LIST OF MEMBERS

• Lucy Njeri Wanjohi - • Shiundu Chrisantus Wanjala

G34/3598/2020 G34/3488/2020
• Kinuthia Grace waithira- • Morine KuriaG34/3474/2020
G34/3614/2020 • Joan Chelang'at G34/3529/2020
• Judith Moraa momanyi- • Ndire Tracey
G34/46095/2017 AdhiamboG34/46376/2017
LIST OF MEMBERS

• Mwangi Joseph Mburu • Koima Kipsoi Oliver

G34/3473/2020 G34/3635/2020
• Mwambire Lucky Mbitha
G34/3492/2020
• Kyalo Yvonne Nthenya
G34/3534/2020
CREDIT INFORMATION
SHARING
INTRODUCTION
INTRODUCTION

• DEF. Credit Information Sharing (CIS) is a process where credit providers (such as banks,
microfinance institutions, saccos, etc.) exchange information on their outstanding loans and
advances through licensed Credit Reference Bureaus (CRBs).
• Lenders can obtain reports from the CRB via CIS, providing them with information
regarding a borrower's repayment history.
• In Kenya, all institutions authorized by the CBK for the sharing of credit information with
CRBs are required to share full-file to all licensed CRBs, according the Credit Reference
Bureau Regulations 2020. Both a daily and monthly electronic submission of this data is
made.
• By taking into consideration the borrower's credit history and enabling credit
to be priced appropriately, the Credit Information Sharing (CIS) mechanism
seeks to close the information gap on borrowers' creditworthiness.
• The purpose for which this information is being shared is under s31 of the
Banking Act.
• S31 B.A
• “ Without prejudice to the generality of subsection (3) (b), regulations
under that, subsection may provide for the establishment and operation of
credit reference bureaus, for the purpose of collecting prescribed credit
information on clients of institutions licensed under This Act, and
disseminating it amongst such institutions for use in the ordinary course of
business, subject to such conditions or limitations as may be prescribed.”
• The Banking (Credit Reference Bureau) Regulation Act 2008 controls the
Central Bank's establishment, licensing, governance, management, and
oversight of the Credit Reference Bureau.
• The operation of the Credit Reference Bureaus and the bank's need to
maintain customer anonymity have been balanced by the sharing of credit
information through these bureaus.
ESTABLISHMENT AND LICENCING OF CREDIT
REFERENCE BUREAUS

• Kenya Credit Information exchange Initiative (KCISI) oversees the

management of credit information exchange . This is in tandem with banks,
the Central Bank of Kenya, and the Kenya Bankers Association.
• Its primary purpose upon formation was to offer analysis, counsel, and
support for the growth of the bank-licensed credit reference bureau data
sharing initiative.
• A potential applicant seeking to register a Credit Reference Bureau must
provide the following information to the Central Bank:
• Register a limited liability company with the Registrar of Companies.
• Submit a duly completed application form to the Central Bank of Kenya
(CBK). The Prescribed application form can be downloaded from the CBK
website, www.centralbank.go.ke.
BENEFITS OF CREDIT INFORMATION
SHARING

• Benefits to a customer
• Good clients can maintain their reputation by using a credit report to help
them stand out from chronic defaulters.
• It compiles a client's verified credit history from multiple lenders into a
reputable, official database that the client and the credit provider can access.
• Credit providers can obtain credit reports produced by the CRBs online,
which saves customers time and effort by processing loans more quickly.
• Customers can quickly switch credit providers and benefit from competition
to get better conditions on credit by making credit records more transferable.
• Benefits to the economy
• The linkage between access to credit and economic development of a country
is clear. CIS creates an opportunity for a wider cross section of the
population to access credit, particularly those with no access to tangible
collateral.
• The SME sector is an important driver to the industrial development of this
country and the Vision 2030. A functioning credit reference system is known to
reduce transactions costs in lending to small and medium enterprise (SME) which
will have the effect of making credit more available while helping to reduce price
not only through reduced costs but also enhanced competition.
• The ratio of Private Sector Credit to GDP will rise, hence improving efficiency in
financial intermediation that comes with reduced cost of operations. This would
in turn enhance stability of the financial system hence faster economic growth.
CREDIT REFERENCE BUREAUS

• DEF: is a business that has been licensed by the Central Bank of Kenya to
gather, aggregate, and preserve credit data about people and businesses
from various sources. The data is then made available to lenders in the
form of credit reports.
• There are three reference bureaus: Metropol Credit Reference Bureau Ltd
• Transunion Credit Reference Bureau Ltd
• Credit Info CRB Kenya
CHALLENGES FACING CIS

• It has not worked as expected, requiring a refresh. For instance, it was seen
as a punitive “blacklisting” tool that bars Kenyans from getting loans, instead
of helping borrowers take advantage of their credit history to get better
pricing of loans. There are 378 million records in CRBs, of which, 42 million
are blacklisted. Of these, 13 million are being blacklisted for amounts less
than Ksh. 1,000
• Customers have also complained about slowness in updating CRB records
after payment arrears have been cleared.
• delays in correcting errors by lenders who mistakenly “blacklisted”
compliant borrowers;
• The cost of clearance reports for youth entering the employment market.
IMPROVEMENTS TO THE CIS

