Overview

The mission of the department is to ensure a sound and vibrant Non-Banking financial sector through effective supervision. This is in line with the BOU Mission ‘To foster price stability and a sound financial sector’. The financial sector is categorised in a tiered framework where institutions are classified as:

Tier 1: Commercial Banks,

Tier 2; Credit Institutions,

Tier 3: Microfinance Deposit Taking Institutions (MDIs) and

Tier4; Non Deposit taking financial institutions such as Credit only NGOs, SACCOs and MFIs.

The tiered approach encourages broadening and deepening of the financial system and promotes the concepts of financial inclusion and sustainability. NBFI department is one of three departments in Supervision Function and derives its supervisory and regulatory mandate from the Micro Finance Deposit-taking Institutions Act 2003, Financial Institutions Act 2004, Foreign Exchange Act 2004 and the respective accompanying Regulations.

Role of the Department

The department monitors and supervises Credit Institutions, Microfinance Deposit-taking Institutions, Forex Bureaus and Money Remitters, National Social Security Fund (NSSF), Deposit Protection Fund and Credit Reference Bureau (CRB). The supervised financial institutions (SFI) are subject to periodic risk-based full-scope on-site examinations and Off-site monitoring through the analysis of the financial mandatory statutory returns of data submitted to BOU on a regular basis.  The on-site and off-site sections work closely towards the realization of the department’s strategic objectives of enhancing the Non-Banking Financial Institution (NBFI) sub-sector’s soundness, stability and strengthening supervision.

The department implements micro prudential supervision, which focuses on the financial soundness of each individual SFI with the aim of detecting risks to the stability of the NBFI sub-sector and finding approaches to mitigate them. Identifying risks to the NBFI sub-sector involves drawing on a wide range of sources, including statutory returns, consumers directly contacting the department and monitoring markets and the economy.

The Credit Reference Bureau (CRB) currently operated by Compuscan CRB Limited started 4 years ago and has since registered over 780,000 borrowers through issuance of financial cards. In addition, 546 branches of Participating Institutions are installed on the CRB system and the number of credit enquiries made on the bureau has grown to 1,036,422 averaging 40,000-50,000 per month. The benefits of credit information sharing include: reducing information asymmetry between lenders and borrowers; instilling discipline and a good credit culture to borrowers to ensure they are not over indebted; there are also long-term benefits such as reduction in lending rates and reduction of Non- performing Asset ratios of lending institutions.

The CRB market was opened up to competition on October 1, 2012 for any other potential provider who meets the eligibility criteria.