CBK-AFI Member Training on Regulatory & Supervisory Framework for Digital Credit – Opening Remarks by Norbert Mumba, Deputy Executive Director, AFI

CBK-AFI Member Training on Regulatory & Supervisory Framework for Digital Credit
Nairobi, Kenya
6 November 2019 

Opening Remarks by AFI Deputy Executive Director Norbert Mumba

Good morning and a warm welcome to all to the CBK-AFI Member Training on Regulatory & Supervisory Framework for Digital Credit and to the beautiful city of Nairobi. And I am sure you will agree that Kenya is possibly one of the most relevant jurisdictions to be in, to learn about digital approach to financial inclusion.

In 2016, CBK had hosted a series of three trainings on Digital Financial Services and we are indeed glad to be back in Kenya with our training. So let me start by thanking the Central Bank of Kenya (CBK) not only for hosting this event but for being a very active member in the network and having played very critical roles as Chair of DFS Working Group, as host of AfPI, when it was African Mobile Financial Services Policy Initiative (AMPI). And not to forget that the first Global Policy Forum was hosted by CBK in 2009 and that also Professor Njuguna N’dungu, former Governor of the CBK, served as AFI’s very first Steering Committee Chair. It is very heart-warming for us to receive such support from CBK and I am sure the network will continue to benefit from this as we move forward in enhancing greater financial inclusion agenda.

Since the early 2000s, Kenya has been a centre of technological innovation from which novel financial offerings have emerged such as the mobile company of Safaricom’s M-Pesa. In addition, the mobile-based lending has grown in Kenya since the past 10 years with the launch of M-Shwari in Kenya as a first-mover in November 2012. It is reported that there are currently about 49 mobile lending applications in Kenya including major financial players offering instant and seamless mobile loans[1]. Therefore, it is no surprise that technology and lending have developed together so strongly in Kenya.

The implications of digital credit offering are typically two-fold; first, it can help small enterprises to scale and to manage their daily cash flow. It can also help households cope with things like medical emergencies. The evidence from demand-side surveys reported by FSD Kenya[2] has shown:

• About 1 in 2 digital borrowers in Kenya report using their most recent loan for basic or personal consumption;
• Just over a third of digital borrowers used their most recent digital loan for production (e.g. investments in a business or farm);
• Just under a third for education or bill payment
• Only 8 percent of digital borrowers reported using their last loan for an emergency

Second, the speed and ease of access to credit through mobile applications has, on the other hand, caused many borrowers to become heavily indebted.

Given this significant progress made by Kenya in the area of digital credit, CBK will lead the sharing of implementation experience and expertise in this training along with other stakeholder institutions using the AFI’s Regulatory & Supervisory Framework for Digital Credit. Together we hope to address the concerns, promote responsible digital credit and closing the gender gap.

This Regulatory & Supervisory Framework for Digital Credit was drafted by AFI and has been adopted by the AfPI leaders at the Global Policy Forum (GPF) in Rwanda, Kigali in September this year. The objective of the Framework is to provide a tool to improve the capacity of regulators in the regulation and supervision digital credit in Africa. It provides minimum regulatory and supervisory requirements for enabling the development of responsible digital credit. To facilitate ease of referencing, the minimum requirements are grouped into ten key principles which will be discussed throughout this 3-day Member Training. The principles include, among others the Digital Credit Regulation and Supervision, Credit Information Sharing, Cyber Security, Data Protection & Privacy and Consumer Awareness & Financial Literacy.

The framework is an evolving guide for AFI members to build upon as they share experiences and best practices. Members will be supported to apply these principles in the improvement of their overall digital credit policy and regulatory environment. Therefore, the participants will be able to identify the key criteria to be considered while developing a supervisory framework for responsible use of digital credit.

Continuing with our focus on learning through sharing and taking a very practical route to learning, this Member Training will ensure that all of you get a chance to contribute to the learning of the others and get to see policies and initiatives in action in the field. Also, we are glad to have Helen Walbey, the lead of Gender Inclusive Finance of AFI with us throughout this training to provide inputs on gender considerations. I am sure under the very able leadership of CBK and the consultant of AFI, you will have a great week of learning here at KSMS, a great centre of knowledge and learning excellence.

This Member Training brings together 53 participants representing 35 member institutions representing all regions that AFI works in – Asia, Pacific, Sub-Saharan Africa, Middle East and North Africa, Latin America and the Caribbean, Eastern Europe and Central Asia. We sincerely thank you for your continued overwhelming interest in learning to expand your horizons, which to us is a reflection of your institution’s commitment towards building a supportive financial environment for all. Please convey my thanks to your management for making your participation in this training possible.

From 2017 until October 2019, a total of 10 trainings have been held in Sub-Saharan Africa – focusing on various AFI thematic areas such as Financial Inclusion Strategy (FIS), Consumer Empowerment & Market Conduct (CEMC) and Digital Financial Services (DFS). Also, within the same period, capacity building has trained at least 522 policymakers from the Sub-Saharan Africa, which accounts approximately around 42 percent from the total participants trained in that same period. AFI started its third phase of corporate strategy in 2019 and a key pillar of our current approach is that of in country implementation. We now have our regional office in Abidjan, Ivory Coast and you will see more trainings held in SSA. This approach is of course also for other regions as we are taking some of our trainings to the regions, but at the same time retaining in global content.

As I conclude, let me emphasize on the importance of financial education as a far-reaching and inclusive tool which induces real, positive behavioral change in financial matters. I wish to again thank CBK for making this event a reality and to your management for supporting your learning process by nominating you for this event. Best wishes for the 3-day learning!