• removing credit-only and unregulated digital lenders from the CIS system
due to their inability to provide efficient channels for client grievances and
redress.
• Setting a minimum threshold of Ksh.1,000 for negative credit information
that is submitted to CRBs by lenders. Thus, borrower’s information regarding
non-performing loans below that threshold will not be submitted to CRBs.
• CRBs will now provide CRB clearance certificates at no charge.
• SACCOs regulated by the Saccos Regulatory Authority (SASRA) will now
provide and access information from CRBs, similar to commercial and
microfinance banks.
• The new regulations enhance the governance of CRBs by requiring a
diversified Board composition, and empower CBK to set minimum capital
requirements to ensure CRBs are financial sound.
END!

• EEEENNNNDDD!!
BANCASSURANCE

• INTRODUCTION
• Def;The World Bank defines bancassurance as the process of using a bank's
branches, sales network, and customer relationships to develop sales of
insurance products.
• Also is the collaboration between banks and insurance companies whereby
banks may manufacture, distribute or market insurance products offered by
partner insurance companies in one form of construct or other, which ranges
in complexity on a continuum depending on the degree of collaboration
between the bank and its partner insurance provide.
Bancassurance agencies:
• First Insurance Agency license issued to CBA Bank under CBA Insurance
Agency
• Equity Bank under Equity Insurance Agency
• KCB under KCB Insurance Agency
• National Bank under National Bank Insurance Agency.
REGULATION OF BANCASSURANCE IN
KENYA

Kenya has a rich legal framework contained in various pieces of Acts of

parliament and other subsidiary legislation passed in parliament:
• Constitution, Article 46
• Banking act, s2
• Central Bank of Kenya Act, s4
• CBK guidelines on incidental business activities, s21
• IRA Guideline to Insurers on Bancassurance.
• Institutional Framework
• Central Bank of Kenya (CBK)
• Insurance Regulatory Authority (IRA)
DISTRIBUTION CHANNELS

• Various distribution channels currently in use include the following; Career

Agents, Special Advisers, Salaried Agents, Agencies or brokerage firms,
Direct Response and Internet.
Requirements For Application For Bancassurance
Business.

under regulation 5:
• be incorporated in Kenya;
• be wholly owned by a bank, microfinance bank or other financial institution
regulated in Kenya;
• apply in writing to the (IRA)Authority to be registered as a bancassurance
intermediary;
• have a minimum paid up capital of five million shillings;
• have at all times a minimum of ten million shillings in the form of a bank
guarantee as set out in the First Schedule: Provided that the bank,
microfinance bank or financial institution owning the applicant shall not
provide the guarantee; or a government bond with a maturity of at least two
years issued by the Central Bank of Kenya in favor of the Authority
Registration

• under regulation 6
• an application fee of twenty thousand shillings;
• a collaboration agreement with any insurer whose products the applicant
intends to market or distribute;
• a bancassurance business plan;
•
• a letter of no objection from the regulator of the bank, microfinance bank or
financial institution;
• a written application for approval of the principal officer of the
bancassurance business;
• constitutive documents including a certificate or registration or certificate of
incorporation.
Market Conduct By Bancassurance Intermediaries

According to Regulation 7, an individual who has registered as a

bancassurance intermediary must function as an intermediary for insurance and
must not;
• undertake or engage in the business of the underwriting of risks or engaging
in any other insurance business.
• give the impression of being the underwriter of the insurance products it is
marketing or distributing on behalf of the insurer on whose behalf it is acting
as a bancassurance intermediary.
• A bancassurance intermediary is required by Regulation 8 to make sure the
insurance product is registered in the underwriter's name and to notify its
clients that the insurer will handle any claims pertaining to the insurance
product.
Debiting client’s account

Regulation 9 requires that a bancassurance intermediary ensures that the bank,

microfinance bank or financial institution does not debit the client's bank
accounts for premiums without the prior written authority or consent of the
operator of the account held at the bank, microfinance bank or financial
institution.
Roles of the Bancassurance Intermediary

• informing, in writing, a customer that the customer has the right to select any
underwriter from among the underwriters licensed by the IRA
• not to advise or coerce a customer to cancel an existing policy from an
underwriter licensed by the IRA;
• not restrict the client's ability to work with an underwriter directly or to
employ any other bancassurance intermediary of their choosing.
Distribution of products

• Reg.11 ,a bancassurance intermediary to only distribute products approved

by the IRA.
Reporting Requirements

• Reg.14
The report contains;
• Number of insurers
• Number of policies
• Total commission earned
• Total premium under the policies placed
• Largest percentage commission from any one insurer
governance of a bancassurance intermediary

