The document summarizes the structure of Kenya's financial sector. It describes the major components as commercial banks, non-bank financial institutions, mortgage companies, forex bureaus, development finance institutions, pension schemes, SACCOs, the insurance sector and stock market. It then discusses the key regulatory bodies that oversee each component, including the Central Bank of Kenya, Insurance Regulatory Authority, Capital Markets Authority, Retirement Benefits Authority, and SACCO Societies Regulatory Authority. The regulators are responsible for licensing, supervision and developing policies to promote efficient operations within their respective sectors.

1. Structure of Kenya’s Financial
Sector
ARIEMBA JARED MOGAKA
SOUTH EASTERN UNIVERSITY COLLEGE
(A CONSTITUENT COLLEGE OF THE
UNIVERSITY OF NAIROBI)
BACHELOR OF COMMERCE LECTURE II

2.  The financial market deals with the purchase and
sale of money. It therefore involves obtaining
money from those who have more than they need
by attracting it either as:
 deposits through commercial banks;
 premiums through insurance companies;
 units or shares through Mutual Funds
 or shares or bonds through investment banks.
 The money drawn from the savers is then pooled
and allocated throughout the economy by giving it
out as loans, common or corporate bonds, treasury
bills inter alia.

3.  The financial market in Kenya can be said to have
two major functions:
 it allocates money capital through identifying those with
surplus funds, attracting the funds into a pool and then
distributing them to those who need to spend more than they
have.
 The other function of the financial market is the distribution of
the economic risk through the creation and distribution of
securities.

4.  Principally, financial market in Kenya comprise:
 commercial banks,
 non-bank financial institutions,
 mortgage companies,
 forex bureaus,
 development finance institutions,
 pension schemes,
 SACCOs
 the insurance sector and the stock market.

5. Structure of Kenya’s financial system
 In the current structure, the firm’s legal status (bank,
broker or insurance company) determines which
regulator is responsible for supervising its activities.
 There are five key agencies and regimes for prudential
regulation:
 Central Bank of Kenya (CBK) for banks and payments settlement;
 Insurance Regulatory Authority (IRA) for insurance;
 the Capital Markets Authority (CMA) for capital markets
 Retirement Benefits Authority (RBA) for pensions.
 SACCO Societies Regulatory Authority (SASRA), which has been
mandated to license and supervise SACCOs.
 The chief regulator is however considered to be the
Ministry of Finance.

6. Central Bank of Kenya
 it is established under Article 231 of the new
Constitution.
 The Constitution does not expressly state the
regulating function of the Central Bank but under
sub-article 2 it is prescribed that an Act of
Parliament shall provide for other functions
conferred on the Bank.

7.  The Central Bank of Kenya Act Cap 491 Laws of
Kenya is such kind of an Act and it also establishes
the Bank under section 3.
 Section 4A(1) of the Act then provides that the
Central Bank of Kenya shall license and supervise
authorised dealers and also formulate and
implement such policies as best promote the
establishment, regulation and supervision of
efficient and effective payment, clearing and
settlement systems. These two functions clarify the
regulatory functions of the bank.

8.  The Central Bank of Kenya oversees the robust and
systemic supervision of commercial banks, non
bank financial institutions, mortgage companies,
forex bureaus, building societies and micro finance
institutions
 The Central Bank supervises commercial banks
through ensuring the enforcement of the Banking
Act regulations, for instance banks are not allowed
to grant a loan to an individual borrower in excess
of 25% of the capital to avoid overexposure.
 This was also established in the case of Stanley
Githunguri v Jimba Credit Corporation Ltd. Cap
488 Laws of Kenya

9.  The Central Bank supervises several activities in
commercial banks including interest rates,
information and reporting requirements,
inspection and control of the institution inter alia.
 The Central Bank of Kenya also launched the
revised Forex Bureau Guidelines 2011 on 18 March
2011. These guidelines were revised in consultation
with the stakeholders of the forex bureaus sub-
sector.

10. Insurance Regulatory Authority
 The Insurance Regulatory Authority (IRA) was
established in 2006 as a governmental agency tasked
with the regulation, supervision and development of
the insurance industry in Kenya.
 The body is also mandated to assist in the
administration of the Insurance Act Cap 487 Laws of
Kenya. IRA also provides advice to the government
on insurance policy issues.

11.  The Authority is in charge of supervision of
insurance companies, insurance brokers, and agents,
assessors and adjustors and health management
organisations (HMOs).

12. Capital Markets Authority
 The Capital Markets Authority (CMA) was
established in December 1989 under the Capital
Markets Authority Act, renamed the Capital Markets
Act in 2000 after amendments.
 The CMA is responsible for the licensing, regulation
and supervision of all capital markets participants.
 The CMA also disseminates rules and regulations
within its jurisdiction, and is empowered to carry out
enforcement and sanctions. Cap 485A Laws of Kenya
 Section 5 of the Act establishes the Capital Markets
Authority

13.  All companies that issue securities are regulated
under the Capital Markets Act, the Companies Act,
and the CMA's regulations.
 The CMA is mandated to supervise securities
exchanges, fund managers, Central Depository
Systems, custodians, investment banks, collective
investment schemes, investment advisers, stock
brokers, securities dealers, listed companies, credit
rating agencies and venture capital firms.

14. Retirement Benefits Authority
 The Retirement Benefits Authority (RBA) is established
under section 3 of the Retirement Benefits Act No.3 of
1997.
 The objects and functions of the Authority are
established under section 5 of the Act as follows:
 regulate and supervise the establishment and management of
retirement benefits schemes;
 protect the interests of members and sponsors of retirement benefits
sector;
 promote the development of the retirement benefits sector;
 advise the Minister on the national policy to be followed with regard
to retirement benefits schemes and to implement all Government
policies relating thereto and any other functions as are conferred on
it by any legislation.

15.  The Authority regulates retirement benefit schemes,
pooled schemes, the National Social Security Fund
(NSSF), administrators, fund managers and
custodians.

16. SACCO Societies Regulatory Authority (SASRA),
 SACCO Societies Act of 2008, and the SACCO
Societies (Deposit-taking SACCO Business)
Regulations of 2010 provide for the establishment of
SASRA.
 (SASRA)has been mandated to license and supervise
SACCOs in the country

17.  All SACCOS operating FOSA services are required to
apply for an annual renewable license from SASRA.