The Central Bank of Kenya (CBK) is set to develop a new system that will enable financial service providers to identify their customers electronically.
CBK and the Monetary Authority of Singapore (MAS) on Monday signed a Memorandum of Understanding to co-develop infrastructure on identity, data and electronic Know-Your-Customer (KYC) procedures. The new system is expected to offer an efficient and more credible way for banks and other service providers to identify their customers.
This in comparison to the current manual KYC process that is costly and largely dependent on information provided by the customer.
The infrastructure is also expected to feed into the digital ID system that the Government has been trying to develop that includes getting Kenyans to register for the largely unpopular Huduma Namba.
President Uhuru Kenyatta witnessed the signing of the MoU on the sidelines of the two-day Afro-Asia Fintech Festival at the Kenya School of Monetary Studies in Nairobi jointly hosted by CBK and MAS.
He said the development of the digital ID and KYC tools fits into the Government’s digital ID strategy.
“This initiative between our two central banks aligns well with the ongoing drive by my government to introduce a ‘single source of truth’ digital identity,” he said.
Among the factors that have seen central banks increase KYC requirements for banks include control of the illicit flow of money. The Singaporean central bank is expected to assist with expertise having implemented a similar system based on the Government’s ID database.
The shared KYC utility enables financial institutions to identify and verify potential customers’ details.
President Kenyatta at the same time made a case for the recently launched Stawi Loan, a mobile credit facility targeting small enterprises and leverages both traditional and non-traditional sources of credit information. The product, just as with other mobile loans, largely uses mobile money transactions by a business to allow banks to form an accurate credit appraisal of enterprises for the purpose of credit rating.
The product is against the back of declining lending to Small and Medium Enterprises that banks deem risky in the wake of the interest rates cap.
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