the central bank continues with its initiatives to modernize the national payments system. accordingly, from 1 october 2009, value capping was effected with all payments above kshs. 1 million being made through the real time gross settlement system ( rtgs ). this initiative enhanced the security and efficiency of high value payments. the celebrated mpesa falls under this category of reforms. as we have seen this market unfolding, mpesa account holders have soared to 9 million, total transactions surpassed ksh. 48 billion a month ( or averaging ksh. 1. 6 billion a day ) and agents increased to 17, 000 in the last 3 years. ladies and gentlemen ; on the monetary policy front, the cbk has observed that despite signalling efforts by the monetary policy committee to bring down the rates of interest by lowering the central bank rate ( cbr ), banks have not responded accordingly. further, the failure of the banking system to extend the maturity of their loan products is a consequence of the characteristic nature of their deposits which are largely short term, but also their assessment and pricing of risk. to support economic development, there is need for the development of banking products that support long term lending. these development banking products will play a significant role in influencing a downward trend in commercial banks lending rates. the central bank will therefore explore how development banking products can be introduced into the market to enhance the monetary policy transmission mechanism and lengthen the maturity profile of commercial bank term loans. developments in the bond market : the central bank has successfully raised funds for infrastructure development for the government through infrastructure bonds. these infrastructure bonds have not only facilitated financing of the government ’ s infrastructure program but also set the pace for the issuance of similar bonds by corporate entities such as kengen and safaricom. this, coupled with automated trading in the nairobi stock exchange will be important for a vibrant bond market. in addition, to deepen and widen the bond market, the central bank implemented the following measures : issuance of benchmark bonds : the bank together with market leaders forum adopted 2, 5, 10, 15 and 20 year maturities as benchmark bonds. this move has not only firmed up the yield curve, but has improved pricing, reflected through improved secondary market trading. reopening of benchmark bonds : this has increased trading activities in the secondary market. the shape and position of the yield : the vibrant bond market has led to a downward shift in the yield curve with an upward gentle slope reflecting stability. this has

, to deal with structural binding constraints that prevent the cost of credit to re - align itself with available incentives, market conditions as well as returns on investment. 5. ladies and gentlemen : allow me now to briefly focus on the performance of the banking sector. in 2009, the kenyan banking sector has continued to exhibit resilience in the midst of the global financial turbulences. the performance posted by banks and mortgage finance companies in the first three quarters of 2009 surpassed expectations as exhibited by the following indicators as at the end of september 2009 : • the sector ’ s assets increased by 11 percent from ksh. 1. 18 trillion in september 2008 to ksh. 1. 31 trillion at the end of september 2009 as banks continued to expand their lending portfolio. • deposits increased from ksh. 895 billion in september 2008 to ksh. 1 trillion on the back of deposit mobilization and expansion of branch networks by banks. • the total capital to total risk weighted assets ratio stood at 20 percent which was above the statutory minimum of 12 percent. this is an indicator that the sector has a reasonable cushion against periodic shocks. • the sector ’ s average liquidity at end of september 2009 was 40. 8 percent well above the statutory minimum of 20 percent. • the profit before tax for the banking sector increased by 7 percent from ksh. 34. 68 billion for the period ended 30 september 2008 to ksh. 36. 95 billion for a similar period in 2009. this reflects the increased business from expansion and diversification drives by banks. • the number of branches stood at 918, an increase of 130 branches from the corresponding period in 2008. 6. ladies and gentlemen : it is worth noting that in the year, significant steps were made in operationalising a credit information sharing mechanism for the banking sector. the banking ( credit reference bureau ), 2008 regulations became operational in february 2009. the regulations empower the central bank to license and supervise credit reference bureaus ( crbs ). the bureaus will collate credit information from banks that will facilitate credit risk decisions. this is the most significant step towards building information capital. it will allow us to influence the collateral technology in use currently. the licensed credit reference bureaus will join the family of financial sector actors. 7. ladies and gentlemen : the national payments system sits at the centre of the financial system. it is imperative that payments systems are secure and efficient. the central bank continues with its initiatives to modernize the national payments system. accordingly,