Corporate Governance and Access to Finance - ESBG

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To supplement this network, Postbank also provides services through over650 ATMs operated by Kenswitch and PesaPoint network, distributedacross the country, to ensure that customers are served conveniently.Postbank also has installed 26 own- ATMS.To achieve its mission of providing accessible banking services, besidesthe recent incorporation of ATMs to the network, KPOSB offers savingsand payments services through a wide network of 92 online branchesand a further 350 outlets operated on agency agreement with the PostalCorporation of Kenya and other Agents.Accessibility for KPOSB does not only mean having a wider branchnetwork and reaching poor areas, but also charging smaller fees andcommissions and being a friendly bank. Requirements to open anaccount have been set at low levels, compared to the rest of Kenyanfinancial institutions. The requirements are a minimum balance of Kshs200 (~2 euros) to open the account (Kshs 300 to have a debit card), anational I.D. card, filling up the application and a photo that can be takenin the branch. It just takes 15 to 20 minutes to open an individualaccount. KPOSB also provides salary accounts (where the minimumbalance is zero) and student accounts (where the minimum balance is200 Kshs, there are no card fees and the charges for ATM utilization arelower). This enables KPOSB to reach low and middle income populationand provide depositors without access to banks with a safe, convenientmethod to save money, and to promote savings among the poor.To better serve its clients KPOSB is evaluating the possibility of providingcredit. KPOSB does not operate under the Banking Act, and its Act,the KPOSB Act, does not allow the bank to offer credit. Therefore ifKPOSB was to be allowed to give credit either the KPOSB Act wouldhave to be amended or KPOSB would have to adapt to the Banking Act.For the KPOSB to comply with the terms of this act it should implementcertain changes that include auditing of its accounts by private auditorsand not the Kenya National Audit Office, as is presently the case, beingKPOSB a State Corporation or a parastatal. Though the bank hadadopted international accounting standards, it is not capitalised andunder the Banking Act no single owner can have more than 25 percentof the capital. In the past, however, the Central Bank of Kenya (CBK) hasgranted an adaptation period to other institutions to facilitate compliancewith some of these requirements.126
Related to the concession of credit by KPOSB, the CBK is concernedabout the government’s influence on it. Political interference is one of themajor threats for the successful functioning of government-ownedfinancial institutions and there have been bad examples in Kenya in thepast. This is therefore a risk that would need to be carefully mitigated.KPOSB´s has the social responsibility of providing access to finance incompliance with international quality standards. Thus, Postbank is ISO9001:2000 certified in line with initiatives by this financial institution toimprove service quality to its customers within the requirements set bythe Ministry of Finance.KPOSB, through the World Savings Bank Institute (WSBI), is enrolled inthe Bill and Melinda Gates Foundation program aimed at doubling thenumber of accounts in rural areas, providing therefore a higher level ofoutreach. To fulfil this objective KPOSB is developing an agent structurefocusing on people with ongoing retail businesses and requiring them tohold a minimum balance (own balance) for security reasons. A team atKPOSB will monitor and manage these agents.Link between Corporate Governance and Access to FinanceIn the case of KPOSB there is a strong link between corporate governanceand access to finance. A specific and clear reference is included in themission providing a focused business strategy. The Board’s mandate alsohighlights the financial sustainability of the institution, providing incentivesto the Board members and senior management to make proper use ofavailable resources, which in the end leads to more availability of fundsthat can be used to promote financial inclusion.The most relevant instrument to ensure the fulfilment of this mandate isthe Performance Contracts and Service Level Agreements They includeagreed quantitative and qualitative objectives that monitor that theresults of the business strategy and service quality are aligned with theinstitutional mandate. The fulfilment of these objectives is monitored ona regular basis by the government. Given the clear focus of the KPOSB’smandate on both financial inclusion and sustainability, specific targets areincluded in the Performance Contract.127
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BoxesBox 1. German Sparkassen 27Box
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EXECUTIVE SUMMARYBackground and obj
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nnAccess to Finance in enshrined in
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Chart A.Corporate Governance, Acces
