 Good afternoon. As we come to the final session of our conference on the central bank of the future It's fitting that we focus on the central bank of Kenya a central bank that has been the forefront of policy and technological innovation to build a more inclusive digital economy in 2015 the Economist magazine noted that it was easier to pay for a taxi cab With your phone in Nairobi than it was in New York City at the time That first mover advantage reflects both the entrepreneurial spirit of Kenyan pioneers in mobile payments As well as the forward-looking thinking and measured approach that regulators at the central bank of Kenya Took in response to the birth of the mobile money revolution in that same year in 2015 Dr. Patrick Joe Roghe was appointed governor of the central bank of Kenya in this capacity He is the chief executive officer of the central bank and chairman of the monetary policy committee Dr. Joe Roghe joined the central bank after a 20-year career at the International Monetary Fund in Washington, D.C At the IMF Dr. Joe Roghe's senior leadership roles included serving as advisor to the IMF deputy managing director as Well as this deputy division chief of the finance department Prior to joining the IMF Dr. Joe Roghe worked in the Kenyan government as an economist in the Ministry of Finance And as a planning officer in the Ministry of Planning Here in just bachelor of arts and master of arts degrees in economics at the University of Nairobi and his PhD in Economics at Yale governor. Thank you so much for joining us today Thank you, Chris Governor we're meeting today online rather than in person at the Federal Reserve Bank of San Francisco Because of the travel and public health restrictions in light of the pandemic now the central bank of Kenya was among the First central banks in Africa to issue policy pronouncements in Response to the pandemic earlier this year the central bank announced temporary changes in transaction limits on customers Eliminated charges on transactions between non-bank mobile money wallets and commercial bank accounts the central bank lowered interest rates And it also instructed banks to activate their precautionary measures What I think we in the US would call contingency plans to ensure the continuity of operations now clearly the central bank was thinking of many different potential pressures on consumers on businesses and on the financial services sector When you're facing that much uncertainty in March of 2020 How did the central bank decide what to prioritize in its policy responses? Well, thank you, Chris, and thank you University of Michigan and obviously the Fed Reserve Bank of San Francisco For inviting me to this event when you are looking at the Problem that was evolving In March actually we had the advantage of having seen the problem evolve in China and Europe and we had been monitoring quite as we generally do developments around the globe and That was something that we could see Slowly evolving and we knew it was gonna come to us just as it did in Europe UK and eventually of course the US etc so we already began thinking about it and One of the things that was clear at the beginning in terms of prioritizing things is that this is like no other not only in terms of the The extent of the problem, but actually that it is about people that was the first problem And you can imagine all the business continuity plans are all about systems This is a pandemic and therefore the first issue was to protect people in terms of staff of the central bank in terms of Staff in the commercial banks and more generally the population so in terms of prioritizing we had to deal with the policies that to do that and we aside from issuing guidance on Let's say how banks could deal with this issue meaning like having alternative work arrangements to minimize risk on their staff Separation of teams etc. Etc. Actually within within three two weeks of the virus getting here the first case of Positive case of the corona virus we issued guidance a guidance note to banks on pandemic response at the same time we also looked at the the the possible Contagion through bank notes and that's why we also benefiting from our being very advanced in terms of mobile money We put in measures that would increase incentives to using mobile money This is things like lowering the cost of the lower end Also, for instance increasing the limits etc. Etc. Thirdly the issue of liquidity like any other Crisis liquidity becomes a real problem. And so we put in measures quickly That would increase liquidity in the system and in banks So today that has not been a concern at all in terms of liquidity and then there are the issues about The the shocks that would you know, they the economic shocks So indeed we and therefore supporting the economy So we put in measures like lowering interest rates, etc. Standard measures So I think the the short answer to your question is that the prioritization was based on the This the greatest I mean How the the greatest point of impact of the crisis people Liquidity and of course more generally financial stability Yes, thank you You mentioned that you emphasize the impact on people and this was a crisis That's a little unusual from what central banks are used to addressing a health crisis as you said and in your remarks In public about the response this the pandemic You've talked about the impact that the pandemic has had on vulnerable members of society including women and How women have faced some of the greatest burdens during the pandemic now generally central banks think about the State of the entire economy, but in light of what we're learning from the pandemic What are your thoughts about the role that a central bank should play in responding to inequalities in the population? Interesting question Chris. I think as a consequence of this pandemic inequalities in our economies have increased and Now this is not exactly at the beginning a macro problem But I think if it will become a macro problem if left unaddressed Directly, obviously, this is a problem that is more on the government side So fiscal policies and things like that to correct those inequalities but we on the other hand are also handmaids of