## 1. Priority Recommendations ## Source details **Canonical URL:** [1. Priority Recommendations](https://www.imf.org/-/media/files/publications/cr/2020/english/1kenea2020002.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2020/english/1kenea2020002.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2020/english/1kenea2020002.pdf.json) --- ### Summary of mission objectives and outcomes - A monetary and financial statistics (MFS) technical assistance (TA) mission visited Nairobi, Kenya, during December 3–14, 2018. - Main objectives: - Review implementation of recommendations made by the MFS mission in January 2017. - Review expanded coverage of the standardized report form for other depository corporations (SRF 2SR) including SACCOs, microfinance banks (MFBs), and money market funds (MMFs). - Review the standardized report form for other financial corporations (SRF 4SR) comprising insurance companies and pension funds. - Review adequacy of available data for remaining institutions in the other financial corporations (OFCs) subsector and adapt reporting forms to allow expansion of SRF 4SR coverage. - Provide three-day training on compilation of MFS for staff of the Central Bank of Kenya (CBK) and other financial sector regulatory authorities. - Achievements: - CBK started to receive regular submission of source data from other financial sector regulatory authorities to expand coverage of 2SR and develop 4SR. - CBK compiled provisional data for 2SR with expanded coverage to include SACCOs and MFBs. - CBK developed provisional data for 4SR comprising insurance companies and pension funds. - Provisional data for 2SR and 4SR were submitted to STA for review. - A technical working group (TWG) on MFS comprising staff of the CBK and other regulatory authorities was formed and has met quarterly. - A three-day training on MFS, including the balance sheet approach (BSA), was provided in conjunction with the fourth TWG meeting. ### Priority recommendations (from Table 1) - Ongoing - Continue to organize TWG’s meetings on a regular basis; cooperate and collaborate further with other financial sector regulatory authorities to improve the compilation of MFS. — Responsible: CBK - December 2019 - Finalize provisional data for 2SR with the coverage extended to include SACCOs and MFBs to be submitted to STA for review; regularly report revised 2SR to STA. — Responsible: CBK - December 2019 - Finalize provisional data for 4SR comprising insurance companies and pension funds to be submitted to STA for review; regularly report 4SR to STA for publication in the IFS. — Responsible: CBK ### The financial system in Kenya — key statistics (as of September 2018 unless otherwise noted) - Central Bank of Kenya total assets: KSh 1,064 billion (about 12 percent of GDP). - Commercial banks: - Number of institutions: 41 commercial banks — including 2 under receivership and 1 mortgage finance company. - Total assets: KSh 4,933 billion, equivalent to USD 48.4 billion. - Share: about 70 percent of total assets of the financial system excluding the central bank. - Other Depository Corporations (ODCs): - Deposit-taking SACCOs: 174 institutions, total assets KSh 487 billion. - Deposit-taking MFBs: 13 institutions, total assets KSh 79 billion. - Money Market Funds (MMFs): 20 active, total assets KSh 46 billion. - Other Financial Corporations (OFCs): - Pension funds: 1,277 funds, total assets KSh 949 billion. - Insurance companies: 56 companies (15 life, 28 general, 9 composite, 4 reinsurance), total assets KSh 625 billion; life insurance accounts for over 60 percent of insurance assets. - Non-deposit-taking SACCOs: 2,286 institutions, total assets KSh 153 billion (coverage not universal as of end 2017). - Non-MMF investment funds: 16 funds, total assets KSh 11.6 billion. - Summary table totals (Table 2, KSh billion, September 2018): - Other Depository Corporations total assets: 5,545.1 (sector percent of total subsector assets: 100.0%; percent of total financial sector assets: 66.4%). - Other Financial Corporations total assets: 1,739.0 (sector percent of total subsector assets: 100.0%; percent of total financial sector assets: 20.8%). - Total financial corporations assets: 8,347.6 (3960 institutions, 100.0%). - Notes: - Investment Funds and Non-Deposit-Taking SACCOs coverage dates: Investment Funds as of June 2018; Non-Deposit-Taking SACCOs as of end 2017. - Commercial banks include one mortgage finance company. - Non-life insurance includes general, composite and reinsurance. ### Technical Working Group (TWG) — assessment