Existing financial sector regulatory framework in Kenya
The existing regulatory framework for the financial sector in Kenya consists of a number of independent regulators each charged with the supervision of their particular sub sectors. The creation of the Insurance Regulatory Authority
completed the shift from having departments under the Ministry of Finance to having independent regulators for each sub-sector.
The current regulatory structure is characterized by regulatory gaps, regulatory overlaps, multiplicity of regulators, inconsistency of regulations and differences in operational standards. For example, some of the regulators have at least partial exemption from the State Corporations Act while others do not, some have tax exemption, and others do not. Some regulators have powers to issue regulations while in other cases the power is retained by the
Minister for Finance. This regulatory framework is clearly captured by the figure below.
Some of the existing cases of regulation gaps are:
The Kenya Post Office Savings Bank (KPOSB)
The Kenya Post Office Savings Bank (KPOSB) was incorporated in 1978 underthe KPOSB Act(Cap 493B). The mission of the bank is to sustainably provide
savings and other financial services to customers, through a countrywide branch network, by use of modern technology in delivery of efficient and effective customer service, and to the satisfaction of all stakeholders. Section
8(1) KPOSB Act that provided for the Government guarantee over the deposits placed with the savings bank was repealed via the Finance Bill 2001. The repeal of the section implies that new avenues should be found for deposit protection. It also implies that the bank should be adequately capitalized as a first step to protect deposits against possible losses.
Companies Act (CAP 486)
The Companies Act, which is a holdover of pre-colonial British Law, is creating problems for private sector activities in Kenya and indeed the financial services sector. This law currently in use, is complicated, cumbersome, inconsistent and at odd with modern enabling regulation of corporations. Another layer of complexity and compliance is added to an already burdensome structure leading to multiple disclosures requirements, overlap and expensive
duplication. The regulation of companies is currently under the Registrar of Companies in the Office of the Attorney General but could be brought under the financial sector regulatory framework for more responsiveness to market
Development Finance Institutions (DFIs)
DFIs have always provided the impetus for economic development be it in the developed or developing countries. In Kenya, DFIs were specifically established to spearhead the development process by:
Availing credit funds to those venturing into commerce, tourism and industry.
Assisting those wishing to venture into small-scale manufacturing enterprises.
Assisting in the initiation and expansion of small, medium and largescale industrial and tourist undertakings.
Provide long-term lending (Project financing) to sustain economic development Provide Technical Assistance/Co-operation extension services
Provision of special Financing and Support services to stimulate Private
Sector to live up to its potential and create jobs and wealth, develop and expand indigenous skills
The existing framework has potential for disharmony as they fall under different regulators. For example ICDC/KIE are under the Ministry of Trade and Industry, IDB is under the Central Bank of Kenya and AFC the Ministry of