{"doc_id": "00a6d67e78fb1182a8eb6c0046c1a2c8", "text": "CENTRAL BANK OF KENYA\nABSA AFRICA BANKING CONFERENCE\nRe-Imagining Banking in Africa in a Post-COVID World\nKeynote Address by Dr. Patrick Njoroge\nGovernor, Central Bank of Kenya\nTuesday, September 7, 2021\nAs Prepared for Delivery\nGood morning! I am pleased to join you at the ABSA Africa Banking Conference. Let\nme at the outset express my gratitude for the invite. The theme of the conference—\nRe-imagining Banking in Africa in a Post COVID World— is timely, as we reflect on the\nchallenges and opportunities that the coronavirus (COVID-19) pandemic has brought to\nthe fore. I am sure that your deliberations over the next two days will illuminate the path\nforward for the African banking sector.\nWe meet at a critical juncture and I want to set the context by highlighting three pertinent\nthemes. First, as was highlighted by the International Monetary Fund in its July 2021\nWorld Economic Outlook, COVID-19 vaccine access has become the principal fault line\nfor global recovery from the pandemic. On one side are the advanced economies, with\naccess to vaccines and who can look forward to some semblance of normalcy. On the\nother side, are emerging and developing economies including Africa, with limited\nvaccine access and who face a steeper climb out of the pandemic valley. However, the\nrecovery remains uncertain even in the advanced economies as the virus continues to\nmutate and circulate elsewhere, posing a significant downside risk.\nSecond, and on a more positive note, the global banking sector has redeemed itself\nthrough the pandemic. Following the reforms after the global financial crisis in 2008, the\nsector entered the pandemic period with strong capital and liquidity buffers. These\nbuffers have stood the sector in good stead through the turbulence of the last 18 months.\nMore importantly, the sector kept the lights on in the wider economy through the\npandemic, supporting lives and livelihoods. Banks were also a key channel for support\nincluding from governments particularly for Micro, Small and Medium Enterprises\n(MSMEs), keeping them afloat in the tempest.\n\nThird, and the poster child of the pandemic, has been the acceleration of digitization.\nThe drive towards digitization that had started before the pandemic has been the saving\ngrace not just in financial services but also in the health, entertainment, retail, education\nand hospitality sectors. In the midst of containment measures, including lockdowns and\nstay-at-home protocols, businesses, governments and individuals have continued to\nprovide essential services on digital platforms. However, with the opportunities come\nrisks. Major cyber attacks such as Solarwinds, Colonial Pipeline, and Kaseya in the\nUnited States, have led to significant consequences including on critical supply chains.\nTurning for a moment to Kenya, I thought of sharing with you a message I sent to all\nCEOs of commercial banks on March 15, 2020, which may provide an inkling as to our\nframe of mind at that time.\n“..the coronavirus pandemic has arrived in America and Africa—like distant thunder\nthat presages a summer storm. Only this is more like a tsunami. My first ask is that we\nface this crisis with courage, and remember that we don’t have the sure-fire solution. No\none does. Secondly, in times like this, we are reminded of our own frailty and the\nirreducible minimums of our human existence. A recent story from Wu Han reminded me\nof some things I take for granted—a simple sunset, good health, family, life.... Thirdly,\nlet’s be exceptional in our kindness to others. There are a lot of ugly stories out there but\nplease remember “a single act of kindness throws out roots in all directions, and the\nroots spring up and make new trees.” Let’s check on others—family, friends, neighbors...\n[…] We are now entering the eye of the storm. The crucible. We will get thru this. […]\nMay God watch over us.”\nThe banking sector came into the pandemic on a solid footing with strong capital and\nliquidity buffers. We had also embarked on a transformation of the sector in 2016,\nculminating in the issuance of the Kenya Banking Sector Charter (the Charter) in 2019.\nThe Charter sought to operationalize a vision of a banking sector that works for and with\nKenyans, anchored on four pillars, customer-centricity, risk-based pricing, transparency\nand ethical banking. Its implementation was well underway as the pandemic broke out in\nKenya in March 2020.\nThe Central Bank of Kenya (CBK) had keenly followed the unfolding of the pandemic,\nas it erupted in China in January 2020, and spread with devastating results in Europe and\nthe United States. As the first case was announced in Kenya in March 2020, CBK moved\nquickly together with banks and other players to put in place a set of measures to ride\nthrough the pandemic. The measures were intended to increase the use of digital\nplatforms, facilitate the continued flow of credit in the economy while providing\nliquidity to banks and to ensure business continuity. In the end, it was about people.\n2\n\nOne and half years into the pandemic period, Kenya’s banking sector remains stable and\nresilient. Digitialization has accelerated over the period, with over 94 percent of\ntransactions being conducted outside bank branches up from 90 percent before the\npandemic. Over a one year period to March 2021, with CBK providing regulatory\nflexibility, banks restructured 57 percent of gross loans. As at end July, the outstanding\nrestructured loans stood at 16 percent of gross loans, with over 92 percent of the\nrestructured loans performing as per the terms of the restructuring. From a credit risk\nperspective, the level of non performing loans to gross loans has fallen from 14.5 percent\nat end December 2020 to 13.8 percent at end July 2021, on the back of repayments and\nrecoveries.\nIn a personal message to my fellow Central Bank Governors on September 5, 2020, I\nsummarized the situation as follows:\n“COVID has tested us all and continues to re-test us every month with the new\nrevelations. So far all in our families are okay and we pray for ‘rona to be gone soon.\nStill, we have seen some positives, as people let go the crutches of materialism, “no\nlonger at ease here, in the old dispensation” to quote T.S. Eliot.