those policies and in some sense we Have to look at the things that are close to us from our perspective in the central bank of Kenya And I think in other central banks like ours We are very concerned or financial about financial inclusion and we've been pushing the agenda in financial inclusion So it isn't just now an issue of access it is also an issue of use and that means we need to look at the vulnerable at the groups where Financial inclusion still is weak and apply specific policies. So Going back to your question Women in this crisis have been hit the hardest. Why fast and foremost? They are the ones that are involved in most of the let's say Marginal sectors so in the SMEs, etc So you have a higher proportion of women in those sort of areas and also They are the ones that may be lost their jobs that were you know That very in various sort of processing plants, etc, etc Also at home. They are the ones that have taken the blunt of having the kids at home instead of at school, etc So what we have done and what other central banks are doing? We are looking at Supporting specific sectors and in this case, I'm thinking of the SMEs and if you support the SMEs Obviously, you'll have a disproportionate three positive impact on those vulnerable groups women, etc more generally central banks need to To begin thinking and we have been thinking about some long-term Let's say changes that would in a sense Have not been as part of our current mandate But are important for financial stability in the long run and a clear example here is climate change Which is something that we as central banks around the world are now very much in the you know In the driver's seat or leading that whole charge Yes, thank you You mentioned how the emphasis on mobile money the historical emphasis on mobile money and technology in Kenya Put the country in good sending to respond quickly to the pandemic and research does suggest that countries that had active digital financial services sectors And that had digitized their government cash relief transfers and so on were able to get aid faster to their populations and more easily than other countries did And and I think that in part reflects the fact that Kenya has been a home to innovation for many many years Especially in the case of the M-Pesa non-bank payments services that you've mentioned Now the central bank has sought to leverage this innovation in Kenya and you've sponsored some hackathons For example to encourage innovation to think about even topics like health and the pandemic I was wondering if you could tell us a little bit about the hackathons and what benefits these have brought to Kenya Yes, Chris We the hackathon sort of experience started a year ago Which is when we had in July of 2019 we had our first Afro-Asian FinTech festival And it was a global event and connected with the FinTech FinTech festival in the in Singapore Which is also organized by the Monetary Authority of Singapore So we in a sense have been partnering in this in this regard And as a consequence last year we actually had this hackathon and all sorts of people from around Africa participated And in the end the winners of the hackathon here We brought them to Singapore and indeed we had one of them was in the top ten finalists Of the global list in Singapore so we were proud of that Now all the others actually got even those that didn't go to Singapore They did get a lot of mentoring They also got support in particular ways so it wasn't just the prize wasn't just going to Singapore and participating in that So that is something that we have wanted and we've been doing mentoring the young innovators At the same time supporting them in various ways and providing them sort of guidance as needed So this year because of the pandemic we couldn't do the FinTech festival The Afro-Asian FinTech festival but we decided to have a non-virtual hackathon And indeed there were very interesting applications and all of it The general question was around health and the COVID response Health and economic sort of problems related to COVID And we had some very interesting presentations and we had two winners that will be sending to the global hackathon in Singapore So this is very exciting from my perspective because the solutions that they put forward Some of them are very exciting and you can see that the human ingenuity and innovativeness of our young people is just mind boggling So I think this is something that we find exciting You could say that that is our night job as opposed to our day job which is run in the central bank But I think in the long run this will benefit Kenya, will benefit Africa, will benefit the world These are people that in a few years will be holding their own anywhere on this planet So we feel that we are in some sense privileged to be with them when they are taking their first steps Well how wonderful, it's truly exciting and also a little surprising that a central bank is sponsoring such an event As I mentioned to you earlier sir, I'm a former central banker and regulator myself And so I know that the public often views regulators and central bankers as being risk averse people So what's your take on that? How do you square the very serious responsibilities you have to promote stability, safety and soundness and so on With the notion of experimenting with technology that might be untested Well Chris I agree, central bankers are the only people who you'd be walking without their bright day And you sort of tell them hey, excellent day isn't it? And they'll say yes it is but it may rain in the afternoon So in some sense they are risk averse but I think it is that the business of central banking is also about looking at the risk and measuring The risk and taking response to avoid sort of the catastrophic results So that's really why we are central bankers but with regard to the specific question I think the role of central banking is changing or rather the characterization of what a central bank does is changing And I think that is inevitable because our society is changing At the end of the day the priority of course has to be on the first mandate which is macro stability inflation etc But and financial stability but I think the other