KENYA AS A SERVICES HUB
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KENYA AS A SERVICES HUB

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KENYA AS A SERVICES HUB




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Presentation on theme: "KENYA AS A SERVICES HUB"— Presentation transcript:

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KENYA AS A SERVICES HUBThe role of services in economic transformation

#SupportingEconTransform

Slide2

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Judith E. Tyson, Research Fellow, Overseas Development Institute

April 2015

Financial services in Kenya:

its potential role in economic transformation

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introduction

Overview of Kenya’s financial deepeningTypes of hubs and their pros and consRegional financial hubsFinancial processing hubsKenya’s competitive positionKey questions for our discussion

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Kenya has experienced strong success in its financial sector

7.4% of 2013 GDPFinancial deepening has accelerated Growth in regional banks and cross-border bankingInnovation in mobile banking

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Source: World Bank’s Global Financial Development database

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And Its regulation is keeping pace with new demands

2014 removal from the Financial Action Task Force following improvements in anti-money laundering and terrorist financing2015 enhanced capital buffers implementedIMF see a “Strong commitment to strengthening prudential and regulatory oversight” (IMF, 2014)EAC Treaty – liberalization and harmonization of financial services

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GLOBAL Financial HUBs

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Hong Kong

Singapore

Tokyo

New York

London

Globally represent $3.2 trillion or 5% of GDP and 10% of services exports

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Developing country successes are of most relevance to Kenya

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Hong Kong

1. Regional financial hub

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. Specialist financial hub

2. Processing financial hub

Mauritius & Seychelles(Offshore banking)

Dubai (Islamic banking)

Bermuda(Offshore banking)

Singapore

Johannesburg

Sao Paolo

India

Philippines

There are 3 broad types of hubs… some examples in developing countries today

Lagos

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1. Regional financial hub

High potential contribution to GDPHigh potential to create high-skill, high-wage employment Accelerates economic development through financial sector growth and strong linkages to other sectorsBut…“Winner takes all” - although not yet in Sub-Saharan Africa Potential negative impacts on macroeconomic management and financial stabilityLonger term timeframe

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2. Financial processing centers

Serve as “outsourced” processing centre to major financial centresExamples include call centres, data processing, accounts and invoice processingHigh-volume, low-skill employment creationLittle potential for negative impacts on macroeconomic or financial stabilityRelatively rapid timeframeBut …Little impact on financial sector deepeningMore limited linkages to other sectors

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What is Kenya’s current competitive position?

Proven success in domestic financial services and its rapidly regionalizing banks are creating critical mass in NairobiFurther synergy because of growing strength in complimentary business services and ITLarge talent pool of English-speaking graduates (2)Compatible time zone for global financial centers (2)Participant in EAC treaty (1)

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Need for “best practice” legal and regulatory framework (1)Need for greater number of experienced financial service professionals (1)Need for further financial deepening including in capital and interbank markets (1)Need to ensure confidence in long-term political and economic stabilityWeaknesses in urban infrastructure that attract business

Competitive advantages

Competitive disadvantages

(1) Most relevant to regional financial hubs (2) Most relevant to financial processing centers

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K

ey questions for the panel discussion;

1. Do participants believe that being a financial hub is a realistic prospect?

2. If so, which type of hub is best for Kenya’s structural transformation - a regional financial center or a processing hub?

3. What is needed from private institutions, regulators and government to make it a reality?

Thank you!

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111 Blackfriars Road, London, SE1 8NJT: +44 207 9220 300

Website address

Email address

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KENYA AS A SERVICES HUBThe role of services in economic transformation

#SupportingEconTransform