As Kenya continues to mature as an economy, it is important that the private sector ensures how it earns profit is sustainable and responsible — not because this is a trendy concept in corporate circles but because it’s the most intelligent way to operate.
Not only is the capacity of regulators to ensure adherence to legal obligations increasing but irresponsible behaviour is creating reputational risks that can negatively affect the firm’s bottom line.
A sector of interest in this conversation is banking. Kenya is lauded for expanding financial inclusion to 75.3 percent by 2017, a 50 percent increase in 10 years. The country is also lauded for its mobile money and e-banking platforms which cement Kenya’s position as the financial anchor of the East Africa region.
By 2013 Kenya held a 60 percent share of assets in East Africa’s banking sector. It is therefore crucial that the banking sector pursues responsible and sustainable strategies as this has ripple effects on the region. Luckily, there are initiatives focused on pooling the banking sector to play a role in promoting sustainable development.
The UNEP-Finance Initiative (UNEP-FI) seeks to make the banking sector part of a more sustainable economy by lending to economic activities that yield the best return from society’s point of view and seeks to strengthen the sector’s ability to play a leading role in achieving the Sustainable Development Goals and the Paris Climate Agreement.
While international banks active in Kenya are members, only two Nairobi-headquartered banks are part of this initiative; the KCB Group and Commercial Bank of Africa. The Kenya Bankers Association (KBA) advocates for the Sustainable Financing Initiative, which has guidelines for financiers on how to optimise the balance between business goals and socio-environmental concerns.
We need commitment from all actors across the financing sector. It is simply not enough to allocate money to green causes. We need a fundamental approach to our financial knowledge with an ambitious agenda on sustainable growth.
Clear terminology must be defined and financial regulation needs to be assessed at every level to achieve optimal disclosure and transparency and to ensure success. This is where the UNEP FI International Banking Principles for Responsible Banking will see the alignment of a standard and sustainable banking practices.
As a boost to the original KBA SFI principles, banks will be able to align business strategies with customer needs and society’s goals in line with the Sustainable Development Goals through the UNEP FI Responsible Banking Principles.
The proposed principles include alignment, impact, clients, stakeholders, governance and culture, and transparency and accountability.
It is crucial for financial institutions to incorporate principles into corporate strategy funding decisions and product/service definition processes, because banks can be influential in supporting and promoting environmentally and socially responsible projects and enterprises.
So what is the point of highlighting this? Well, as consumers of financial products, Kenyans should encourage our banks to align themselves to the UNEP FI responsible for banking principles.
Perhaps in doing so, not only will the flow of illicit financial flows in the sector decrease, a greater array of responsible financial products will be created to meet the needs of excluded Kenyans and businesses.