Kenya now has the third-largest financial sector in sub-Saharan Africa, the World Bank has said. The global financier, however, says there is need for further structural reforms to enable the country achieve its true development potential.
The bank’s country partnership strategy for Kenya and the government’s Vision 2030 identify access to finance as critical to enhancing the prospects for growth, regional competitiveness and shared prosperity.
Consequently, the World Bank Group board of executive directors on Friday approved an International Development Association credit of $37 million for the country’s financial sector support project to strengthen the legal, regulatory and institutional environment.
The initiative is aimed at helping Kenya improve financial stability and increase affordable and long-term financing.
“Kenya’s financial sector is the third-largest in sub-Saharan Africa and it makes a significant contribution to economic growth and job creation,” said World Bank Country Director for Kenya Diarietou Gaye.
“The opportunity for Kenya now is to transform the financial sector to provide more affordable and longer term credit to contribute effectively to growth and shared prosperity.”
The World Bank says it will continue to support efforts to increase financial access to improve the environment for private investment, which plays a critical role in Kenya’s development.
The new programme will build on reforms that were supported by the financial and legal sector technical assistance project, which helped strengthen Kenya’s financial sector in the past decade.
The critical need now is to consolidate these gains by addressing the remaining gaps and weaknesses in the financial markets as they relate to long-term financing needs of Kenya’s development agenda.
“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,” said senior financial sector specialist and task team leader Smita Wagh.
“Stronger policy, regulatory environment and market infrastructure are needed to support the development, efficiency and integrity of the financial market.”
The programme will focus on banks, insurance and pension schemes through a more targeted approach that supports solutions to specific constraints that curtail economic growth and job creation in the private sector.