and recommended action - Background and progress: - TWG established January 2018 to improve quality and timeliness of monetary data and coordination among regulatory authorities. - TWG members include staff from the Retirement Benefit Authority (RBA), the Insurance Regulatory Authority (IRA), the SACCO Societies Regulatory Authority (SASRA), the Capital Markets Authority (CMA), the Kenya Deposit Insurance Corporation (KDIC), the Kenya National Bureau of Statistics, and the CBK. - TWG meets quarterly; since inception the CBK started to receive improved-quality and regularly submitted source data enabling inclusion in 2SR and 4SR. - Source data contributions that enabled provisional expanded SRFs: - SASRA provided source data for deposit-taking SACCOs (monthly frequency, reported within 20 days after the end of the reference period). - MFBs report monthly directly to CBK within 10 days after the end of the reference period (same timeliness as commercial banks). - IRA and RBA provided source data for insurance companies and pension funds respectively for 4SR development. - Three-day training on MFS and BSA was provided in conjunction with the fourth TWG meeting (held in Naivasha). - Benefits observed: - Training and the BSA matrix improved participants’ understanding of data needs and analytical uses; clarified classification of financial instruments and institutional sectors; facilitated resolution of outstanding data issues. - TWG arrangement considered an effective model for improving inter-agency cooperation for MFS compilation. - Recommended Action: - Continue to organize TWG’s meetings on a regular basis; cooperate and collaborate further with other financial sector regulatory authorities to improve the compilation of MFS. ### Other Depository Corporations (ODCs) accounts — source data, provisional data, and issues - Source data developments: - At the time of the 2017 mission, CBK compiled and reported 1SR and 2SR mainly comprising commercial banks. - 2017 recommendation: expand 2SR to include deposit-taking SACCOs and MFBs. - SASRA committed to provide monthly data starting January 2017 with detailed sectoral breakdown. - With TWG formation, CBK began regularly receiving SACCO source data from SASRA and continued receiving MFB data directly from MFBs. - Provisional data for expanded 2SR: - CBK produced initial provisional data for expanded 2SR and submitted to STA for review in August 2017; after STA feedback, CBK improved classification by gathering more detailed source information. - Mission assessment: provisional data for 2SR expanded to include deposit-taking SACCOs and MFBs are broadly in accordance with MFSMCG methodology. - Remaining methodological issues identified in SACCO source data (Appendix II references): - Transferable deposits (assets) were in part misclassified as other deposits. - Prepayment of insurance (assets) was in part misclassified as other prepayments. - Other securities (assets) issued by other depository corporations were in part misclassified as by public nonfinancial corporations. - Loans (assets) for households were in part misclassified as other nonfinancial corporations. - Data for SACCOs were not included in 2SR prior to January 2015. - Recommended Action: - CBK to correct misclassification of counterpart sectors and financial instruments in source data provided by SASRA and include SACCOs data in 2SR. - With these issues addressed and continued regular data provision by TWG members, CBK can report expanded 2SR to STA on a regular basis for publication in IFS. ### Inclusion of deposit-taking SACCOs and MFBs — impact on ODCs sector monetary data - As of September 2018, total assets of deposit-taking SACCOs amount to KSh 487.46 billion and MFBs amount to KSh 78.63 billion, accounting for 9.9 percent and 0.9 percent of commercial banks’ total assets, respectively. - Deposits included in broad money of deposit-taking SACCOs amount to KSh 328.50 billion and MFBs amount to KSh 40.14 billion, accounting for 11.2 percent and 1.4 percent of commercial banks’ deposits, respectively. - The parallel monthly compilation of provisional expanded 2SR and the existing 2SR has increased the workload of MFS compilers; earliest possible completion of the coverage expansion is desirable to streamline compilation by terminating the existing 2SR. - Recommended actions (2SR expansion and data corrections): - Correct misclassification of counterpart sectors and financial instruments, and include data for SACCOs prior to January 2015 in 2SR; submit revised provisional