Regulation and Supervision of Bank Channels: Policy Options for Kenya

This report reviews current and proposed approaches to the regulation and supervision of bank distribution in Kenya. It examines current experience, international practice and future needs. The report makes recommendations to Central Bank of Kenya (CBK) about the policy approach towards regulation and supervision of bank branches and agents.

The report states that there is a lack of clarity about the supervisory approach to alternative banking channels. It suggests that CBK should offer a longer term vision and espouse a policy direction in which the country will be able to develop widespread financial distribution points.

The report makes a case for revising CBK’s regulatory approach towards bank distribution away from the current approach of individual outlet licensing towards an approach in which banks are pre-authorised to operate defined channels, based on their capability to manage the risks involved. Specific recommendations for CBK include:

• Draft and issue guidelines to set a strong foundation for the future development of the industry;
• Investigate the feasibility of establishing a central register of agents;
• Engage with the e-payment framework to ensure a level playing field between bank and nonbank agents.