? monetary policy response to uncertainty the reserve bank can contribute to a stable economic environment by continuing to focus on fulfilling its dual - mandate. firstly, maintaining low and stable inflation enables organisations and individuals to carry out meaningful financial planning, by reducing overall uncertainty. this is something that is nearly impossible when prices are high and volatile or falling uncontrollably. secondly, when employment is near its maximum sustainable level, firms have a stronger incentive to make productivity - enhancing investments that raise their capacity. 5 this is hard to identify precisely, but is partly associated with the ongoing shift from manufacturing to services within the economy, with services contributing relatively lower measureable investment. 6 see nolan, pomeroy, and zheng ( 2019 ). uncertainty can affect the monetary policy response through the execution of this dualmandate. in particular, it is now more suitable for us to take a risk - management approach. in short, this means we look to minimise our regrets. we would rather act quickly and decisively, with a risk that we are too effective, than do too little, too late, and see conditions worsen. this approach was visible in our august ocr decision when we cut the rate by 50 basis points. it was clear that providing more stimulus sooner held little risk of overshooting our objectives — whereas holding the ocr flat ran the risk of needing to provide significantly more stimulus later. we can also address uncertainty through our communication and forward guidance, which are broad - ranging. we reveal our assessment of the economy — good or bad — to the public, so they can make decisions based on the best possible information amid the prevailing uncertainty. we voice the types of policies we believe may be needed to sustain long and prosperous growth —