data to STA for review. - Finalize by incorporating STA’s feedback and report regularly revised 2SR to STA. - Historical data availability and treatment: - Source data for SACCOs: annually from 2011, quarterly from March 2014, monthly from January 2017. - Source data for MFBs: available only starting from January 2015. - Starting data periods adopted: SACCOs January 2014 and MFBs January 2015. - For 2014–2016 (quarterly-only SACCOs data) and other missing quarterly observations, interpolation is applied to estimate monthly series. ### Banks in liquidation - KDIC provided trial balance data for each of 17 commercial banks in liquidation as of January 2018. - Aggregate totals for banks in liquidation as of January 2018: - Total assets: KSh 84.6 billion, accounting for 1.9 percent of commercial banks’ total assets. - Loans outstanding: account for 3.1 percent of commercial banks’ loans. - Deposits: account for 0.45 percent of commercial banks’ deposits both included in and excluded from broad money; and 0.51 percent of commercial banks’ deposits included in broad money. - Trial balance data lack detailed sectoral breakdown needed for MFS; estimation methods are required to assign counterpart sectors (one method: use sectoral information of the latest data observation before liquidation start). - Note on treatment of deposits in liquidation: Deposits of banks in liquidation amounting to KSh 13.7 billion as of January 2018 would have to be classified as deposits excluded from broad money if included in MFS because withdrawal demands cannot be met; if after liquidation those deposits are acquired by existing commercial banks and included in broad money, maximum impact would be to increase broad money by 0.51 percent. - Recommended Action: Assess the feasibility of including data for banks in liquidation in 2SR using appropriate estimation methods. ### Other Financial Corporations (4SR): insurance companies and pension funds - Progress: - CBK started regularly receiving quarterly source data from the IRA (insurance companies) and the RBA (pension funds), submitted within two quarters after the end of the reference period, enabling CBK to compile 4SR. - Provisional 4SR data were reported to STA for review in August 2017; after STA feedback, CBK improved classification by gathering more detailed source information. - Identified misclassifications to correct: - Pension funds’ holdings of debt securities issued by central government were in part misclassified as by public nonfinancial corporations (Appendix II). - Guaranteed funds reported by both pension funds and insurance companies result in double counting; guaranteed funds should be excluded from pension funds subsector in 4SR because insurance companies take the risks and rewards and are responsible for shortfalls/excesses. - Recommended Actions: - Correct misclassification of counterpart sectors for 4SR and exclude data for guaranteed funds from the pension funds subsector; submit revised provisional data for 4SR to STA for review. - Finalize by incorporating STA’s feedback and report regularly revised 4SR to STA for publication in IFS. - Compile and disseminate data on the other financial corporations survey and the financial corporations survey on the CBK’s website and in other publications. - Historical data for 4SR: - Insurance companies: source data quarterly starting from March 2014; no source data prior to that. - Pension funds: source data semi-annually from end 2001 until end 2014, quarterly starting from 2015 with missing data for March 2015 and March 2016. - Recommendation from previous missions: include historical 4SR data starting from beginning of 2014; use interpolation for semi-annual and missing quarterly observations as necessary. ### Further expansion: Investment funds and MMFs - CMA collected balance sheet data for investment funds and provided end 2017 data to CBK. - Among 36 investment fund institutions, 20 offer MMFs; MMFs account for about 80 percent of the investment funds industry’s total assets. - MFSMCG recommendations: - Divide investment funds into MMFs and non-MMF investment funds. - Classify MMFs under the ODCs sector if liabilities are close substitutes for transferable and other deposits. - Include MMF shares in broad money if held by money-holding sectors, contingent on counterpart sectoral information. - Data issues and planned actions: - CBK found inconsistencies between total assets and total liabilities in MMF data provided by CMA; CMA to investigate and use reporting forms providing aggregate data