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special featureTransformation of Banks in KenyaProf. Njuguna Ndung'u, CBS *Ladies and Gentlemen :I am delighted and honoured to have been invited topreside over the opening ceremony of this Conferenceorganized by the Indian Institute of Banking andFinance. At the onset, kindly allow me to extend a warmwelcome to all participants attending this importantConference. The theme : “Managing Transformationfor achieving Growth” is indeed compelling. Growthis driven by fundamental factors, but key among themis the transformation of markets and institutions toguard the market and define appropriate incentives. Onesuch market is the financial market, guided and regulatedby several institutions. Today, I will share my thoughtson how the Central Bank has transformed the bankingsub-sector as a means of transforming and deepeningthe financial sector in line with Kenya's developmentgoals. Let me parade at least seven of them :1) Rollout of branch networks to provide financialservices to remote and lower income areas :The expansion of branch networks in the financialservices industry has registered significant growthover the last 4 years and is well distributed acrossall regions in both rural and urban centres. Currently,we have 1064 branches from 740 in 2007.2) Allowing mobile phone financial services toprovide a new technological platform :This entails approval for banks to leverage onmobile phone technology to present convenience andlower costs to their customers without compromisingquality of service. Through mobile phone banking,customers are now able to perform their transactions“anytime, anywhere”. Mobile phone money transferhas evolved from the initial concept of transferringmoney from one individual to another to include otherfunctions such as payment of utility bills, disbursementand repayment of loans, payment of salaries anddeposit mobilization.3) Introduction of Agent Banking mechanism :This is the “banking beyond branches'' model wherecommercial banks are allowed to engage third partiesto provide certain banking services to increaseoutreach of the banks to the vast under-banked andunbanked Kenyan populace. In a nutshell, AgencyBanking enables banks to leverage on additionalcost effective distribution channels to offer financialservices. So far 5552 Agents have been approvedand are providing financial services.4) Credit Reference Bureaus (CRBs) :Through licensing of Credit Reference Bureaus,the CBK has enabled credit providers to collect,collate, analyse and disseminate credit information.Credit information sharing provides an opportunityfor individuals and businesses to rely on their credithistory (information capital) to support the processof collateralization and even change the collateraltechnology in the country. Individuals will also beable to use their positive credit history to negotiatefor better terms and conditions from their banks.On the other hand, banks will benefit from themechanism since it will address the problem ofinformation asymmetry and by extension the problemof non-performing loans which has in the pastthreatened the stability of the banking sector. Thetraditional challenges of the moral hazard andadverse selection can hinder financial sector growth.As a result, credit appraisal by bank staff will greatlyth* Welcome address at the 11 Bank Human Resources Conference held in Kenya by the Governor, Central Bank of Kenya.The Journal of Indian Institute of Banking & Finance July - September 2011 15