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Financial sector to increase savings for investment from 14 per cent to 30 per cent

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By Prof Njuguna Ndung’u


The government recognizes the vital role the financial system plays in the economy.Financial services is among Vision 2030 pillarsFinancial services is among Vision 2030 pillars

In this regard Kenya’s development blue print, Vision 2030, covering the period 2008 - 2030, envisages the financial services sector being transformed into a vibrant and globally competitive sector that will drive high levels of savings to finance the country’s investment needs.

The government recognizes the vital role the financial system plays in the economy. In this regard Kenya’s development blue print, Vision 2030, covering the period 2008 - 2030, envisages the financial services sector being transformed into a vibrant and globally competitive sector that will drive high levels of savings to finance the country’s investment needs.

The transformation entails doubling deposits mobilization from 44 per cent to 80 per cent of GDP and enhancing growth of savings channeled into productive investments from 14 per cent to over 30 per cent.

This goal can be achieved by addressing the Vision’s three core objectives, namely: enhancing financial system stability, efficiency, and expanding financial access and usage.

Regarding the objective of Expanding Access to Financial Services there would be no meaningful financial sector development, if it is not accessible.

There is, therefore, a case for expanding access of quality and affordable financial services and products to majority of the population.

Access to finance will encourage savings and credit. This will effect savings/investments cycle, allowing for capital accumulation and asset building which enables the poor to escape poverty.

Safe havens for savings by the poor reduce their vulnerability to periodic economic and social shocks. Access to finance will expand the level of participants and so lower unit costs.


Our efforts to ensure expanded financial access have been measured by three national financial access surveys for 2006, 2009 and 2013.

These surveys have clearly demonstrated that Kenya’s financial landscape has considerably changed over the period 2006-2013.

The financial system is now offering a wider range of financial services and products to more Kenyans, covering a wider geographical spread, and even going beyond Kenyan borders.

This has strengthened the banks and created a wider market. These developments are a testimony to the strength and vibrancy of our banking sector it has contributed to Kenya’s financial development.

Enhancing the efficiency of the financial system has an immediate impact on the welfare of its customers and the wider real economy through the consequent reduction of costs of financial services.

Competition is essential in ensuring that financial institutions are incentivised to invest in improving productivity, efficiency and cost effectiveness.

The CBK has acted to encourage greater transparency in pricing of financial services and products to foster effective competition and delivery of services to majority of Kenyans.

On the financial stability front, the Government has continued to implement necessary reforms designed to strengthen the legal, regulatory and supervisory framework in to ensure stability of the financial system.


Lessons from the 2008-2009 global financial crisis call for regulators to invest in better regulation.

Better regulations is characterised by a regulatory framework with ability to readily identify weaknesses and emerging vulnerabilities; analyse and price risks; provide appropriate incentives (and penalties) to induce prudent behaviour in the market place; and encourage innovations and develop strong institutions of the regulators and the regulated – strong institutions enforce the rules of the game and define appropriate incentives.

FinAccess Survey, 2013 results bears witness to the above gains made in enhancing the reach and coverage of financial services to Kenyans.

It shows that the proportion of the adult population using formal financial services rose to 66.7 per cent in 2013 from 27.4 per cent and 41.3 per cent in 2006 and 2009, respectively.

The proportion of the financially excluded on the other hand has been falling steadily from 39.3 per cent in 2006 to 31.4 per cent in 2009 and now stands at 25.4 per cent of the adult population.

Equally and more striking, the proportion of the population using informed financial services has declined to 7.8 per cent from 35.2 per cent in 2006 and 26.8 per cent in 2009.

These findings demonstrate impressive achievements and vindicate policy strategies and reforms undertaken by Government and initiatives and innovations by the financial sector players’ as having helped expand financial inclusion.

It is even more interesting to note from the results that many more people are now accessing and using financial services and products supplied by diverse providers. This shows that people are now moving towards using a broader portfolio of financial services and products to satisfy their needs.

The use of combinations of all formal prudential, formal non-prudential, other formal and informal financial services except the excluded has been rising from 16 per cent in 2006 to 25 per cent in 2009 and to 29 per cent in 2013.


These patterns demonstrate that financial sector participants require choices and therefore the need to maintain diversity and encourage competition amongst providers of the different financial products in different market segments.

The survey results are as a result of developments in the wider economy, policy and regulatory reforms, increased competition and innovation and advances in information and communication technology.

These developments have set off a dramatic shift away from the traditional delivery of financial services. In the banking industry, the introduction of Automatic Teller Machines (ATM) a few years ago already moved customers out of the physical branches.

And now more than ever, access through point-of-sale (POS) devices, the internet and mostly through mobile phones platforms have accelerated and are still poised to accelerate the swing to branchless banking.

We, however, still have some ground to cover in expanding access to financial services, given that about 25 per cent of the population remains totally excluded.

Prof Njuguna Ndung’u is the Governor, Central Bank of Kenya. This is an edited version of a speech he delivered during the launch of FinAccess Survey 2013 in Nairobi.



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