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Dr James Mwangi, The Chief Executive Officer, Equity bank Mr Gideon Muriuki, The Chief Executive Officer Cooperative Bank of Kenya Mr Albert Ruturi, The Chief Executive Officer, K-Rep Bank The Financial Secretary The Economic Secretary Other Senior Staff of the Ministry of Finance Staff Members of the Banking community Members of the Press & Media. Ladies and Gentlemen, 1. I am proud to announce that today we embark on the final stage of establishing a Revolving Fund of Ksh. 3.8 billion to meet the objectives of addressing youth unemployment and encouraging growth of micro and small enterprises (MSEs) as key drivers of economic growth and development. 2. The fund was officially launched on the 14th March 2011 which was followed by the signing of the agreements with the three

selected banks (i.e. Equity Bank, Cooperative Bank of Kenya and K-Rep Bank) to implement the fund. Today, we are going to actualize the operations of the fund by availing the first tranche of Kshs 250 million to each bank for credit extension and 50 million for capacity building. Ladies and Gentlemen, 3. Let me stress that this is not a new program. It’s design and implementation arrangements were drawn from the Microfinance Sector Support Credit (MFSSC) which we have been implementing with financial support from the Government of France, through the French Development Agency (AFD). This programme was a great success, to date we have disbursed all the credit with repayment rates of 100 percent to Government, and about 96 percent to the banks. 4. The programme has also gone a long way in removing the invisible barrier that separates banks from SMEs and the informal sector borrowers due to the perceived risk. Through the capacity building facility, banks are in a position to understand the risk profiles of this sector, and therefore lend at rates much lower than what the borrowers were paying before. In some cases, the benefit to the borrowers is upto 10 percent lower. 5. Over time, we expect that the banks will have built enough information about the informal sector and SMEs and they will therefore be in a position to go directly to them without the support that we are providing now. We also expect that due to their better understanding of the risk profiles of these sectors, they will be able to lend at lower rates. The ultimate objective is therefore to ensure

that many more Kenyans have access to credit without government intervention.

Ladies and Gentlemen 6. It is for these reasons that we decided to draw lessons from this very successful programme and invest our own resources to scale it up so that we can reach many more deserving Kenyans. Through the Fund, the Government seeks to empower an estimated 8.3 million Kenyans working in the informal sector, including 2 million in the Jua Kali industry and 5 million kiosk owners, hawkers and mama mbogas; and with the rest going to the informal transport sector and small manufacturers. 7. We can speak with authority from the experience we have had under the Microfinance Sector Support Credit (MFSSC) Programme in partnership with AFD, the Wholesaler Banks, SACCOs and MFIs; that there is greater scope and opportunity to increase access under the right conditions. The selected banks represented here that have been involved in this programme can attest to this fact. 8. In the same vein, we have used the lessons learned to develop a new programme targeting the rural areas agribusiness value chain in partnership with IFAD called Programme for Rural Outreach of Financial Innovation and Technologies (PROFIT) just recently launched. It is clear that our development partners also share our vision.


Ladies and Gentlemen, 9. The Fund also addresses the Financial Sector policy goals under Vision 2030 that include increasing financial access and enhancing efficiency. It is intended to widen and deepen financial inclusion for the under banked and unbanked in Kenya through efficient use of innovative delivery channels like M-banking to lower the cost of transactions and make finance more readily affordable to the majority of our people. 10. Allow me Ladies and Gentlemen at this juncture to delve into the detail of M-Banking platform as an opportunity to improve efficiency and affordability. Due to the innovations we promoted in the money transfer business we are now reaching millions Kenyans with almost all adults covered. The CBK issued draft regulations on the provision of electronic retail transfers and e-money in February 2011, and we will soon have a National Payment Systems law. It is therefore no longer an issue to transfer money to any part of Kenya. 11. Moreover, with the introduction of agent banking regulations in May 2010, the banking sector should now be able to reach their customers with services in any part of this country through their agents. 12. Leveraging on these technological innovations, we shall be able to reach more unbanked people due to the reduced transactions costs of lending and repayment. The Fund further supports the transition of informal sector enterprises into the formal sector through access to formal providers of financial services. We want to dispel the myth that there is an informal sector that cannot be reached through formal means.

13. The challenge to you, as the Banks that have been selected through a rigorous screening process of the first phase, is to provide this platform and avail the services including credit to the lowincome groups at sustainable and affordable rates. We are all aware that you have your own matching contributions to this fund which more than five times the Government’s contribution and therefore expect this business to be fully sustainable. 14. It is our belief that you will live up to the high expectations that has been created both by the public and Government on this programme. Having gone through a thorough screening process, we know that you have what it takes to live up to this challenge. Ladies and Gentlemen 15. In addition to the Credit Schemes we have developed to Support the Small and Micro Enterprise sector, we have also addressed support to the sector through a policy change in Public Procurement and Disposal Act 2005. 16. The Government has issued Subsidiary Regulations under the Public Procurement and Disposal Act 2005 Namely – (Preference and Reservations Regulations 2011). These regulations are aimed at providing preferential treatment to Small and Micro enterprises (SMEs) and other disadvantages groups in public procurement in a manner that is consistent with our international obligations. 17. I would therefore like to call upon all procuring entities to make good use of this legislation to promote provision of goods, works and services by our Small and Micro enterprises and other

disadvantaged groups. Successful implementation of this scheme will help promote Local, National and Regional industries to grow and hence support faster socio economic development with inclusive economic growth. Ladies and Gentlemen 18. As I conclude, let me also stress that these selected banks are not being given a handout to profit from. It is important to realize that they are taking on the full risk. Our role is to assist them in understanding the initial challenges of a complex and risky sector. With these interventions and opportunities, we look forward to a thriving MSE sector driving our inclusive development agenda. 19. It is Now my pleasure to declare this programme officially launched and operational with the Presentation of the cheques for the first disbursements to the representatives of the banks Thank you and God bless you.

Presentation of Symbolic Cheques by the Deputy Prime Minister and Minister for Finance.