Financial Governance

Google+ Pinterest LinkedIn Tumblr +

By Deno Maish

Effective Financial Governance Is Fundamental to Kenya’s Economic Prosperity and Sustainability

The pursuit of robust financial governance is not merely a matter of compliance but a fundamental requirement for sustainable economic growth and development. As the heartbeat of the economy, the accounting landscape in Kenya plays a profound role in shaping financial governance practices.

As accountants, we are the stewards of financial data which calls for our unwavering commitment to ethical conduct, professional excellence, and regulatory compliance. This ensures the integrity of financial information, fostering trust and confidence in the financial system while safeguarding the interests of stakeholders.

Overview of Financial Governance in Kenya

Kenya’s financial governance framework is made up of regulatory bodies, legislative instruments, and industry practices. The key stakeholders in this sector are the Central Bank of Kenya (CBK), the Capital Markets Authority (CMA), and the Institute of Certified Public Accountants of Kenya (ICPAK). These entities work in tandem to establish and enforce policies that govern financial institutions, markets, and reporting standards.

The CBK promotes the development of a safe, sound, and inclusive financial sector that supports economic growth and development objectives in conjunction with various government ministries overseeing economic affairs. The Capital Markets Authority plays a critical role in regulating, supervising, and developing the country’s capital markets while ICPAK plays a crucial role in regulating, supporting, and advancing the accounting profession in Kenya. 

Pillars of Financial Governance

Before delving into the landscape of financial governance in Kenya, let’s first explore the key principles that shape financial governance.

  • Accountability

Accountability lies at the core of effective financial governance. Through rigorous financial analysis, internal controls, and audit processes, we hold individuals and organizations responsible for their financial actions and decisions. These accountability mechanisms ensure compliance with accounting standards and regulatory requirements which help mitigate risks and safeguard the stakeholders’ interests.

  • Transparency

Clear, accurate, timely and comprehensive information per relevant standards and regulations are the hallmarks of transparent financial reporting. This not only enables investors and regulators to make informed decisions but also fosters public trust and confidence in the financial system.

  • Integrity

As custodians of the economy, our integrity should be beyond reproach to maintain the credibility and reputation of financial institutions. Honesty, objectivity, and professional conduct become essential ethical attributes for any accountant due to the sensitivity and magnitude of their actions in the broader financial community.

  • Compliance

Compliance is paramount in ensuring the legality and legitimacy of financial activities. The scope of an accountant’s role spans from risk assessment, internal audits, and regulatory reporting to staying abreast of rapidly evolving laws, regulations, and accounting standards. Besides, compliance is not complete unless these frameworks are implemented in the organisations.

  • Risk Management

Effective risk management has to be the ultimate goal for financial governance. By identifying, assessing, and mitigating potential risks, decision-makers in organisations are empowered to make informed choices and safeguard the long-term viability of such organizations. 

Challenges in Financial Governance

In recent years, Kenya has witnessed significant strides in effective financial governance. However, the financial system is still plagued with several shortcomings such as: 

  • Transparency

While transparency is a cornerstone of financial good governance, instances of opaque financial reporting and deliberate undisclosed transactions in audits have raised concerns about accountability and integrity of the Kenyan financial system.

  • Lapses in the Regulatory Framework

Despite sustained enforcement efforts by ICPAK and the Capital Markets Authority (CMA), there are still gaps in their regulatory oversight which leaves room for malpractice and financial irregularities by unscrupulous entities.

  • Corruption

Corruption remains a pervasive issue in Kenya, with frequent reports of embezzlement, collusion and bribery tarnishing the financial landscape. Such fraudulent activities have greatly undermined trust in our financial system deterring potential investments.

  • Inadequate Technological Infrastructure

Despite the rapid advancement of technology in the financial sector, Kenya still grapples with outdated systems opening us to cybersecurity vulnerabilities which pose significant risks to our financial data integrity and security.

Strategies for Improvement of Financial Governance

After exploring key challenges in Kenya’s pursuit of effective financial governance, here are some potential solutions which can ensure transparency, accountability, and integrity in financial operations:

  • Strengthening Regulatory Oversight

Empowering the regulatory institutions (ICPAK and CMA) will have a profound impact on the stability, resilience, and sustainability of the Kenyan financial system. It calls for increased funding and legislative support to enhance their capacity and thus bolster their effectiveness.

  • Embracing IFRS Standards

There is need to enhance transparency and comparability to match up to global financial standards. The International Financial Reporting Standards (IFRS) advocates for mandatory disclosure requirements and public access to financial information which can significantly improve accountability.

  • Anti-Corruption Measures

Tackling corruption requires a deliberate multifaceted approach and collaboration from all stakeholders. There needs to be robust legal reforms, strengthening of investigative agencies, and public awareness to foster a culture of integrity.

  • Capacity Building Initiatives

The regulatory bodies need to invest more in training programs and professional development initiatives that can address skill gaps or new emerging areas within the financial sector. ICPAK’s collaboration with educational institutions such as universities is a step on the right more but we need to bring more domestic and international partners to facilitate knowledge transfer and skill enhancement.

  • Technological Innovation

The financial world is changing fast and we need to embrace the new technological advancements springing up to enhance our efficiency and transparency in financial operations. However, as is always the case with technology, it’s imperative to address accompanying measures, especially on cybersecurity risks to ensure data safety and privacy.

  • Stakeholder Engagement

We need to encourage collaboration and dialogue among stakeholders, including the government, regulators, private sector, and civil society. This promotes consensus-building, the exchange of best practices in financial governance and avoids anxiety in the marketplace as evident with the introduction of the new tax policies. 

Effective financial governance is fundamental to Kenya’s economic prosperity and sustainability. It is therefore paramount that entities strengthen their financial governance framework by addressing accountability, regulatory, integrity and technological challenges. Thus, it is vital for entities to establish comprehensive financial governance. 

Deno Maish [email protected]

Share.

About Author

Leave A Reply