over all investment funds institutions. - Reporting forms were assessed as broadly adequate with minor adjustments. - CBK expects to start regularly receiving quarterly data for investment funds including MMFs beginning with data for the fourth quarter of 2018 via reporting forms. - CBK to review data quality and timeliness for the first few quarters and assess ability to compile and report 2SR and 4SR to STA within three quarters after the reference period. - Once adequate, MMFs included in 2SR (ODCs sector and broad money) and non-MMF investment funds included in 4SR (OFCs sector). - Recommended Actions: - Assess adequacy of data for MMFs reported by the CMA to be included in the ODCs sector and in broad money. - Assess adequacy of data for non-MMF investment funds reported by the CMA to be included in the OFCs sector. - Assess feasibility to receive monthly data for MMFs with appropriate timeliness from the CMA to be classified in the ODCs sector and in broad money. - Until monthly data become available, compile monthly 2SR including MMFs based on quarterly data using appropriate estimation methods. ### Non-deposit-taking SACCOs and non-deposit-taking MFBs - Non-deposit-taking SACCOs: - Recent CCD data (with SASRA assistance) show at least 2,286 non-deposit-taking SACCOs as of end 2017. - Aggregate totals as of end 2017: - Total assets: KSh 153.22 billion (or 34 percent of deposit-taking SACCOs and 3.4 percent of commercial banks). - Deposits: KSh 117.50 billion, accounting for 3.8 percent of commercial banks’ deposits. - Loans: KSh 118.22 billion, accounting for 4.6 percent of commercial banks’ loans. - Given relatively large size, recommended that CBK collect more detailed balance sheet data to assess feasibility of inclusion in monetary data. - Recommended Action: Collect detailed balance sheet information on non-deposit-taking SACCOs to assess feasibility to include them in the monetary data (target Completion Date: June 2020; Priority: M). - Non-deposit-taking MFBs: - CBK does not currently collect source data; sector has been growing and is significant for SME credit. - Mission suggested CBK monitor activities and investigate availability of source data for potential inclusion in 4SR. ### Future technical assistance and resource implications - Short-term objectives (finalizing provisional expanded 2SR and 4SR) require relatively minor adjustments (correcting misclassification of instruments and sectors) and are achievable with CBK resources and TWG cooperation. - Medium-term tasks (collecting and mapping data for investment funds/MMFs, assessing inclusion of banks in liquidation, and non-deposit-taking SACCOs) will require additional resources. - STA stands ready to support CBK with remote TA and, if requested and resources permit, a follow-up on-site TA mission. ### Mission’s prioritized recommendations (selected milestones and target completion dates from the action plan) - Continue regular TWG meetings and cooperation with regulators. (Priority: H; Target: Ongoing) - Correct misclassification and mapping for 2SR; submit revised provisional data to STA for review. (Priority: H; Target Completion Date: September 2019) - Finalize provisional 2SR by incorporating STA feedback; report regularly revised 2SR to STA. (Priority: H; Target Completion Date: December 2019) - Assess feasibility of including banks in liquidation in 2SR using estimation methods. (Priority: L; Target Completion Date: June 2020) - Correct misclassification for 4SR and exclude guaranteed funds from pension funds subsector; submit revised provisional 4SR to STA. (Priority: H; Target Completion Date: September 2019) - Finalize provisional 4SR by incorporating STA feedback; report revised 4SR to STA for IFS publication. (Priority: H; Target Completion Date: December 2019) - Compile and disseminate OFC and financial corporations survey data on CBK website and other publications. (Priority: M; Target Completion Date: December 2019) - Assess adequacy of MMF and non-MMF investment fund data reported by CMA. (Priority: M; Target Completion Dates: June 2019) - Assess feasibility to receive monthly MMF data from CMA; until then, compile monthly 2SR including MMFs based on quarterly data using estimation methods. (Priority: M; Target Completion Dates: December 2019) - Collect detailed balance sheet information on non-deposit-taking SACCOs. (Priority: M; Target Completion Date: June 2020) *Source: Excerpt from Kenya monetary and financial statistics mission report (content unit: 1kenea2020002).