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Presentation on theme: "KENYA AS A SERVICES HUB"— Presentation transcript:
KENYA AS A SERVICES HUBThe role of services in economic transformation
Judith E. Tyson, Research Fellow, Overseas Development Institute
Financial services in Kenya:
its potential role in economic transformation
Overview of Kenya’s financial deepeningTypes of hubs and their pros and consRegional financial hubsFinancial processing hubsKenya’s competitive positionKey questions for our discussion
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
Source: World Bank’s Global Financial Development database
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
GLOBAL Financial HUBs
Globally represent $3.2 trillion or 5% of GDP and 10% of services exports
Developing country successes are of most relevance to Kenya
1. Regional financial hub
. Specialist financial hub
2. Processing financial hub
Mauritius & Seychelles(Offshore banking)
Dubai (Islamic banking)
There are 3 broad types of hubs… some examples in developing countries today
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
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
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)
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
(1) Most relevant to regional financial hubs (2) Most relevant to financial processing centers
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?