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State advised to establish development banks to support growth

Zachary Ochuodho @zachuodho

Kenya has been asked to consider establishing a “national development bank” to liaise with multinational institutions to provide affordable long-term financing to her projects.

Chief Executive Officer, Africa Development Bank, East Africa region, Caleb Nyamajeje, said national development banks play important role in growth of key sectors. He said countries which are keen about funding long-term development can only be able to realise the dream if they establish development banks.

“Kenya needs to establish a national bank which will liaise with multinational institutions like World Bank Group, Africa Development Bank and Asian Development Bank among others so as to fund long-term development projects,” Nyamajeje said.

He said national development banks would also provide affordable long-term financing and technical assistance to sectors not adequately serviced by commercial banks.

Development banks play a key role in promoting and financing enterprises in the private sector, mainly for medium or long-term industrial projects at a low interest rate.

At independence, Kenya had banks that were established basically to bankroll key sectors of growth such as agriculture and manufacturing, but they were quickly turned into commercial banks – which have become purely commercial entities.

National Treasury, Cabinet Secretary Henry Rotich said the government was teaming up with the private sector to establish a company that will disburse affordable home loans to low-income earners.

He said the creation of Mortgage Refinancing Company (KMRC) is one of the initiative by the government to stop commercial banks from charging high interest rates.

According to the Treasury, commercial banks, international financial institutions, non-bank financial institutions and Saccos will be on the list of KMRC’s principal shareholders.

He said already the World Bank has agreed to provide $150 million (Sh15 billion) towards the project. However, Nyamajeje said, AfDB will also contribute between $100 and 150 million (Sh10 and 15 billion) as the seed money to enable individuals own their own houses.

Rotich said the government will also set aside funds towards the kitty and urged other institutions which are interested in long-term investment to also join it. The newly created, non-bank financial institution will be restricted to provpeople have taken mortgages in the country.

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