* ### 1. Priority Recommendations _______________________________________________________________________6 ### 1. Priority Recommendations ### Summary of mission objectives and outcomes - A monetary and financial statistics (MFS) technical assistance (TA) mission visited Nairobi, Kenya, during December 3–14, 2018. - Main objectives: - Review implementation of recommendations made by the MFS mission in January 2017. - Review expanded coverage of the standardized report form for other depository corporations (SRF 2SR) including SACCOs, microfinance banks (MFBs), and money market funds (MMFs). - Review the standardized report form for other financial corporations (SRF 4SR) comprising insurance companies and pension funds. - Review adequacy of available data for remaining institutions in the other financial corporations (OFCs) subsector and adapt reporting forms to allow expansion of SRF 4SR coverage. - Provide three-day training on compilation of MFS for staff of the Central Bank of Kenya (CBK) and other financial sector regulatory authorities. - Achievements: - CBK started to receive regular submission of source data from other financial sector regulatory authorities to expand coverage of 2SR and develop 4SR. - CBK compiled provisional data for 2SR with expanded coverage to include SACCOs and MFBs. - CBK developed provisional data for 4SR comprising insurance companies and pension funds. - Provisional data for 2SR and 4SR were submitted to STA for review. - A technical working group (TWG) on MFS comprising staff of the CBK and other regulatory authorities was formed and has met quarterly. - A three-day training on MFS, including the balance sheet approach (BSA), was provided in conjunction with the fourth TWG meeting. ### Priority recommendations (from Table 1) - Ongoing - Continue to organize TWG’s meetings on a regular basis; cooperate and collaborate further with other financial sector regulatory authorities to improve the compilation of MFS. — Responsible: CBK - December 2019 - Finalize provisional data for 2SR with the coverage extended to include SACCOs and MFBs to be submitted to STA for review; regularly report revised 2SR to STA. — Responsible: CBK - December 2019 - Finalize provisional data for 4SR comprising insurance companies and pension funds to be submitted to STA for review; regularly report 4SR to STA for publication in the IFS. — Responsible: CBK ### The financial system in Kenya — key statistics (as of September 2018 unless otherwise noted) - Central Bank of Kenya total assets: KSh 1,064 billion (about 12 percent of GDP). - Commercial banks: - Number of institutions: 41 commercial banks — including 2 under receivership and 1 mortgage finance company. - Total assets: KSh 4,933 billion, equivalent to USD 48.4 billion. - Share: about 70 percent of total assets of the financial system excluding the central bank. - Other Depository Corporations (ODCs): - Deposit-taking SACCOs: 174 institutions, total assets KSh 487 billion. - Deposit-taking MFBs: 13 institutions, total assets KSh 79 billion. - Money Market Funds (MMFs): 20 active, total assets KSh 46 billion. - Other Financial Corporations (OFCs): - Pension funds: 1,277 funds, total assets KSh 949 billion. - Insurance companies: 56 companies (15 life, 28 general, 9 composite, 4 reinsurance), total assets KSh 625 billion; life insurance accounts for over 60 percent of insurance assets. - Non-deposit-taking SACCOs: 2,286 institutions, total assets KSh 153 billion (coverage not universal as of end 2017). - Non-MMF investment funds: 16 funds, total assets KSh 11.6 billion. - Summary table totals (Table 2, KSh billion, September 2018): - Other Depository Corporations total assets: 5,545.1 (sector percent of total subsector assets: 100.0%; percent of total financial sector assets: 66.4%). - Other Financial Corporations total assets: 1,739.0 (sector percent of total subsector assets: 100.0%; percent of total financial sector assets: 20.8%). - Total financial corporations assets: 8,347.6 (3960 institutions, 100.0%). - Notes: - Investment Funds and Non-Deposit-Taking SACCOs coverage dates: Investment Funds as of June 2018; Non-Deposit-Taking SACCOs as of end 2017. - Commercial banks include one mortgage finance company. - Non-life insurance includes general, composite and reinsurance. ### Technical Working Group (TWG) — assessment and recommended action - Background and progress: - TWG established January 2018 to improve quality and timeliness of monetary data and coordination among regulatory authorities. - TWG members include staff from the Retirement