Out-Law News 2 min. read
06 May 2015, 3:27 pm
The bank said $37 million of credit will be provided by its International Development Association for the ‘Kenya Financial Sector Support Project’ “to strengthen the legal, regulatory, and institutional environment”.
The new programme will build on reforms supported over the past 10 years by a financial and legal sector technical assistance project, the bank said. That project, which was approved in 2004 and ended in 2013, was financed by a bank credit of $18m with co-financing of $10m from the UK’s Department for International Development.
Banks, insurance and pension schemes will be the focus of the new programme, “through a more targeted approach that supports solutions to specific constraints that curtail economic growth and the job creation of the private sector”, the bank said. “This will improve investment opportunities for institutional and foreign investors.”
Primary beneficiaries of the programme will be Kenya’s National Treasury, and financial sector regulators including the Central Bank of Kenya, Capital Markets Authority, Retirement Benefits Authority, Insurance Regulatory Authority and the Sacco Societies Regulatory Authority. The programme will also support the Kenya Deposit Insurance Corporation and the Public Debt Management Office.
The bank’s senior financial sector specialist and task team leader Smita Wagh said: “The new facility will also facilitate access to and reduce the cost of finance, which are identified as constraints to business growth and job creation. Stronger policy, regulatory environment and market infrastructure are needed to support the development, efficiency and integrity of the financial market.”
Eloise Walker of Pinsent Masons, the law firm behind Out-Law.com, said: “The involvement of the World Bank is a real boost for Kenya’s profile. It shows that its economy has international backing for legitimate investment, and a more developed financial market will enable foreign businesses to commit to serious projects. Whether this will trickle down to benefit the man in the street remains to be seen, as supporting a financial services industry in Kenya is no mean feat.”
Access to finance was identified as “critical” to boosting growth and regional competitiveness in the bank’s Country Partnership Strategy for Kenya for 2014-18 and the government’s ‘Vision 2030’ priorities, which includes “development investments in more and better quality infrastructure, improved health, social protection, rural development, and other areas that can increase economic opportunities while lowering inequality”, the bank said.
The bank said last year that, as of 2012, it had a portfolio of $2.8 billion in Kenya invested in 21 national and 6 regional projects, with the largest share of commitments [83%] covering the transport, energy, water, urban development and agriculture sectors. The bank said it had invested an additional $316m through the International Finance Corporation and $149m in insurance cover by the Multilateral Investment Guarantee Agency to five private investment projects.
Kenyan president Uhuru Kenyatta told business leaders in Nairobi last year that his government wanted to increase partnerships with the private sector. “We are here to facilitate you so that you can help us meet our social and economic development agenda for this country,” he said.
Kenyatta said he had directed his senior ministers to “ensure they meet with private sector representatives at least once a month to iron out any emerging issues regarding improvement of the business environment”.
Kenyans working abroad are also making a “huge impact” on the country, having sent home an estimated 11bn Kenyan shillings ($115m) in March 2015 alone, the National Treasury cabinet secretary Henry Rotich revealed last month.
Hawala, popular in the Middle East and parts of Asia, “is the most common unofficial channel of sending money into the country”, the National Treasury said. “The Central Bank now requires all businesses used to remit money into the country to be licensed by it to help keep track of the cash and ensure the country is not used for money laundering or financial terrorism.”