• Reg.17. for a board of directors of at least three members possessing diverse

qualifications and skills.
• Reg.16
Disqualification Of Registration

• Reg.19
• if; the applicant or any of its directors has, within a period of five years
preceding the date of the application, been convicted of an offence involving
fraud or dishonesty
• the applicant or any of its directors has, within a period of five years
preceding the date of the application become insolvent or compounded with
its creditors.
• the principal officer or the applicant's staff do not have sufficient knowledge,
skill or experience to satisfactorily discharge their functions;
Penalty For Violations

• According to regulation 20, in the event that a bancassurance intermediary

violates any regulation, the Policyholders Compensation Fund will be
entitled to a penalty from the bancassurance intermediary equal to twenty
thousand shillings for each day or portion of the violation.
• See Diamond Trust Bank Kenya Limited v Mohamed & another (Civil Appeal
E074 of 2021) [2023] KECA 436 (KLR) (14 April 2023)
Partnerships

• The main models that were approved by the Insurance Regulatory Authority
in 2014 are the specialist model and the integrated model.
• Most of the banks have a fully owned subsidiary that provides insurance
products to the public thus they have adopted the integrated model.
Bancassurance Products Range

• Only individual life insurance products and/or non-life personal insurance

shall be sold by the bancassurance intermediary in accordance with IRA
Bancassurance rules.
• Regulation 11 requires a bancassurance intermediary to only distribute
products approved by the IRA.
• In Kenya, the majority of banks have a subsidiary that provides
bancassurance:
• KCB Insurance Agency
• Equity Insurance Agency
• Cooperative Insurance Company
• CBA insurance Agency
Market Penetration

• strategy seeks to increase market share of the current product or services in

the existing market.
• should be executed when; current market is not fully saturated, Market share
of the competitors is decreasing whereas the industry growth rate is
increasing, Existing buyers have the potential to purchase same products and
services in more quantity and when economies of scale provide competitive
edge.
Risk Management

• CBK Risk Management Guidelines offer a number of measures to guide

companies on risk mitigation, especially in ICT CBK Risk Management
Guidelines:
• Risk assumption
• Risk avoidance
• Risk limitation
• Risk planning
• Risk transference
Conclusion

•END!
AGENCY BANKING
INTRODUCTION
• DEF. a banking model where traditional banks or financial institutions
extend their services to customers through third-party agents.
• These agents can be local businesses or individuals who are authorized to
conduct basic banking transactions on behalf of the bank. Customers can
deposit and withdraw cash, check their account balances, and perform other
simple banking activities through these agents, making financial services
more accessible, especially in areas with limited access to physical bank
branches.
Types of Agency Banking

• .Cash-in/Cash-out Agents: These agents primarily handle cash-related

transactions, allowing customers to deposit or withdraw cash. They are often
found in areas where people need easy access to cash, such as rural locations.

• Merchant Agents: These agents are usually businesses, such as convenience

stores or supermarkets, that offer banking services alongside their primary
products. Customers can conduct transactions while shopping.
Types of Agency Banking

• Mobile Money Agents: Mobile money agents work with mobile network
operators to provide services like mobile wallet top-ups, money transfers,
and bill payments through mobile phones.
• Banking Correspondents: These agents are typically more closely aligned
with traditional banks and may offer a broader range of services, including
account opening, loan applications, and more complex banking transactions.
Types of Agency Banking

• Postal Agents: In some countries, postal services partner with banks to

provide agency banking services through post offices, extending banking
services to a wider population.
Roles of Agency Banking

• enhances the accessibility of basic banking services.

• play a key role in streamlining the process of opening new bank accounts.
• facilitate various types of bill payments for customers, including utility bills,
mobile airtime purchases, and other financial obligations.
• offer essential customer support, assisting with inquiries and resolving issues
related to accounts or transactions.
Importance of Agency Banking

• enhances financial inclusion, especially in remote and underserved regions.

• presents a lucrative opportunity for agents. Local businesses and individuals
acting as banking agents can earn additional income through commissions
and fees for the banking services they provide.
• accessibility of banking services through agency banking naturally leads to
an increase in transaction volumes.
Importance of Agency Banking

• enhances the security of financial transactions. By using advanced

technology, banks can ensure that transactions carried out by agents are
secure and reliable.
Negative effects of agency banking

• Transactions conducted outside the traditional bank setting can be vulnerable

to various security threats, including data breaches and physical theft.
• The variation in the quality of service provided by agents is a notable
drawback of agency banking.
• The risk of fraud and mismanagement is heightened in agency banking due
to the decentralized nature of transactions.
• In regions with unreliable or no internet access, this reliance can lead to
frequent service disruptions.
Factors Influencing Adoption And Success Of
Agency Banking

• The regulatory environment is a critical determinant in the success of

agency banking.
• availability and robustness of technological infrastructure. Essential
elements like reliable mobile networks and internet connectivity are
indispensable for real-time transactions and seamless communication
between banks and their agents.
• Trust and security are paramount in the banking sector, especially in the c
• Local economic conditions and demographics, such as income levels,
population density, and urbanization rates also play a significant role in
determining the demand for and effectiveness of agency banking services
context of agency banking.
• The size, distribution, and quality of the agent network directly impact the
success of agency banking.
END

• END!