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Kenya banking industry over low national savings rate   

NAIROBI (Xinhua) -- Kenya’s banking industry lobby on Thursday decried the country’s low savings rate.

Joshua Oigara, Chairman of the Kenya Bankers Association (KBA), told a banking forum in Nairobi that the levels of domestic savings which is estimated at an equivalent of about 10 percent of gross domestic gross (GDP) remains low, compared to total investments of about 17 percent of GDP in 2017.

“This means that to some extent, we rely on foreign savings to finance our investments. While that in itself is not a bad thing, we need to continuously explore how we can enhance the ability to mobilize more savings,” Oigara said during the opening ceremony of the KBA Seventh Annual Banking Research Conference.

The two-day event aims to explore credit market issues in the context of a dynamic regulatory environment that seeks to promote stability and growth amidst new market players and a technologically-enabled way of operation that presents both opportunities and risks.

Oigara said the banking industry remains upbeat in regard to opportunities that the economy offers and is ready to continue financial intermediation in a manner that supports the economy’s growth aspirations.

He noted that being optimistic is by no means an indication that the banking sector does not appreciate the challenges that constrain the ability to optimally offer credit and mobilize savings.

“While Kenya’s economic growth of about five percent in 2017 is positive and higher that the Sub-Saharan Africa average at 2.8 percent, it is my view that we are performing below our full potential,” he added.

KBA is currently pursuing a number of key initiatives meant to promote resilience and growth in the banking sector.

“One is the compelling need to invest in analytical capability to use the rich information pool that banks have so as to innovatively lend to segments hitherto considered risky, but which in reality are disenfranchised because they are less understood,” Oigara said.

He observed that the sectors considered risky by lenders include agriculture, low-income households and micro small and medium enterprises and by understanding them, and then availing credit to them, the financial sector will go one step forward in removing them from their low-income, small size traps.

The banking sector is also keen to increase its loans to the agriculture sector. The chairman said that the agricultural sector is a key sector of the economy whose share of credit is presently far below what it deserves.

KBA CEO Habil Olaka said that as government directs funding to the agricultural sector in order to de-risk the sector, financial institutions can invest in organizing small-holder farmers as enterprises with sufficient levels of capitalization that can enable them access credit like other segments.

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