Benefit Authority (RBA), the Insurance Regulatory Authority (IRA), the SACCO Societies Regulatory Authority (SASRA), the Capital Markets Authority (CMA), the Kenya Deposit Insurance Corporation (KDIC), the Kenya National Bureau of Statistics, and the CBK. - TWG meets quarterly; since inception the CBK started to receive improved-quality and regularly submitted source data enabling inclusion in 2SR and 4SR. - Source data contributions that enabled provisional expanded SRFs: - SASRA provided source data for deposit-taking SACCOs (monthly frequency, reported within 20 days after the end of the reference period). - MFBs report monthly directly to CBK within 10 days after the end of the reference period (same timeliness as commercial banks). - IRA and RBA provided source data for insurance companies and pension funds respectively for 4SR development. - Three-day training on MFS and BSA was provided in conjunction with the fourth TWG meeting (held in Naivasha). - Benefits observed: - Training and the BSA matrix improved participants’ understanding of data needs and analytical uses; clarified classification of financial instruments and institutional sectors; facilitated resolution of outstanding data issues. - TWG arrangement considered an effective model for improving inter-agency cooperation for MFS compilation. - Recommended Action: - Continue to organize TWG’s meetings on a regular basis; cooperate and collaborate further with other financial sector regulatory authorities to improve the compilation of MFS. ### Other Depository Corporations (ODCs) accounts — source data, provisional data, and issues - Source data developments: - At the time of the 2017 mission, CBK compiled and reported 1SR and 2SR mainly comprising commercial banks. - 2017 recommendation: expand 2SR to include deposit-taking SACCOs and MFBs. - SASRA committed to provide monthly data starting January 2017 with detailed sectoral breakdown. - With TWG formation, CBK began regularly receiving SACCO source data from SASRA and continued receiving MFB data directly from MFBs. - Provisional data for expanded 2SR: - CBK produced initial provisional data for expanded 2SR and submitted to STA for review in August 2017; after STA feedback, CBK improved classification by gathering more detailed source information. - Mission assessment: provisional data for 2SR expanded to include deposit-taking SACCOs and MFBs are broadly in accordance with MFSMCG methodology. - Remaining methodological issues identified in SACCO source data (Appendix II references): - Transferable deposits (assets) were in part misclassified as other deposits. - Prepayment of insurance (assets) was in part misclassified as other prepayments. - Other securities (assets) issued by other depository corporations were in part misclassified as by public nonfinancial corporations. - Loans (assets) for households were in part misclassified as other nonfinancial corporations. - Data for SACCOs were not included in 2SR prior to January 2015. - Recommended Action: - CBK to correct misclassification of counterpart sectors and financial instruments in source data provided by SASRA and include SACCOs data in 2SR. - With these issues addressed and continued regular data provision by TWG members, CBK can report expanded 2SR to STA on a regular basis for publication in IFS. _International Monetary Fund_ ### 22. Inclusion of deposit-taking SACCOs and MFBs will have a significant impact ### 22. Inclusion of deposit-taking SACCOs and MFBs will have a significant impact ### Impact on monetary data for the ODCs sector - As of September 2018, total assets of deposit-taking SACCOs amount to KSh 487.46 billion and MFBs amount to KSh 78.63 billion, accounting for 9.9 percent and 0.9 percent of commercial banks’ total assets, respectively. - Deposits included in broad money of deposit-taking SACCOs amount to KSh 328.50 billion and MFBs amount to KSh 40.14 billion, accounting for 11.2 percent and 1.4 percent of commercial banks’ deposits, respectively. - The parallel monthly compilation of provisional expanded 2SR and the existing 2SR has increased the workload of MFS compilers; earliest possible completion of the coverage expansion is desirable to streamline compilation by terminating the existing 2SR. ### Recommended actions (2SR expansion and data corrections) - Correct misclassification of counterpart sectors and financial instruments, and include data for SACCOs prior to January 2015 in 2SR; submit revised provisional data to STA for review. - Finalize by incorporating STA’s feedback and