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nThe study also shows that Corporat
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1. INTRODUCTION1.1. Focus and objec
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WSBI members are by definition acco
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For the particular case of developi
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2. THE LINK BETWEENCORPORATE GOVERN
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Table 2. Main features of the Missi
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Access to financeSparkassen promote
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All these examples illustrate how p
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In the case of Peru, the profits th
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Among the WSBI institutions that re
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BOX 2. KENYA POST OFFICE SAVINGS BA
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The fact that the banking system is
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3. CORPORATE GOVERNANCE -CONCEPTUAL
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Figure 2. Sound Governance of Finan
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As can be seen in the figure above,
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nnnAt the same time, the distance a
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The first two elements (the ownersh
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nHowever, this does not mean denyin
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Cooperatives are similar to mutuals
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3.4. FoundationsFoundations do not
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3.5. Good Corporate Governance prac
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F. DISCLOSURE AND TRANSPARENCYPrinc
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4. ACCESS TO FINANCE -CONCEPTUAL FR
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4.1. Financial deepening and improv
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The board does not have any executi
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In other words, sustainable financi
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The following table shows how the W
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The fourth dimension refers to the
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Table 8. Access to Finance in the f
Page 76 and 77: Only 27 members established in 21 c
Page 78 and 79: nnDCI (Depth of credit information
Page 80 and 81: 5.2. Corporate Governance and Acces
Page 82 and 83: 5.2.1. Corporate Governance and Ave
Page 84 and 85: Chart 8.Specific Corporate Governan
Page 86 and 87: 5.2.2. Corporate Governance and Ave
Page 88 and 89: Chart 13. Corporate Governance comp
Page 90 and 91: Chart 16. Corporate Governance Inde
Page 92 and 93: Chart 19. Specific Corporate Govern
Page 95 and 96: ANNEX 1: REVIEW OFTHE LITERATUREThe
Page 97 and 98: Even among the relatively narrow un
Page 99 and 100: Figure A.1. Structure of agents' re
Page 101 and 102: The table captures the essence of s
Page 103 and 104: A case study built by Clarke et al
Page 105 and 106: A very recent contribution to the d
Page 107 and 108: For example, in Latin America, WSBI
Page 109 and 110: The paper examines whether a poor e
Page 111 and 112: For the survival of microfinance in
Page 113 and 114: ANNEX 2: CASE STUDIES 32CASE STUDY
Page 115 and 116: It is one of the major characterist
Page 117 and 118: Although Sparkassen are legally and
Page 119 and 120: Figure A.2. Corporate Loans Market
Page 121 and 122: Financial education is also an impo
Page 123 and 124: Corporate GovernanceKPOSB is wholly
Page 125: Among the initiatives that the gove
Page 129 and 130: OPERATIONS1. Deposit Base: It was p
Page 131 and 132: Corporate GovernanceThe Central Ban
Page 133 and 134: To address the problem of capital,
Page 135 and 136: Financial inclusion ranges very hig
Page 137 and 138: CASE STUDY 4:SPANISH SAVINGS BANKS
Page 139 and 140: The uniform financial regulation of
Page 141 and 142: Figure A.3. Governing Bodies - Span
Page 143 and 144: The web-based tool www.rededucacion
Page 145 and 146: On the liability side, CMAC offer m
Page 147 and 148: A specificity of CMAC is that the m
Page 149 and 150: Table A.3.MissionMissionCMAC AREQUI
Page 151 and 152: As of September of 2009, the twelve
Page 153 and 154: Furthermore, the consensus culture
Page 155 and 156: ANNEX 3: QUESTIONNAIREQUESTIONI. Ge
Page 157 and 158: ANNEX 4:THE HONOHAN INDEX 43COMPOSI
Page 159 and 160: COMPOSITE MEASURE OF ACCESS TO FINA
Page 161 and 162: ANNEX 5:QUANTITATIVE RESULTSCountry
Page 163 and 164: Overall Corporate Governance IndexO
Page 165 and 166: REFERENCES- Andrianova, S., Demetri
Page 167 and 168: - FSD Kenya (2009), Financial Secto
Page 169 and 170: - World Bank (2006) The Role of Pos
Page 172: WSBI - ESBG - The Global Voice of S
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