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"id": 246896,
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"speaker_name": "Mr. Kenneth",
"speaker_title": "The Assistant Minister for Finance",
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"legal_name": "Peter Kenneth",
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"content": " Thank you, Mr. Temporary Deputy Speaker, Sir, for giving me this opportunity to give my comments on this Motion in form of a response, although I know that hon. Members are yet to debate it. First of all, let me appreciate the eloquence with which hon. Oloo-Aringo has moved this Motion. I have had an opportunity to look at his write-up. I must say that he has done thorough research. Looking at his Motion, having been a banker, I fully understand the issues that the hon. Oloo-Aringo is raising. They are, indeed, very critical to the common person. However, there are issues that we need to address before we think about this Motion. At a later stage, when he will have been granted the leave, if the House will so desire, there are issues we will need to look into. June 14, 2006 PARLIAMENTARY DEBATES 1342 The core business of the Kenya Post Office Savings Bank was basically to attract savings. They managed to attract savings in various rural areas. Today, Kenya Post Office Savings Bank has over two million savers. This Motion seeks to allow the Post Office Savings Bank to lend money. About 14 years ago, there was a similar feeling and because of the nature of the Kenya Post Office Savings Bank Act it was felt that the Kenya Post Office Savings Bank could actually start a lending institution called Post Bank Credit. The results were very disastrous when this outfit came into being. I have cited that case because it is important for the House to consider it. If the spirit is right and intentions are perfect, how do we move on? We should look at this Motion keenly, and the Mover, in introducing the Bill, will be able to put that issue into consideration. We must not lose the core function of Kenya Post Office Savings Bank because the only reason why it has thrived is its core function which is mainly to deal with savings. The time they tried to offer credit facilities, it was disastrous for them. Indeed, on a light note, I think the infamous Youth for KANU 92 (YK 92) had its roots in that bank that was started by Kenya Post Office Savings Bank. Mr. Temporary Deputy Speaker, Sir, the other thing I would like the Mover to put into consideration is that at the moment we have the Kenya Post Office Savings Bank Act. Do we want to move the Kenya Post Office Savings Bank, considering the spirit of this Motion, to fall under the Central Bank of Kenya (CBK) Act or do we want it to fall under the Micro-finance Act, which we want to introduce in this House? If you look at the nature of the savers in this institution, we are talking about micro-finance. If you look at a small micro-finance institution like K-Rep, which has gone through that route, you will realise that it has done so much for the rural communities. I am saying all these things for the consideration by the Mover of this Motion after he has been granted leave to bring the Bill before the House. We must also consider the intention of the Government of Kenya to come out of business. Indeed, the Minister for Finance has spoken about the Government coming out of the National Bank of Kenya, the Consolidated Bank and other institutions. The Kenya Post Office Savings Bank is a Government institution. The Government, if the core function of this institution were to change, intends to come out of the shareholding. These are some of the points I want the Mover of this Motion to look at. Generally, the intention of the Government is to come out of business and allow free enterprise to thrive. The other consideration I would be requesting for has to do with the capacity of Kenya Post Office Savings Bank. We know that its capacity has been built purely on the core function of savings. Lending is a very big risk in any banking institutions. Definitely, certain restructuring processes inside Kenya Post Office Saving Bank have to take place even before we consider the way forward for that institution. In fact, we should look at the guidelines issued by the CBK on lending and the lack of capacity in Kenya Post Office Savings Bank. I would like to appeal to the Mover to put that fact into consideration. Any banking institution that goes out there and makes lending its core function takes about 90 per cent of the risk involved in the banking industry. It will, therefore, be very important that the savings of two million people is not put to risk simply because a line of lending has been opened. Mr. Temporary Deputy Speaker, Sir, if you look at most of the financial institutions that have collapsed, it is because of poor lending policies. There are no guarantees in any institution that the borrowers can actually keep to their word when it comes to repayment. I would like hon. Oloo- Aringo to take that into consideration. What risks are we putting on savings that belong to two million people? That is a very key point. Most of the savers in Kenya Post Office Savings Bank continue to save knowing that the money is not going to be lent. The minute they realise that their money is exposed to lending, another danger will come in. You might have a small percentage June 14, 2006 PARLIAMENTARY DEBATES 1343 having a run on this savings bank. There are always those who go to the stock market knowing that risks exist. There are also those who invest their money in the CBK Treasury Bills knowing that their money is guaranteed. The savers in Kenya Post Office Savings Bank have actually saved with a notion that their money will not be lent out. That, in itself, is a confidence building item of the core function of this institution. So, when we open it up, and bearing in mind the risk of lending, it is a step worth considering. As I said before, I have no problem with the spirit in which this Motion has been brought before this House. I am aware of the example that was cited by the Mover about Bangladesh. I am also aware that there are certain institutions in this country which have tried to copy that particular institution in Bangladesh. In fact, Equity Bank started in the same way the institution in Bangladesh did. K-Rep tried to copy the same. Probably, we have not perfected it. However, we need to look at the spirit in which the Mover has brought this Motion before this House. Mr. Temporary Deputy Speaker, Sir, I have requested hon. Oloo-Aringo, who I can consider to be one of the most polished debaters of our time, that when he gets to the stage of drafting the Bill, to take into consideration all these issues I have talked about."
}