elements are important particularly if we take a long term view about where the financial sector will be going So it is in that context that the central banks new role is being found It's not that they should extend into what I would call quasi-fiscal operations, they shouldn't do that Those should really be left to the appropriate authority But I think the direction is determined by looking forward and seeing what would happen to the financial sector And therefore taking let's say actions that would in some sense minimize the catastrophic risk of a bad outcome in the financial sector That's very helpful I'm sorry, go ahead sir I was going to say it's also fun Yes, it's tremendous fun Yes, I look forward to seeing some of those events go forward and some of the technology comes out of there And I should say your comment about always being prepared for rain for many many years I always carried a briefcase in my briefcase in umbrella which was good training for working in Seattle I have to say with the Gates Foundation Very good, very good Let's return to the subject of financial inclusion Now Kenya is an exemplar in many ways for policymakers and regulators who seek to alleviate poverty by promoting the use of digital tools for the unbanked and underbanked And there have been studies done by the economist Billy Jack at Georgia University and Tavneet Suri at MIT That have found that the adoption of say the mobile payments infrastructure in Kenya lifted about 200,000 Kenyan households almost a million people out of extreme poverty And today over 80% of Kenyans own a financial account of some kind a near doubling since 2011 So the central bank has clearly played a key role in this success What do you define as the key elements of a central bank's efforts to promote inclusion and what other partners did the central bank need to be so successful to date? Thank you I think first and foremost the technology that was brought to the central bank to make transfers that allowed you to make transfers from one person to another P2P transfers At that point it was just a technology and there was a specific need people in the cities wanting to transfer money to their families in the rural areas etc So there was a unique need and this technology tried to fill that need And I think that is one element which is technology by itself doesn't cut it I mean you can get excited about technology but at the end of the day we have to ask ourselves what is the problem that is being resolved So it's always about people in that sense And so here there was a clear answer and the issue then was to minimize the risk of this product And I think the second element here was the collaboration between the innovator and the central bank Both parties needed to take some risk and needed to understand at what point are they okay to let to try the system as it were to try the product And so in that sense the central bank was innovative, truly innovative in willing to deal with this product And obviously with the understanding that if it began to raise significant financial stability issues then it's going to be pulled off the wall kind of thing But that is another element of collaboration Interestingly there were no laws when this product was put in place in 2007 There wasn't a law that you can say we licensed them under this act of parliament whatever The laws only came in 2013 So during that period there was that sense of okay we will regulate you as an exception And we know what limits we are giving you and both sides understood the sort of the limits within which they are operating So that's the second element of collaboration etc I think the other elements of the success of this in my mind was that in time it became clear Well actually there was the other element which was important here was that it did not displace cash This is an important point because as a matter of fact there was a network of agents That developed around the country where people could cash in and cash out So we draw cash, go to cash and sort of your wallet on your phone etc So that was important and I think without that network the pace would have been slower But I think on the whole the as you look forward other this technology was scalable Not just in the context of the P to P transfers but also in the context of other Let's say development of an ecosystem not just of transfers but also of other services that developed around it That in itself is a success of the initial innovation And actually I would want to see somebody redo those numbers that you mentioned by Jack and Tarnit And because I really think now the benefits are much more than the 2% that they mentioned And from our perspective a lot more people have been lifted out of poverty And even ourselves that maybe are not at poverty levels have benefited from this technology I mean as I have said before I don't remember the last time I actually had a cash transaction And I mean with a phone that said but when I go to London yes I'm required to do some sort of cash transactions which I find really odd Interesting and yes it's probably time to revisit some of those studies and to take a look at the progress that's been made Now since so much progress has been made well over 80% of Kenyans have an account of some kind today What's next in terms of inclusion you mentioned earlier for example access and use is being important So what are you thinking about next in the space? Actually for me this has developed into an elaborate ecosystem And to really push on the use not just access, access is fine and yes there is some ways to go I mean it's true we are 82% and therefore there is still some ways to go to 100 But I think the point here is that the focus should now be more on use Which means there has to be specific services and the services that come to the top of my mind One of which is savings products, new savings products And again as we said before whatever technology you put in place it has to be for the people Meaning resolving a specific issue and I think there is a need for a savings product or savings products Particularly for people in the lower end of the income end or society So for instance somebody who earns only $5 a day, they could probably