Financial regulation in Kenya: Balancing inclusive growth with financial stability
Mwega, Francis M
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This case study investigates the potential tradeoffs between regulations and stability of Kenya’s financial sector and their implications for inclusive growth. This is done in the context of six areas: (i) size and growth of the financial sector relative to LICs and MICs; (ii) implications of a mixture of local banks (some of which have spread to neighbouring countries), foreign banks and development finance institutions; (iii) evolution and macroeconomic implications of financial innovations and inclusion; (iv) cost and access to credit, especially to SMEs; (e) prudential regulations; and (f) management of capital flows in the context of large current account deficits, mainly financed by short-term net capital inflows such that their easy reversibility could potentially generate a currency crisis.