CBK: Financial education is the key to development

By James Anyanzwa

The Central Bank of Kenya (CBK) wants the private sector to step up investment in financial education to help deal with the high levels of financial exclusion that has impeded economic development.

The banking regulator noted that financial illiteracy ranks among the major factors that have increased inaccessibility of financial products and services to the populace.

CBK Governor, Njuguna Ndung’u, said efforts by the Government to promote financial education would not work if the private sector did not provide requisite support.

Ndung’u said the Ministry of Finance, Financial Sector Deepening Trust Kenya (FSD) and the financial sector regulators were seeking ways to institutionalise the Financial Education and Consumer Protection Partnership initiative, which was formed in 2009.

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Sizeable Resources

“ I applaud some private sector players who have already committed sizeable resources to enhancing financial literacy of both existing and potential clients. Your efforts won’t pass unnoticed. A financially informed client is guaranteed business for you,” he said.

Ndung’u was speaking at a conference on ‘building financial capability’ in Nairobi yesterday. The two-day conference organised by financial regulators – in partnership with the Organisation for Economic Co-operation and Development (OECD) and the World Bank – seeks to share insights on promoting financial literacy and inclusion in Africa.

Financial Access (FinAccess) survey conducted by FSD and other partners in 2006 and 2009, shows only 18.9 per cent of the adult Kenyans accessed formal financial services in 2006. The number rising to 22.8 per cent in 2009.

Significant Role

Ndung’u noted that financial inclusion would play a significant role in financial development and it is the most sustainable approach to poverty reduction.

“The poor can accumulate capital through savings and affordable credit once there is access to the financial markets,” he said adding that financial inclusion would also lower unit costs of financial products and services.

Building financial capability has assumed center stage in recent years as an initiative of enhancing financial inclusion.

Financial capability refers to possession of knowledge on financial matters to confidently take effective action that best fulfils an individual’s personal, family and global community goals.