By Morris Aron

Kenyan banks will partner with micro-finance institutions (MFIs) and Savings and Credit Co-operative Societies (Saccos) to draw the un-banked population into the mainstream economy.

Central Bank of Kenya (CBK) Governor, Njuguna Ndungu said the financial market regulator is working on a framework that will see even the most rural of populations gain access to affordable banking services.

"We are working on modalities that will see banks partner with grass root financial services providers such as MFIs," said Ndungu.

Among key strategies lined up for the project is a plan by Treasury to amend the Banking Act, to allow for branchless banking.

The amendment that is awaiting approval by Parliament — will allow banks to extend services to various parts of the country by partnering with established institutions that will act as their branches.

Successful adoption of the proposal will see banks offer financial services through appointed agents.

The development is bound to cut costs associated with opening a branch, and in the process reduce the cost of financial services provision for low-income groups. CBK said it plans to put in place mechanisms to ensure technological innovations such as M-Pesa and Zap are used widely.

Other areas the market regulator will be looking at include State bank reforms and consumer education.

Cost of credit

The market regulator is also betting on the recent establishment of the credit reference bureaus (CRB) to bring down the cost of credit, as bank customers will be able to use their repayment credit history as collateral to acquire loans.

"The establishment of a CRB eliminates systemic risks, which form a huge component in the pricing of interest rates," said Ndungu.

The announcements will complement past efforts by financial market players in increasing financial services access and education.

Currently, 33 per cent of Kenyans have no access to any form of financial services, while 27 per cent access financial services from the informal sector, according to a Financial Access survey by CBK.

Twenty three per cent of the Kenyan population is banked, while another 18 per cent access financial services from Saccos and MFIs.