report regularly revised 2SR to STA. ### Historical data availability and treatment - Source data for SACCOs: annually from 2011, quarterly from March 2014, monthly from January 2017. - Source data for MFBs: available only starting from January 2015. - Starting data periods adopted: SACCOs January 2014 and MFBs January 2015. - For 2014–2016 (quarterly-only SACCOs data) and other missing quarterly observations, interpolation is applied to estimate monthly series. ### Banks in liquidation - KDIC provided trial balance data for each of 17 commercial banks in liquidation as of January 2018. - Aggregate totals for banks in liquidation as of January 2018: - Total assets: KSh 84.6 billion, accounting for 1.9 percent of commercial banks’ total assets. - Loans outstanding: account for 3.1 percent of commercial banks’ loans. - Deposits: account for 0.45 percent of commercial banks’ deposits both included in and excluded from broad money; and 0.51 percent of commercial banks’ deposits included in broad money. - Trial balance data lack detailed sectoral breakdown needed for MFS; estimation methods are required to assign counterpart sectors (one method: use sectoral information of the latest data observation before liquidation start). - Note on treatment of deposits in liquidation: Deposits of banks in liquidation amounting to KSh 13.7 billion as of January 2018 would have to be classified as deposits excluded from broad money if included in MFS because withdrawal demands cannot be met; if after liquidation those deposits are acquired by existing commercial banks and included in broad money, maximum impact would be to increase broad money by 0.51 percent. - Recommended Action: Assess the feasibility of including data for banks in liquidation in 2SR using appropriate estimation methods. ### Other Financial Corporations (4SR): insurance companies and pension funds - Progress: CBK started regularly receiving quarterly source data from the IRA (insurance companies) and the RBA (pension funds), submitted within two quarters after the end of the reference period, enabling CBK to compile 4SR. - Provisional 4SR data were reported to STA for review in August 2017; after STA feedback, CBK improved classification by gathering more detailed source information. - Identified misclassifications to correct: - Pension funds’ holdings of debt securities issued by central government were in part misclassified as by public nonfinancial corporations (Appendix II). - Guaranteed funds reported by both pension funds and insurance companies result in double counting; guaranteed funds should be excluded from pension funds subsector in 4SR because insurance companies take the risks and rewards and are responsible for shortfalls/excesses. - Recommended Actions: - Correct misclassification of counterpart sectors for 4SR and exclude data for guaranteed funds from the pension funds subsector; submit revised provisional data for 4SR to STA for review. - Finalize by incorporating STA’s feedback and report regularly revised 4SR to STA for publication in IFS. - Compile and disseminate data on the other financial corporations survey and the financial corporations survey on the CBK’s website and in other publications. ### Historical data for 4SR - Insurance companies: source data quarterly starting from March 2014; no source data prior to that. - Pension funds: source data semi-annually from end 2001 until end 2014, quarterly starting from 2015 with missing data for March 2015 and March 2016. - Recommendation from previous missions: include historical 4SR data starting from beginning of 2014; use interpolation for semi-annual and missing quarterly observations as necessary. ### Further expansion: Investment funds and MMFs - CMA collected balance sheet data for investment funds and provided end 2017 data to CBK. - Among 36 investment fund institutions, 20 offer MMFs; MMFs account for about 80 percent of the investment funds industry’s total assets. - MFSMCG recommendations: - Divide investment funds into MMFs and non-MMF investment funds. - Classify MMFs under the ODCs sector if liabilities are close substitutes for transferable and other deposits. - Include MMF shares in broad money if held by money-holding sectors, contingent on counterpart sectoral information. - Data issues and planned actions: - CBK found inconsistencies between total assets and total liabilities in MMF data provided by CMA; CMA to investigate and use reporting forms providing aggregate data over all investment funds institutions. - Reporting forms were assessed