Kenya Urged to Reform Its Financial Sector
Africa News, - For micro and small enterprises to thrive in Kenya there is an urgent need to reform the financial sector, a UN official said in Nairobi last week.
The United Nations Development Programme (UNDP) deputy resident representative, Ms Nardos Bekele-Thomas, said the provision of access to credit, savings, insurance, transfer remittances and other financial services through the intermediation of micro finance institutions needs to be seen as fundamental requisite in helping Kenyan societies secure better livelihoods and prosperous futures.
"While we are establishing the necessary and needed strategies to improve the delivery of services by MFIs, create the necessary linkages between our formal banks and the MFIs, and also regulate the MFI industry, we also need to reflect on the past, draw some lessons and take individual and collective responsibility in correcting our mistakes," Ms Thomas said.
She was speaking during the launching of the International Year of Microfinance and Microcredit at the Kenyatta International Conference Centre, Nairobi, last week.
The UN official said there was a need to expand the number of stakeholders in the economy through the promotion of micro and small-scale enterprises and accelerate their graduation to higher levels, so as to create the necessary space that the young generation will require to exercise their creativity and innovative inclinations.
"Our small and micro enterprises, allover Africa, are in dire need of the requisite conducive environment, support institutions for research and development, technology, quality assurance, strategic technical and managerial skills, and access to financial services," she said.
Ms Thomas said, while the government is primarily responsible for the creation of a conducive policy environment, it is the partnership of the private and public sectors that could make a difference in solving the daunting challenges faced by micro and small enterprises.
She said the National Co-ordinating Committee will plan and involve at least five micro-finance institutions in the proposed (UNDP-supported) initiative on Growing Sustainable Business in Kenya. This initiative will: Broker partnership between Financial Service Associations (village banks) and larger commercial banks and strengthen credit and financial intermediation between the Financial Services Association, micro-finance institutions and the commercial banks.
The chief executive officer of the Association of Micro-Finance Institutions (AMFI) Ms Beatrice Sabana said, whereas other African countries like Uganda had realised the potential that microfinance has in fighting poverty and prioritised the development of the microfinance industry, in Kenya the story is different.
She said microfinance was treated as the distant cousin of the banking sector.
"Just last week, it was reported that the government had received financial support for its financial sector reforms. So far these reforms have targeted the banking system and yet the banking system covers only 10 per cent of the population," she noted
Statistics indicate that only 1 per cent of Kenyans have access to insurance services, despite the fact the poor and low-income earners are the most vulnerable. These people are effectively locked out of the mainstream economic activities.
Ms Sabana said the microfinance institutions were the alternative financial intermediaries that will bridge the huge gap between the demand and supply of financial services to the majority of poor households in Kenya.
To many of the beneficiaries, this industry is delivering concrete benefits in the form of savings, credit and insurance services, leading to the formation of assets and increased incomes among the low income and poor people of Kenya.
She urged the Government to embrace and support microfinance revolution as a way of combating poverty.
The Vice President Mr Moody Awori, who attended the function, said the government was in the process of preparing a Micro Finance Bill to provide legal framework for regulation and supervision of micro-finance institutions.
"Our plan is to have the legislation in place before the end of the current financial year," he said.
The VP said despite the potential dynamism of micro and small enterprise sector, it had not been fully exploited. He said studies conducted both locally and abroad had shown that lack of access to affordable credit was one of the biggest constraints to the growth of micro and small enterprises.
Mr Awori said for MFIs to reach out to the poor more effectively, they will need to work closely with the other financial institutions.
23 November 2004 ,Copyright 2004 AllAfrica, Inc.
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