save $1 a day And at the end of the month they have $30 which they could save in government securities So we have a product that is aimed at that, it's called Emma Keeber and we are refining it So there are those specific services, there is another service that I think if you think about changing people's lives It seems that 70% of the shocks and this you would know Chris, 70% of the shocks that drive people back into poverty are actually health related So you could think of having some sort of micro insurance product and micro we mean micro micro You know sort of gives insurance to let's say a mother or somebody who is selling a fruit seller at the street corner for two days Or three days of insurance when they fall sick or income, three days of income when they fall sick And that will allow them to take the child to hospital or they themselves go to hospital And that would be significant in terms of the long term benefit of this person as one can So there are things like that, at the end of the day our objective is the democratization of financial services That I think is really the vision that we have I mean you and I have a whole range of financial services that we can call upon and you know efficient etc But not everybody has that and one can consider aside from just the democratization sort of going up the pyramid in terms of the various other services That can be put on the on the platform meaning this mobile platform I think it's very exciting and I really think there's a lot of innovative ideas that will come into this into play That will really change the landscape of some of the products out there Thank you. We at the Games Foundation would be in complete agreement that it's more than just access It's also use and having good use cases for people to make use of a digital account The Machiba product as you said democratizes your ability to invest and savings product helps you to build your own financial cushion So that families can be financially stable and withstand potential shocks So governor we could easily carry on this conversation for much longer I would love to have that opportunity perhaps on another occasion But I did want to mention that we have a number of students watching this event from the University of Michigan and beyond As well as central bankers from around the world in all different kinds of countries who are watching you And so I was wondering if you could leave us with some words of inspiration because your comments have been so inspirational so far And what would you advise to central bankers who want to make a difference in their countries and in the world more generally To leverage their abilities to serve the public good what recommendations would you have for them And what recommendations would you have for students who are trying to figure out how they can get to a life of meaning and purpose Wow well Chris this is a tough one I guess well I don't know I guess my view would be I mean first you need to be to throw yourself into your work But not just to do work not just to be at the top but to make a difference in your work And you make a difference in your work not because you are doing the most remarkable project Even if it's a very mundane very ordinary sounding ordinary looking report whatever it is Throw yourself into that project 100% and do a good job technically But I think at the same time is look at your job as a calling A calling to change the world most of us and particularly the students I'm sure they they want to change the world in some way You have this ambition that is very good and we have to maintain we have to keep up that ambition We shouldn't be jaded when you get into I don't know midlife and have some sort of midlife crisis or whatever it is No I think we have to maintain it I think our calling as professionals is actually to change the world and in whatever we do So let's focus on that we change the world in what we do directly but also in combination with others And this is where I think more for the students I think where you are today it is good training ground For being you know really pushing yourself in your studies but I would add it is important not to be just one truck minded So get involved in other things get involved in things that are not exactly in your you know in economics or whatever else it is It is important to expand our vision beyond beyond just our main line of specialization as a matter of fact in doing all those things You begin to see other other aspects of yourself that you didn't know before So I think those are the ideas I would sort of throw at you be ready to make mistakes actually that's a good one that's an important You should not be afraid to make mistakes learn from the mistakes as a matter of fact at times the people are frightened to do things because they fear they may fail I think that's terrible there will be many failures as a matter of fact the products that we talked about I mean they weren't perfect when they started off They actually had to be revised many times before they could see the light of day you know sort of like the beta version etc So I think that is something we need to remember that we should not be afraid to make mistakes and finally have fun I think it is important to have fun to and do things that you know that you are passionate about if you like cycling if you like football if you like running All these things don't just be one truck minded you know I think we should expand our vision of things and learn from others So be bold have broad horizons get involved and work with and learn with others and don't be afraid of failure what wonderful advice for everyone governor Governor Jeroge today we've covered everything from how central banks can prepare for the unknown and how central bankers and even students can prepare themselves to build a better world Thank you so much for sharing with us your vision and inspiration and for showing us a little bit about what the central bank of the future might look like And with that let's return to the final online breakout sessions being hosted by our colleagues at the University of Michigan and the Federal Reserve Bank of San Francisco Thank you governor Thank you Chris I enjoyed this