The Effects of Financial Liberalisation in Economic Development in Kenya

Abstract

Financial liberalization in Kenya is much more recent. Ceilings on bank lending rates were not removed until July 1991. The central bank continued to announce guidelines for the sectoral composition of bank credit expansion, although these were not strictly enforced after interest rate liberalization. Although the Kenyan authorities have allowed market forces to play a relatively influential role in the financial system, the government maintains a formidable presence in the financial sector. Central Bank is that bank which is responsible for the economic stability and financial soundness of any country. Central Bank is the top national institution. Its chief responsibility is to regulate the flow of money and credit in the country. It seeks to provide monetary conditions favourable to the realization of national objectives, stable prices, steady economic growth, higher employment and a sound international financial position. The objective of the study was to determine the effects of financial liberalization in economic development in Kenya.

Every civilized country now has its own central bank. The primary function of the central bank is to regulate the monetary and credit system of the country and to foster its growth in the best national interest with a view to securing monetary stability and full utilization of the country's productive resources in order to maintain economic stability, efficiency and growth of the country. The Central Bank of Kenya was established in May 1966. The powers and operations of the Central Bank of Kenya are governed by the Central Bank of Kenya Act 1966, and the Banking Act 1968.

The study used descriptive technique and carried out a meta- analysis study. This study used exclusively secondary data. The study used Statistical Package for Social Sciences for data analysis (SPSS) to analyze the data and the data findings were presented in tables and figures. The study carried out regression analysis to establish the relationship between Financial Liberalization and Economic development by conducting a Meta-analysis study, since it is proving to be very useful for policy evaluations and increasingly accepted research tool in finance and economics phenomena (Pang et al. 1999, Stanley 2001)