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Rural economies can spur faster national recovery

By Joshua Oigara | October 31st 2020

Kenya has over the past two decades experienced significant economic growth brought about by relatively stable macroeconomic conditions.

We have seen devolution rolled out as part of the Constitution, and there has been varied success across the country, but the fundamentals of the economy are based and depend greatly on trade in Nairobi, the capital city.

More can be done to unlock the potential of rural economies to achieve more stable growth and expand their capacities for more opportunities for the citizens.

The recent opening of the Central Bank of Kenya (CBK) centre in Kisii town is a pointer in the right direction.  The cash centre will give banks in the town more flexibility in handling of currency, as they will no longer bear the costs of transporting cash all the way to Kisumu. The CBK Governor Dr Patrick Njoroge, rightly put it during the launch last week, this facility is a major milestone in provision of CBK services to Kenyans and is expected to catalyse successful devolution and development of the whole county.

It will offer a wide range of services, including currency services to the public and bank branches, opportunities for investment in Government securities (Treasury bills and bonds), and general banking services to county governments. The establishment of the centre was yet another example of how the government can facilitate the private sector to enhance its potential and contribute to the development of the devolved economies and inclusive growth.

The rural economy is still not as strong as it could be.  That’s why every effort should be pursued to look for ways to promote jobs and opportunities right now in our counties. The setting up of this cash centre alongside others in Nyeri, Meru, and Nakuru, as well as the CBK branches in Mombasa, Kisumu, and Eldoret will significantly lower the cost of banking services. It is imperative, therefore, that banks pass the benefits to customers in form of accelerating financial inclusion.

The timing of this launch wouldn’t have been more perfect. As the country begins economic restart and recovery, the role of the CBK would be more central in enabling banks to deepen inclusion, enhance dignity in finance, and ensure no one is left behind.

Based on the experiences of the 2009 global recession, I am convinced that economic recovery is not going to be driven by Nairobi alone. To facilitate the economy, banks must work to unlock growth and meet societal financial needs. First, as a facilitator of access to basic and quality financing products and services; Second, by adapting the offer to the possibilities of the most vulnerable people; And third, by promoting their financial education to the public to know how to manage their resources efficiently. Our response as an industry has so far has been rapid and effective. The pandemic is an opportunity to build on these gains to ensure more inclusion.

As a first response to the economic implications of the crisis – especially to many of our smaller business customers – we have not only restructured repayment terms, but we are also developing products and services tailored towards meeting the challenges occasioned by this pandemic.

With no clear end in sight, with the Covid-19 pandemic still rampant, banks are acutely aware that how they respond to the crisis now will determine how economies will rebuild. The industry fully realises and acknowledges the importance of maintaining economic and financial activity as normal as possible and will continue to have access to credit.

Easing access to affordable financial products and services will be an important aspect not only in driving economic recovery but also sustainably enhancing livelihood and strengthening self-reliance in some of the remotest parts of the country.

Now, more than ever, coordinated response to inclusive growth amongst various stakeholders including the private sector, government, donor community.

In KCB, we remain committed to our efforts as a financial catalyst across the East African region. We have developed a solid response plan to support businesses and we have identified special market segments and households including women and youth-owned businesses and persons with disabilities. We are deliberate in our efforts to help them bounce back.

The pandemic has left deep economic damage. A combination of immediate relief and long-term reforms are needed to help the economy bounce back. Now is a perfect time for businesses and government agencies including central banks to do their part.

-The writer is KCB Group Chief Executive Officer and MD

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