Kenya to Strengthen Microfinance Institutions

Oct 2009
Nairobi, Kenya, October, 29 2009 - The government is working on a legal framework that will enable commercial banks to transact business through third party agents.

Speaking during the opening of three day conference organised by the microfinance network, Finance minister Uhuru Kenyatta said the introduction of branchless banking was intended to increase penetration of banking services in the country.

“To enhance financial services, Central Bank and other stakeholders are working on legal framework that will enable branchless banking through use of third party agents like Saccos, micro-finance institutions, retail outlets and petro stations.” he said.

Mr Kenyatta said the government would also improve the regulatory environment for the development of the micro-finance institutions.

He said the micro-finance Act 2006 was now operational, and a separate division at Central Bank to supervise the sector had been established.

He said the technical capacity would be continually improved.

Micro-finance Network is a global membership of institutions in the microfinance institutions.

Increasing access to financial services to households and small and micro enterprises, Mr Kenyatta said, were priority in the financial sector reforms.

According to study by FinAccess, only 27 per cent of active population have access to formal finance, and 35 per cent to informal finance services.

However, 38 per cent are still excluded from accessing any form of financial services.

He said it was urgent that more people be availed with financial services, adding that the government and the private sector had partnered to increase the population in formal finance to 62 per cent by 2030, as stipulated in the development blueprint that aims to turn Kenya into a medium income economy in 20 years.

Equity Bank managing director, James Mwangi said the MFIs had survived the global financial crisis due to the low integration with international financial systems, and it would not be prudent to introduce stiffer regulations which could stifle the growth of the sector.

“Traditionally, any crisis is followed by tightened regulation. We are saying that instead of reacting, can we respond to the challenges.” he said.

He said Africa was not affected much by the global crisis because of the conservative regulatory framework.

Instead, he said, the country should learn about issues that cushioned it from severe effects of the crisis, and build on them rather than introduce more regulations that could also kill innovation.

Source : Daily Nation

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