\nConscious of our mandate at the central bank, we have thrown almost everything at this\nbeast, trying to stop the health crisis becoming an economic meltdown. Amazingly, the\nkey constraint is data. Yes, data. If we had data to answer some key questions our\npolicies would be better—precision bombing rather than blanket bombing like some\nother central banks that you know. I feel Donald Rumsfeld’s pain when he famously\nbroke it down into known knowns, known unknowns, and the unknown unknowns. Today\nwe are foundering in the known unknowns. I think it compares to being in the middle of\nthe Atlantic, without navigation equipment, no maps, and in a canoe. I don’t want to be\ndramatic, but the canoe better get to shore. But all things considered, the Kenyan\neconomy is recovering after a decline in April-May, thanks to its diversification. […]\nStay safe and let’s also stay in touch.”\nGetting back to the theme of the conference, how do we reimagine banking in Africa in a\npost-COVID world? I will venture in three broad directions, setting the ground for what I\nam sure will be an insightful discussion over the next two days.\nFirst, people centricity will be the orchestrating theme for banks. People’s needs will be\nat the heart of all that banks do. The pandemic has had devastating impact on lives and\nlivelihoods globally. By World Bank estimates, over 130 million people could be pushed\ninto extreme poverty by 2030. In particular, MSMEs have been pushed to the edge by the\npandemic and will require significant support if they are to survive. MSMEs, as you are\naware, are the engines of growth across Africa. In 2018, before the pandemic, the\nInternational Finance Corporation had estimated a funding gap of USD331 billion for\n3\n\nSMEs in Sub-Saharan Africa. I expect that with the pandemic, this gap has increased\nsubstantially, with banks expected to fund a significant portion. Beyond funding, banks\nwill be expected to play a key role in providing business advisory services to MSMEs as\nthey pivot their business models to the new normal.\nSecond, agility will define the playing field for banks. Traditional business banking\nmodels will need to be refreshed to be fit for purpose in the world of anytime anywhere\nbanking services. Customer expectations were changing even before the pandemic for\nanytime anywhere banking services. The pandemic has only served to accelerate the\ntrend towards on-demand services. This will require agile business models, that banks on\ntheir own, may not be able to deliver particularly through legacy information,\ncommunication and technology (ICT) systems. Partnerships with new, nimble players\nwill be imperative. In this regard, banks will be akin to conductors in an orchestra\nbringing together many different players particularly fintechs to deliver what customers\nrequire. This will in turn require banks to scale up through additional capital injections,\nmergers and acquisitions.\nThe third and final theme is on regulation that will require recalibration to fit in the\nnew normal. The fast evolving digital ecosystem is spawning a new set of players and\nactivities that mimic financial services. Globally, there has been the proliferation of\ndigital currencies that have been presented as payment instruments including\ncyptocurrencies, most notably bitcoins and more recently stablecoins. However, they\nhave turned to be less of payment instruments and more of wealth management tools.\nFurther, they have largely remained out of the realm of regulation, but are being closely\nwatched by regulators.\nCloser home, a medley of financial services have emerged on digital platforms, most\nnotably digital lending. A lot of these digital players, not being deposit takers have\noperated below the radar of regulators. This has caused grave social strife through\nexhorbitant interest rates, aggressive debt collection and overindebtedness. Regulators\nmust therefore review their perimeters without stifling innovation. This is a discussion\nwe are currently having in Kenya, with a Bill under consideration by Parliament to\nempower CBK to regulate fintechs offering digital lending services.\nAs I draw to a close, the African banking sector has done relatively well in the pandemic\nbut we must not be complacent. The pandemic remains far from over while the global\nterrain is rapidly shifting. We came into the pandemic with a well-developed digital\necosystem, leveraging mobile phone technology particularly in Kenya, Ghana,\n4\n\nRwanda,Tanzania and Uganda, among others. These digital rails have enabled the\nfinancial sector keep the lights on as they delivered much needed services.\nWill these advantages be enough to move the African banking sector to the next frontier?\nThe simple answer is no, and African banks must reset their paths. They must keep their\ncustomers at the heart of everything they do while building ecosystems that meet\ncustomer needs at every stage of their lifecycle. Most importantly, they must build new\nships that will steer them in the deeper ocean that they must play in. There is work to be\ndone. I close with a personal message that I sent CEOs of commercial banks on January\n2, 2021:\n“Congratulations, 2021 is finally here! With 2020 now consigned for the history books\nwe should also acknowledge our many accomplishments during a very unusual year.\nThank you for your contributions, even those that appeared small or trivial. Looking\nahead, however, more than ever before the spirit of the legendary trailblazers is\nneeded—courage and hope for the future. We will rise to the challenges along the way\nwith the responsibility of a leader, treading boldly where others have not trodden.\nUnsurprisingly, the period ahead will provide us many opportunities to recommit to a\nshared future, ultimately improving the lives of those around us especially the most\nneedy, and writing a more exciting chapter in that history book.”\nI look forward to the deliberations and the outcomes over the next two days as we\nreimagine the future of the African banking sector.\nThank You!\n5", "source": "CBK", "stratum": "cb_requests", "fetch_date": "2026-04-26", "url": "https://www.centralbank.go.ke/uploads/speeches/308111283_Keynote Address - Absa Africa Banking Conference.pdf"}