Kenya is introducing several laws to strengthen its financial sector as new products such as mobile phone banking fill the market in the wake of technological advances, its finance minister said on Monday.
The east African nation of 36 million people has only 6.3 million traditional branch-held bank accounts, leaving a gap that is being filled by telecom operators with mobile phone money transfer services.
As we embrace the opportunities created by branchless banking, we are also dealing with the emerging challenges, Uhuru Kenyatta told a conference on mobile banking.
It is imperative that branchless banking and indeed the financial sector as a whole be founded on a sound legal and regulatory framework.
Kenyatta said modern technologies like mobile banking hold the key to uplifting the livelihoods of the majority of poor Kenyans who live in marginalized areas.
Access to finance plays a major role in promoting high and sustained rates of economic growth and particularly in reducing poverty, the minister said.
However, he said there is a need to balance innovation and regulation, citing the global downturn.
The recession was triggered by the global financial crisis whose root cause was primarily an imbalance between innovation and regulation, he said.
The new laws include one aimed at safeguarding the integrity of electronic information and giving recognition to electronic payments and another called the Proceeds of Crime and Anti-Money Laundering bill that is before parliament.
This legislation is expected to act as the main buffer against the misuse of Kenya's financial system for money laundering purposes, said Kenyatta of the anti-laundering bill.
Michael Joseph, chief executive of Safaricom the world's first mobile operator to provide mobile money transfer services said regulation is important.
In this field that we are in now, mobile banking, we are trending new ground. We are going where nobody has never been before. Naturally, there is no regulation surrounding it, he told Reuters at the conference.
I would hope that regulation will catch up with us, but it should be a balanced regulatory regime.
(Editing by Toby Chopra)