as broadly adequate with minor adjustments. - CBK expects to start regularly receiving quarterly data for investment funds including MMFs beginning with data for the fourth quarter of 2018 via reporting forms. - CBK to review data quality and timeliness for the first few quarters and assess ability to compile and report 2SR and 4SR to STA within three quarters after the reference period. - Once adequate, MMFs included in 2SR (ODCs sector and broad money) and non-MMF investment funds included in 4SR (OFCs sector). - Recommended Actions: - Assess adequacy of data for MMFs reported by the CMA to be included in the ODCs sector and in broad money. - Assess adequacy of data for non-MMF investment funds reported by the CMA to be included in the OFCs sector. - Assess feasibility to receive monthly data for MMFs with appropriate timeliness from the CMA to be classified in the ODCs sector and in broad money. - Until monthly data become available, compile monthly 2SR including MMFs based on quarterly data using appropriate estimation methods. ### Non-deposit-taking SACCOs and non-deposit-taking MFBs - Non-deposit-taking SACCOs: - Recent CCD data (with SASRA assistance) show at least 2,286 non-deposit-taking SACCOs as of end 2017. - Aggregate totals as of end 2017: - Total assets: KSh 153.22 billion (or 34 percent of deposit-taking SACCOs and 3.4 percent of commercial banks). - Deposits: KSh 117.50 billion, accounting for 3.8 percent of commercial banks’ deposits. - Loans: KSh 118.22 billion, accounting for 4.6 percent of commercial banks’ loans. - Given relatively large size, recommended that CBK collect more detailed balance sheet data to assess feasibility of inclusion in monetary data. - Recommended Action: Collect detailed balance sheet information on non-deposit-taking SACCOs to assess feasibility to include them in the monetary data (target Completion Date: June 2020; Priority: M). - Non-deposit-taking MFBs: - CBK does not currently collect source data; sector has been growing and is significant for SME credit. - Mission suggested CBK monitor activities and investigate availability of source data for potential inclusion in 4SR. ### Future technical assistance and resource implications - Short-term objectives (finalizing provisional expanded 2SR and 4SR) require relatively minor adjustments (correcting misclassification of instruments and sectors) and are achievable with CBK resources and TWG cooperation. - Medium-term tasks (collecting and mapping data for investment funds/MMFs, assessing inclusion of banks in liquidation, and non-deposit-taking SACCOs) will require additional resources. - STA stands ready to support CBK with remote TA and, if requested and resources permit, a follow-up on-site TA mission. ### Mission’s prioritized recommendations (selected milestones and target completion dates from the action plan) - Continue regular TWG meetings and cooperation with regulators. (Priority: H; Target: Ongoing) - Correct misclassification and mapping for 2SR; submit revised provisional data to STA for review. (Priority: H; Target Completion Date: September 2019) - Finalize provisional 2SR by incorporating STA feedback; report regularly revised 2SR to STA. (Priority: H; Target Completion Date: December 2019) - Assess feasibility of including banks in liquidation in 2SR using estimation methods. (Priority: L; Target Completion Date: June 2020) - Correct misclassification for 4SR and exclude guaranteed funds from pension funds subsector; submit revised provisional 4SR to STA. (Priority: H; Target Completion Date: September 2019) - Finalize provisional 4SR by incorporating STA feedback; report revised 4SR to STA for IFS publication. (Priority: H; Target Completion Date: December 2019) - Compile and disseminate OFC and financial corporations survey data on CBK website and other publications. (Priority: M; Target Completion Date: December 2019) - Assess adequacy of MMF and non-MMF investment fund data reported by CMA. (Priority: M; Target Completion Dates: June 2019) - Assess feasibility to receive monthly MMF data from CMA; until then, compile monthly 2SR including MMFs based on quarterly data using estimation methods. (Priority: M; Target Completion Dates: December 2019) - Collect detailed balance sheet information on non-deposit-taking SACCOs. (Priority: M; Target Completion Date: June 2020) *Source: Excerpt from Kenya monetary and financial statistics mission report (content unit: 1kenea2020002).* --- _Source: https://www.imf.org/-/media/files/publications/cr/2020/english/1kenea2020002.pdf_