njuguna ndung ’ u : sustainable finance initiatives across the kenyan financial sector remarks by professor njuguna ndung ’ u, governor of the central bank of kenya, at the technical experts convening on long - term sustainable finance in kenya, nairobi, 11 february 2015. * * * dr. achim steiner, executive director, unep ; mr. manuel moses, regional head, ifc africa ; distinguished participants ; ladies and gentlemen : it is my pleasure to welcome you to this convening together with my co - host, dr achim steiner. my thanks go to dr. steiner and mr. manuel moses for putting together this forum. our meeting today follows yesterday ’ s convening with chief executive officers and leaders of regulatory agencies from the financial sector. ladies and gentlemen : i was impressed at the level of enthusiasm and ownership of sustainable finance by the ceos at yesterday ’ s convening. we should also be proud of the already budding sustainable finance initiatives across the kenyan financial sector ranging from banking, insurance, capital markets, retirement benefits and asset management. these initiatives will be shared with you in the course of today. my key takeaway from yesterday ’ s convening is that there is high level support at ceo level for sustainable finance in the institutions represented here today. ladies and gentlemen : wearing my dual hats as a central banker and regulator, let me underscore that sustainability lies at the heart of our decision making. as a central bank, we take the view that we need to go beyond our traditional mandate of price and financial stability. in emerging economies such as kenya, it is imperative that central banks also act as market development agents. in this role, central banks support development of financial infrastructure, strong institutions and a conducive policy environment. it is this underlying philosophy that has guided us in execution of our mandates that i will now turn to. first, stability of domestic prices creates an environment of certainty. the market formulates long term solutions based on this certainty. when there is uncertainty, the market develops a waiting option and slows down economic activity. a waiting option is not sustainable. ladies and gentlemen : second, we can only talk about financial sustainability when the financial markets are accessible. financial inclusion will lead to financial development and open discussions about policies for financial sustainability. several initiatives in kenya for financial inclusion include : • introduction of mobile phone financial services, • introduction of the agency banking model and currency centres to lower the cost

interest of determining how credit affects aggregate demand, a clear understanding of what motivates the private sector to seek bank credit enables the industry to react in a timely manner. and by identifying constraints, it can propose modalities for overcoming them. at the top in this agenda is to link it to investment. is our investment constrained by credit? we need to know more. ladies and gentlemen : the body of research work arising from the conference ’ s theme will obviously not be definitive ; but it will surely provide a good platform for reflection on the many ways through which the banking industry is readying itself towards further enhancing its role in the economy ’ s progress. there is also a possibility that ideas will emerge which have a quick response that can be put into practice in the short run ; furthermore, there is an opportunity to pick areas for further investigation. i am confident that the banking industry, that has remained stable on the back of the steady growth seen over the past decade, will continue to play an important role in supporting the various economic sectors through provision of credit. with an asset base of ksh. 2. 70 trillion as at the end of december 2013 compared to ksh. 2. 33 trillion as at the end of 2012, the industry is clearly maintaining the growth path. similarly, customer deposits grew by 14 percent in the period from ksh. 1. 71 trillion to ksh. 1. 94 trillion. the banking industry ’ s asset growth of 16 percent between 2012 and 2013 at a time when the economy ’ s real growth rate was less than 5 percent points to the possibility of the acceleration of the growth momentum emanating from finance. that growth will be accelerated once the overall cost of doing business that is being addressed, declines. this will ensure that the underlying asset quality accompanying the growth in the banking industry remains good. as a country, we are making strides in ensuring that financial inclusion is enhanced. the finaccess 2013 survey results revealed that kenya ’ s financial inclusion landscape has undergone considerable improvement. the proportion of the adult population using different bis central bankers ’ speeches forms of formal financial services was at 66. 7 percent in 2013 compared to 26. 4 percent in 2006. this is a notable achievement. the proportion of the adult population totally excluded from financial services has declined to 25. 3 percent in 2013 from 38. 4 percent in 2006. similarly, the proportion of kenyans accessing informal financial sources dropped from 35. 2 percent in 2006 to 7. 8 percent