Financial Sector:  Kenyans appreciates the key role of macroeconomic stability has played in economic recovery and rapid growth experienced by the country since 2003. This has resulted in low levels of inflation, strictly limited public sector deficits, a stable exchange rate, and low interest rates. For this reason, Kenya Vision 2030 places the highest premium on the stable macroeconomic environment the country now enjoys, and expects it to continue in the future as a matter of policy. This is the only way in which confidence among Kenyans and investors can be created and sustained. A stable economic environment also works in favour of the poor who stand to lose the most in periods of high inflation. All the projects proposed under Vision 2030 will, therefore, be implemented subject to the parameters set under the macroeconomic stability framework.

Programmes and Projects for 2008 - 2012

The projects and programmes to be pursued in the medium term for the various components of the financial sector will aim at creating a vibrant and competitive financial sector driving high levels of savings and financing the country’s investment needs. They will be anchored on the flagship projects for the sector, namely:

• Consolidation of the banking sector through enhanced capital base;
• Increase financial access through formalisation of microfinance;
• Deepen capital markets by raising institutional capital and expanding bond and equity markets; and Leverage remittance and long term capital inflows.

In addition to the flagship projects, the strategies and action plans will be on key initiatives to be undertaken by the various components of the financial services sector, that is, banking and quasi-banking, insurance, capital markets, pensions and legal infrastructure.

Objectives under The Medium Term Plan

The key objective of the MTP for the financial services sector is to mobilise savings to realise a savings to GDP ratio of 25-28 per cent as envisaged in the macroeconomic framework underpinning the Vision 2030. This level of savings will sustain an increase in the ratio of investment to GDP of around 30-32 per cent, with a growing amount of resources channelled to support the agriculture, manufacturing and other key sectors identified under Vision 2030, including lending to micro, small and medium enterprises (MSMEs). This will also further the government’s policy objectives under the ERS, which articulated improved access to financial services for a much larger number of Kenyan households and small enterprises; greater efficiency in the delivery of financial services; and ensure the chances of a financial crisis are kept to a minimum.

Specifically, the objectives of the MTP are aimed at achieving the following:

  • Maintenance of sound fiscal and monetary policies to ensure macroeconomic stability which is key to a vibrant financial sector;
  • Review the banking sector legal and regulatory framework to align it to international best supervisory practice as set out by the Basel Committee on Banking Supervision. A revised Banking Act will be enacted in this regard;
  • Enact the Proceeds of Crime and Money Laundering (Prevention) Bill to safeguard the integrity of the financial sector Operationalise regulations for Credit Reference Bureaus to facilitate credit information sharing;
  • Promotion of a competitive, sound and efficient banking system, including strong microfinance institutions that are well regulated and supervised, that effectively mobilises savings to provide financing to support the growth of private sector; Establishment and development of non-bank financial institutions that will increase the depth of the financial sector as well as increase access of financial services to majority of Kenyans by providing a broad array of diversified services such as leasing and finance to MSMEs;
  • Development of the insurance sector that is well regulated and supervised so as to effectively protect businesses and individuals from risks;
  • Promotion of a strong pensions system that provides a secure retirement to a wider Kenyan population and which provides capital for long-term investment in the real sector;
  • Development of a safe and reliable payments system that will ensure smooth transfer and settlement of funds between customers and banks as well as between banks;
  • Strengthening of money/inter-bank markets that provide banks, enterprises, and individuals with the means for effective liquidity management;
  • Develop a comprehensive consumer protection framework;
  • Promote financial literacy/education;
  • Invest in human capital and information technology;
  • Improve the functioning of the financial system to enable it mobilise domestic savings and to promote investments;
  • Expand the coverage and outreach of financial services to all parts of the country especially the rural areas;
  • Encourage commercial banks to finance industrialisation;
  • Development of efficient and transparent capital markets with a critical mass of issues that mobilises funds for long-term investment;
  • Establishment of a legal infrastructure that promotes and enforces the rule of law in commercial and financial transactions including protection of property rights and enforcement of contracts, as well as that which supports good governance by promoting transparency, accountability, participation, and predictability; and
  • Establish a single unified notification system (register) of all security document (charges, pledges, debentures, etc) of all movable assets given by all legal and natural persons so as to encourage registration of non-traditional securities such as chattels and guarantees to improve collateral security access to credit from the formal sector.


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