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Harnessing fintech for financial inclusion

Kenya Bankers Association, Chief Executive Officer, Habil Olaka on the strategic plan that aims at more inclusivity

By Frankline Sunday

The Kenya Bankers Association (KBA) last month unveiled its strategic plan for the year 2019-2023 with a major focus on harnessing fintech to broaden financial inclusion.

This comes at a time when commercial banks in Kenya are grappling with significant headwinds occasioned by both the global and domestic markets forcing many to re-evaluate their business models and adapt to the changing trends.

Habil Olaka, Chief Executive Officer of the Kenya Bankers Association (KBA) told Management Magazine that the strategic plan is alive to the changing trends in the country’s financial services sector and lays out a roadmap for the industry.

“We have identified several key areas that broadly support banks’ ability to provide affordable financing to drive the economy and we are going to focus on these areas moving forward,” explained Olaka.

“Key among them is technology transfer because the environment is rapidly changing and we’ll need to adapt with technology to remain relevant in the market,” he said.

“Both our member banks and financial technology service providers (fintechs) are making significant strides in facilitating more transactions to run through digital platforms and this presents both opportunities and risks,” said Olaka.

The fraud risk

One of the risks has been fraud with attempts to infiltrate banking networks taking new forms and gaining sophistication as criminals become more tech savvy.

According to a report by cybersecurity firm Serianu, Kenya’s economy lost KSh29.5billion to cybercrime and related activities in 2018 with banks, SACCOs and government agencies leading in the list of institutions at risk of attacks.

The report said that while more Kenyan companies today ramp up awareness of the threat posed by cybercrime, a skills shortage and rapidly evolving technology still threatens to expose more firms, particularly Small and Medium Enterprises, (SMEs) to attacks.

“Initially the common method of fraud that the industry was accustomed to was cheque frauds where the probability of detection was much easier and the exposure was minimum because cheques have a KSh1milion limit,” explained Olaka.

“Through cyber crime, however criminals can infiltrate the core systems of a bank and the exposure then becomes quite significant,” he explained.

Strengthening surveillance

KBA has been working with individual banks and law enforcement agencies to strengthen surveillance. Today, an increasing number of attempts to illegally gain access to bank networks are often intercepted before the perpetrators gain access to funds or sensitive customer data.

At the same time, KBA is working together with the Central Bank of Kenya, (CBK) to assist banks up-skill the existing workforce with the necessary knowledge to help member banks strengthen their digital systems.

The CBK last year published guidelines recommending all banks create a position of a Chief Information Security Officer (CISO) in the C-Suite to coordinate cyber security efforts in the organization.

KBA is working with member banks to cascade the policy to commercial banks while giving recommendations on the best industry practice.

“There are some things that are easier to execute as an industry body than if individual banks go it alone and our role is to provide leadership and the vision of the direction we should take as well as provide support,” explains Olaka

Advocacy initiatives

In a bid to enhance sustainability, KBA is strengthening its research capacity that also goes a long way in providing valuable data to spearhead advocacy efforts with the different stakeholders.

This has been clear in the ongoing conversation around the Banking Amendments Act 2016 that introduced interest rate caps on bank loans and deposits. 

“We commissioned an independent study to evaluate the impact of the interest rate caps to the economy and it has been clear that SMEs have been the worst affected by the interest rate caps with banks unable to price them within the new regulation leading many to lose out on crucial financing,” explained Olaka.

Data from CBK indicates that access to finance for the private sector has fallen from a high of 18 per cent in 2018 to 2 per cent in 2017 and 5 per cent last year.

“Research gives us the information and data to support our advocacy position,” he pointed out.

Other initiatives

KBA in 2017 launched PesaLink under the subsidiary Integrated Payments Services Limited. The payments switch allows customers make direct transactions out of their bank accounts at the convenience of their mobile phone.

In less than two years KSh180billion has been moved through the payments switch and KBA is now working with various stakeholders to scale up the network to include more functionalities and services.

“We are continuously expanding the PesaLink platform which was launched as a person-to-person (P2P) platform and the next step was facilitating person to business (P2B) transactions,” he explains.

Olaka says the next step involves facilitating government payments leveraging on the state’s ongoing efforts to digtise the various cash transfers that previously used to be done in cash or cheque.

“We believe PesaLink can leverage on the state’s digitisation efforts as a solution through which some of these payments can be effected,” he said. “The central government, county government and semi autonomous state agencies all offer a lot of potential because with time taxpayers will increasingly opt for digital payments over cash and we’ll be there to play our role.”

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