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CBK governor scores big on financial services expansion

On his departure from the governor’s office at the Central Bank of Kenya, Prof Njuguna Ndung’u will probably tout increasing the reach of financial services to the unbanked during his tenure as one of his most significant achievements.

The financial inclusion numbers did not make for good reading in 2006, when just 26.4 per cent of Kenyans had access to formal financial services, with 35.2 per cent relying on informal services and the majority (38.4 per cent) excluded altogether.

The latest statistics show that by the end of 2013, 66.9 per cent of Kenyans had access to formal financial services. The size of the bankable population still reliant on informal services had shrunk to 7.8 per cent, while those excluded were at 25.3 per cent.

“It is significant that things like mobile money, agency banking, the additional currency centres and licensing of micro-finance banking institutions were all brought up during his tenure. As banks, it has given us a wider base on which to spread our services,” said the Kenya Bankers Association chief executive Habil Olaka.

The wide acceptance of mobile money and its co-option into the banking system stands out as the key driver of financial inclusion in Kenya.

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Prof Ndung’u crucially backed Safaricom’s M-Pesa in 2007 and 2008 when banks were making a concerted effort to curb the growth of mobile money transfer services, with the lenders having the backing of some top Treasury officials in their endeavour.

The banks, keen to protect their turf, argued that the mobile companies were not allowed to carry out the services as per the Banking Act, and the governor’s backing of this view would most likely have slammed the brakes on the nascent mobile money services.

Today, nearly all banks have integrated mobile money into their systems and are among the leading innovators in utilisation of the technology.

Mobile phone money transactions in December last year were valued at an average of Sh7.27 billion per day, with a total user base of 25.2 million Kenyans.

Agency banking, introduced in May 2010, has allowed banks to reach more people at a lower cost, and today there are over 35,000 agents.

As a result, 76.7 per cent of Kenyan’s now have a financial service within a five-kilometre radius, which is the highest level of access in Africa.

Other developments in the financial sector that came up during Prof Ndung’u’s tenure include the licensing of deposit-taking micro-finance institutions, the first being Faulu Kenya in May 2009.

To date, nine more have been licensed across the country, the latest being Daraja MFB last month.

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