Tough road ahead for incoming CBK Governor

First, I would like to commend the outgoing CBK Governor, Prof. Ndung’u for steering the bank in a direction that has seen tremendous growth in the financial sector, not to mention the deepening of the financial inclusion eco-system and the innovation of products and services. To this end, he has done the sector proud.

Prof Ndugu oversaw growth of a sector that has put Kenya on the global map in terms of financial innovation in times when regulation promised to stifle any potential growth. As he leaves, many will remember him for this. However, he leaves also, a legacy of inaction against the commercial banks whose greed was too much to contain within the bounds of legislation and the good Prof did nothing about this.

The CBK lending rate has been at between 8-12% over the period the Governor was in charge yet commercial banks never honored this and lowered their rates. The lowest any bank dared its shareholders was 18% and CBK failed ordinary Kenyans on this front as access to credit remained high during his tenure.

Prof Ndung’u departs at a time when the financial sector is undergoing serious reforms and innovation from diverse players. A time when banks are becoming mobile firms and telecos are becoming banks. The convergence of products and services put in sharp focus the regulations industry and the element of taxation. This will be of keen interest to watch as the new Governor takes over.

I am not the appointing authority and hence I will not belabour the point on who will be appointed or not. Kenya has a way of disappointing even the best loyal fans. Instead I would like to list what I would like the new Governor to focus on as they take their job.

• The issue of taxation has reared it’s ugly head once again especially with the investment aspect on the NSE with the Capital Gains Tax. This, may not be the purview of CBK but gives the view of the related tax challenges that have hindered further innovation for financial inclusion. The element of double taxation for various bank products and services is an issue for bank customers and this is an issue that the new Governor must look into. This raises the issue of hidden charges that banks have being levying which has now been compounded when you add the hidden mobile transaction charges that ordinary end users have no idea how to address. This means that the CBK Act must be reformed to be in line with the dynamic nature of technology advancement in the financial aspect. This should be driven towards deepening the financial inclusion to ensure that majority of Kenyans are banked.

• There is a tight monetary policy, which I believe is ignoring other key macro economic issues just to keep the KES from weakening further against major currencies. I expect the new governor to let the markets be and let the KES find its own true strength against the major currencies. We can’t keep protecting the KES when key aspects of the economy are not functioning.

• The new Governor must ensure that all commercial banks adhere to the benchmarked lending rate to ensure that access to credit is easier and affordable to all in a bid to spur the economy. The billions in profits that banks have been making are immoral to say the least as the end users continue to suffer as they seeks ways and means to access capital for their businesses. The CBK has the mandate to ensure this is done and I hope they can do this once and for all.

• The New CBK governor must look into the mortgage challenge that this country is going through and to champion the needed reforms to ensure that the licensed lenders have accessible terms to open up the industry.

• Illicit and/or illegal money is abundant in the country and circulating in businesses. This is something that must be stopped. A lot of underground murmurs have been saying how Kenya is a key hub in the African continent for money laundering and if this is ever proved then the consequences will be dire for us as a country. This has also distorted the business eco-system for the legitimate businessman. It is a serious issue that needs to be handled with CBK championing the fight.

My list is long, but this is Kenya. If the new Governor can handle these five, then Kenya will continue to lead in the financial innovation realm.