Kenya has made significant progress in sustainable finance reforms, an International Finance Corporation (IFC) report has indicated.
According to IFC, Kenya is one of 34 countries that have introduced banking reforms to expand sustainable lending, making emerging markets a major force in driving development and fighting climate change, according to the first comprehensive Global Progress Report of the Sustainable Banking Network, an IFC-supported organization of banking regulators and associations.
Kenya has been named among the 6 countries that are at the “emerging” stage and have policies and principles in place and have begun to implement these policies to achieve national development priorities, financial market deepening, and stability. These countries are: Kenya, Mexico, Morocco, Peru, South Africa and Turkey.
“This progress is an important step toward achieving the Sustainable Development Goals by 2030,” said Ethiopis Tafara, IFC’s Vice President for Legal, Compliance Risk and Sustainability. “It shows that even the poorest countries can adopt sustainable finance reforms. The Sustainable Banking Network has demonstrated in a short time how much can be achieved when regulators, policymakers, trade associations and development institutions collaborate to advance sustainable finance.” He added.
The 34 countries account for $42.5 trillion in bank assets—more than 85 percent of total bank assets in emerging markets. Some are wealthier than others, but all of them have made progress in advancing sustainable finance. Eight countries—Bangladesh, Brazil, China, Colombia, Indonesia, Mongolia, Nigeria, and Vietnam—have reached an advanced stage, having implemented large-scale reforms and put in place systems for results measurement. Kenya is currently developing a comprehensive sustainable finance initiative covering the entire financial sector.
“IFC congratulates Kenya for adopting the Sustainable Finance Guiding Principles and ensuring that banks have the capacity and resources to implement them. As one of the few members of the Sustainable Banking Network in Africa, Kenya is demonstrating leadership that will have a positive impact across East Africa.” IFC Country Manager for Kenya, Manuel Moses said.
In Kenya, an e-learning platform has been implemented to train banks.
“Some countries such as Indonesia, Kenya, Mexico, Mongolia, and Nigeria are already granting an official award to promote top performers and publicly acknowledge their willingness to further develop green finance.” Reads the report in part.
The report provides practical indicators and tools for countries to apply to their own domestic markets, regardless of their size or stage of development.
“This is important because it facilitates learning by all members and accelerates the pace of change. It is based on an innovative results-measurement approach that has been agreed by all 34 member countries—a remarkable achievement that is breaking new ground for measuring progress at the global level.” Statement from IFC reads.
According to Edi Setijawan, Sustainable Finance Director, Indonesia Financial Authority (OJK), and a co-Chair of SBN Measurement Working Group that led the development of the unique methodology behind the report, the intention of the report is to provide practical information to SBN member countries to help them develop public policy.
“It is a useful guide not only for regulators and the governments, but also for banks, steering them towards what they could and should do from the bottom up,” he said.
The report underlines several good practices introduced in Kenya, where the Sustainable Finance Initiative Guiding Principles are endorsed by the national banking association and the Kenyan Central Bank, and include not only environmental and social aspects, but also governance. A further good practice in Kenya was the introduction of a dedicated website and an e-learning platform to raise awareness about sustainable banking practices, which has been used to train 80 percent of bank employees.
It also suggests that the Guiding Principles would be enhanced if FIs were directly provided with technical skills or guidance notes to help them implement the principles. Green finance could also be more clearly defined in the principles, and they would benefit from the inclusion of climate risk management.
Emerging-market countries increasingly are learning from one another as they adopt sustainable-finance policies, according to the report. For example, with SBN support, Mongolia Banking Association visited Kenya in March 2017 and learned from Kenya’s advanced sustainable finance e-learning platform.