World Bank approves Sh3.5b loan to Kenya

World Bank Country Director to Kenya Diarietou Gaye delivers a speech during the launch of Kenya economic update edition at a Nairobi Hotel.  (PHOTO DAVID NJAAGA)

 

World Bank Group will support Kenya to develop a stronger financial system, increase long term financing and reduce the cost of credit to borrowers under a new finance programme approved on Friday.

The group's directors approved an International Development Association (IDA) credit of Sh3.5 billion ($37m) for the Kenya Financial Sector Support Project to strengthen the legal, regulatory, and institutional environment.

The new programme is intended to help Kenya improve financial stability and increase affordable and long term financing.

World Bank Country Director for Kenya Diarietou Gaye noted that Kenya's financial sector is the third largest in sub-Saharan Africa and it makes a significant contribution to economic growth and job creation.

"The opportunity for Kenya now is to transform the financial sector to provide more affordable and longer term credit to contribute effectively to growth and shared prosperity," Ms Gaye added in a statement.

Key beneficiaries

The primary beneficiaries of the programme will be the National Treasury and financial sector regulators such as Central Bank of Kenya, Capital Markets Authority, Retirement Benefits Authority, Insurance Regulatory Authority and Sacco Societies Regulatory Authority.

It will also support Kenya Deposit Insurance Corporation and the Public Debt Management Office, according to World Bank.

The programme will focus on banks, insurance and pension schemes through a more targeted approach that supports solutions to specific constraints that curtail economic growth and the job creation of the private sector.

This will also improve investment opportunities for institutional and foreign investors.

According to the statement, the new programme will build on the reforms that were supported by the Financial and Legal Sector Technical Assistance Project, which helped strengthen Kenya's financial sector in the past decade.

Financed by a bank credit of $18 million and co-financing of $10 million from Britain's Department for International Development, this project was approved by the Bank in October 2004 and closed in March 2013.

"The new facility will also facilitate access to and reduce the cost of finance, which are identified as constraints to business growth and job creation" said Senior Financial Sector Specialist and Task Team Leader, Smita Wagh.

"Stronger policy, regulatory environment and market infrastructure are needed to support the development, efficiency and integrity of the financial market," said Wagh.

The bank's Country Partnership Strategy (CPS) for Kenya and the Government's Vision 2030 identify access to finance as critical to enhancing the prospects for Kenya's growth, regional competitiveness, and shared prosperity.

World Bank expressed its commitment to continue supporting efforts to increase financial access to improve the enabling environment for private investment, which it added, plays a critical role in the country's development process.