Financial sector reform in Kenya: A framework for development
This project has provided a roadmap for effective financial sector reform in Kenya. As part of its Vision 2030 Strategy, the Kenyan Government recognised the need to develop a national benchmark for the financial sector to support the achievement of its wider development goals. We were commissioned by the World Bank to work alongside the Kenya Treasury to draft the Comprehensive Financial Sector Reform and Development Strategy (CFSRD). This included a medium term framework that formed the basis of the Sector Plan for Financial Services 2013-2017. We conducted comprehensive analyses of five major financial sub-sectors banking, payments, capital markets, insurance and Pensions. Other significant areas such as funding for Micro Small and Medium Enterprises (MSMEs), consumer protection and broader regulatory issues were also explored through comprehensive reviews and stakeholder discussions. A series of recommendations were developed to support the medium term development of the sector,
A sound, inclusive financial sector is one of the most important factors for socio-economic development in any country, helping to reduce extreme poverty and support livelihoods by improving access to financial assistance for those most in need. In Kenya, recent progress in strengthening the finical sector can be largely attributed to isolated examples of innovative service provision rather than wholesale, sustainable reform of the sector.
The Kenyan Government recognised the need to develop a national benchmark for the financial sector that is aligned with the country’s wider development goals outlined in its ambitions Vision 2030 agenda.
This project was established to address this need by supporting the development of a five year strategic plan that incorporates the interests of a number of different financial sub-sectors into a single policy framework.
We worked with the Kenyan Ministry of Finance and other financial sector stakeholders to support the design and implementation of a Comprehensive Financial Sector Reform and Development Strategy (CFSRD)
A key focus of work was the development of a Sector Plan for Financial Services, incorporating a medium term framework for the five year period 2013-2017 covering a number of financial sub-sectors including banking, payments, capital markets, insurance and pensions. We provided technical support to conduct analyses, identifying the main challenges and emerging issues facing each sub-sector and highlighting critical actions and policies and timelines for their implementation.
We provided technical assistance in the following areas:
- Undertaking comprehensive analysis of the position of the financial sector in the broader context of Vision 2030 including a review of the existing targets and indicators used to assess sector progress
- Conducting situational analyses of all financial sub-sectors and thematic issues for inclusion in medium term plans for the financial sector. This included discussions around shorter term financial sector issues focused on banking, payments and settlements, followed by issues relating to non-bank financial institutions and the longer term concerns relating to capital markets, pensions and insurance
- Coordinating stakeholder discussion around wider issues of financial access and inclusion including the key institutions involved, the particular problems of financing micro and smaller enterprises and the issues of consumer education and protection.
- Developing recommendations around next steps in the financial sector planning process
This project has provided a roadmap for the medium-term development of Kenya’s financial sector. As a result of OPM’s support, the Government of Kenya has been able to outline a strategy for the sector to 2022 that incorporates the elements of change that are required to ensure that the country’s wider Vision 2030 objectives can be accomplished.
Therefore, as our recommendations and suggestions are implemented, they will help contribute to the country’s broader development goal of becoming a middle income country by 2030.