By Macharia Kamau

The regulatory framework governing operations of the Post Office Savings Bank has held it back from being an effective player in the sector.

Postbank Managing Director Nyambura Koigi said the bank has lagged behind others that have had their mandates expanded, allowing them to operate like other financial institutions.

The bank provides a savings platform for its clients but cannot advance credit. Interest charged by banks on loans advanced to their customers has been one of the key sources of revenue.

She said: "The mandate of other post banks in East Africa has evolved with time. We also need to have our mandate expanded to be like that of other savings banks within the region and in the world."

These institutions offer a full range of financial services, including micro-credit and are also the first choice for the Government in disbursement of social funds.

The bank said a review of the Post Office Savings Bank Act would see the bank remain relevant in the face of fierce competition.

In his Budget speech in June, Finance Minister Uhuru Kenyatta proposed an amendment to allow the bank participate in foreign exchange business at the retail level. The proposal is however yet to be approved by Parliament.

Ms Koigi spoke on Friday when the bank launched Pamoja Account, a product tailored for investment groups.

Popularly referred to as chamas, the groups are on the rise locally and banks have moved to tap into them.

Assistant Minister Finance Oburu Odinga presided over the function.

He said the Government was keen on increasing financial access through formal financial institutions from the current 40 per cent to more than 60 per cent through reforms in the financial services sector.

"Increasing financial access for individuals, households and micro and small businesses remains top of financial reforms agenda," he said. The bank also marked the World Thrift Day, which has been set aside by the World Bank Savings Institute to stress the importance of savings to promote financial stability and economic growth.

Oburu said financial services reforms would also facilitate an increased level of savings from the current 17 per cent to 30 per cent as set out in the Vision 2030.

"We need to grow the domestic savings as they provide a pool to tap into for investments, which in turn fuel economic growth and employment.

While borrowing resources can temporarily fill the savings gap, it is domestic savings that in the long term must perform that role," he said.