2005年-世界发展银行全球_Financial_Sector_Assessment___Kenya_16页_1mb

Financial Sector Assessment of Kenya (March 2005)

I. Introduction

This Financial Sector Assessment (FSA) was conducted by the joint IMF-World Bank missions in Kenya in 2003 as part of the Financial Sector Assessment Program (FSAP). The objective was to evaluate the development needs and opportunities of the financial sector, identify vulnerabilities to macroeconomic shocks, and assess risks to macroeconomic stability from financial sector weaknesses. The assessment included compliance with the Basel Core Principles, IOSCO Principles for Securities Regulation, and corporate insolvency and creditor rights frameworks. A separate AML/CFT assessment was also conducted, and its report is included in the FSAP documentation.

II. Overall Assessment and Key Recommendations

A. Increasing Access to Financial Services

• Key obstacles include a weak legal framework, lack of borrower information, and an inefficient judiciary.
• The legal framework for property rights, insolvency, and creditor rights is fragmented and outdated.
• High lending rates and interest spreads are due to non-performing loans (NPLs), high overhead costs, weak banks, and poor regulatory governance.
• Recommended actions:
  • Modernize commercial registries to provide accurate and reliable information.
  • Establish legal credit information-sharing mechanisms among financial institutions.
  • Reform and modernize insolvency procedures.
  • Strengthen the Commercial Court and expand it to other regions.
  • Improve the Companies Registry to collect and disseminate financial data.

B. The Role of the Government

• The government should focus on creating a robust legal, regulatory, and supervisory framework to promote soundness and competition.
• Recommended actions:
  • Divest government stakes in commercial banks to improve efficiency and reduce NPLs.
  • Repeal Section 44 of the Banking Act and the Central Bank Amendment Act 2000.
  • Establish an adequately funded and independent insurance authority.
  • Review the Insurance Law to align with international standards.
  • Create a pension policy committee to address unfunded liabilities.

C. Capital Markets

• The Companies Act and related regulations need modernization.
• The Registrar of Companies should be strengthened as the primary regulator.
• Clear coordination and division of responsibilities between the Capital Markets Authority (CMA) and the Registrar are essential.

III. Main Findings

A. Reducing Interest Rate Spreads

• High lending rates and spreads reflect structural inefficiencies in the financial sector.
• The risk-component of spreads is driven by weak property rights, judicial inefficiencies, and lack of information sharing.
• Overhead costs account for 40% of spreads, mainly due to wage costs and operational inefficiencies.
• Administrative rate controls are discouraged as they may lead to hidden charges, credit rationing, and a preference for short-term lending.

B. Divesting the Government's Ownership Stakes in the Banking Sector

• Government ownership in banks is a key factor in the concentration of NPLs.
• Divesting stakes is crucial for demonstrating fiscal responsibility and improving the banking system.
• Recommended actions:
  • Sell government stakes to private investors or development partners.
  • Liquidate if necessary to avoid contingent liabilities.
  • Ensure close monitoring of restructuring and divestiture processes.
  • Develop a governance restructuring plan to improve capital adequacy and regulatory compliance.

C. Improving the Credit Environment

• Deficient property registration and enforcement systems increase lending risk and cost.
• Courts often favor debtors over creditors, leading to delayed enforcement and lack of legal certainty.
• Recommended actions:
  • Streamline and clarify company and insolvency laws.
  • Improve the efficiency and transparency of the Company Registry and Official Receivers Department.
  • Modernize court procedures and introduce electronic case management.

D. Promoting Access to Financial Services

• The financial sector is segmented, with limited access for SMEs and small borrowers.
• Lack of a unified legal and regulatory framework and information sharing among providers exacerbates this segmentation.
• Recommended actions:
  • Develop a national policy and strategy for micro and SME finance.
  • Encourage private investment in small business finance.
  • Limit KPOSB's role to deposit and payment services, excluding retail lending.
  • Ensure KPOSB invests only in government securities to maintain its status as a safe depository.

E. Promoting the Development of Non-Bank Financial Institutions (NBFIs)

• The insurance market is overpopulated, segmented, and lacks strong underwriting capacity.
• Under-reserving and poor market conduct among brokers contribute to underwriting losses.
• Recommended actions:
  • Consolidate the insurance market.
  • Strengthen underwriting skills and regulatory oversight.
  • Improve the legal and tax framework for financial leasing to encourage its development.

Box 1. Key Recommended Actions

• Access to financial services: Modernize commercial registries, establish credit information-sharing, and reform insolvency procedures.
• Regulatory governance: Grant independence to supervisory agencies and repeal restrictive banking legislation.
• Banking sector: Divest state stakes, intervene in weak banks, and preserve minimum capital requirements.
• Payments and settlements: Implement the National Payments Bill, introduce RTGS, and achieve T+3 and T+5 settlement cycles.
• Insurance and pensions: De-license weak insurers, review insurance laws, and establish a pension policy committee.
• NBFIs: Regulate MFIs and SACCOs, limit KPOSB's investment to government securities, and suspend DFI lending.
• Capital markets: Modernize the Companies Act, strengthen the Registrar, and improve disclosure and settlement systems.