njuguna ndung ’ u : initiatives to foster the growth of the kenyan sme sector remarks by prof njuguna ndung ’ u, governor of the central bank of kenya, at a breakfast meeting celebrating the long collaboration between diamond trust bank and the international finance corporation ( ifc ) to support kenyan smes, adding new focus on very small enterprises, nairobi, 5 october 2012. * * * executive vice president and chief executive officer ifc ; jin - yong cai chairman, diamond trust bank kenya ltd ; abdul samji managing director, diamond trust bank kenya ltd ; mrs. nasim devji board members ; management and staff ; distinguished guests ; ladies and gentlemen : i am pleased to be here this morning and i thank diamond trust bank for the invitation. this breakfast meeting is to celebrate the long standing collaboration of more than thirty years between diamond trust bank ( dtb ) and the international finance corporation ( ifc ). before making my remarks, i would like to congratulate mr. jin - yong cai on his appointment as executive vice president and chief executive officer of ifc. ladies and gentlemen : as the world ’ s leading private sector development institution, ifc has continued to support public policies and investments that create opportunities for the poor developing economies. the activities of ifc have helped developing countries register improved growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments. in financial year 2012, ifc ’ s investments reached an all - time high of more than usd20 billion, leveraging the power of the private sector to create jobs, spur innovation, and tackle the world ’ s most pressing development challenges. this is how dtb ’ s long - standing relationship with ifc has thrived. ladies and gentlemen : dtb has operated in east africa for over 60 years starting off as a small financial institution in mombasa. dtb ’ s focus and commitment to enhancing convenience for customers through branch network expansion has driven the bank ’ s growth in recent years and it currently has 79 branches in kenya, tanzania, uganda, and burundi. the bank became the first bank in east africa to join the ifc africa micro and small micro enterprises ( msme ) finance program in 2008 which provides advisory services to commercial banks seeking to expand their msme banking services. i am also informed that dtb is working closely with the ifc advisory services program to strengthen its positioning in the msme market segment. ladies and

i have alluded to in my remarks in the recent past at other fora. the use of agents by banks should lower service delivery costs as they do not have to put up “ brick and mortar ” structures to expand their footprint across the country. it is the central banks ’ expectation that savings from such innovations will be passed on to customers in the form of lower charges and lending rates. as i draw to a close, i wish to briefly dwell on credit products. competition in the recent years coupled with aggressive marketing has increased personal loans by banks. as we have seen from the survey presentation this morning, the cost of credit is not just the lending rate but also includes other costs such as commitment fees, negotiation fees, legal, valuation and insurance fees. the challenge that we must then face is disclosure to consumers of the total effective cost of loans. in this regard, i would urge kba to require in its ’ code of conduct that banks disclose the total all inclusive “ annual percentage rate ” of credit facilities to enable customers make informed choices and avoid “ debt overloads ”. the recent years have produced results that we will quote for many years to come : a ) lowering barriers to entry : threshold of minimum balance, loan requirements, etc, improves access to financial services. b ) lowering transactions costs attracts potential micro - savers to banks. c ) banks can make profits in downstream activities. let me end by reiterating that the central bank remains committed to continued consumer education and sensitization on banking products and services in conjunction with banks, the media and other like minded players. we are convinced that this will bring on board more kenyans into the formal financial sector, uplifting their well being and enabling them to participate in and benefit from our national development aspirations. i thank you all once again for honouring our invitation and it is now my pleasant duty and honour to officially launch the survey on bank charges and lending rates. thank you.