Dr. Patrick Njoroge is the ninth Governor of the Central Bank of Kenya (CBK). He holds a Ph.D. degree in Economics from Yale University (1993), a Master of Arts degree in Economics (1985) and a Bachelor of Arts degree in Economics (1983) from the University of Nairobi. Dr. Njoroge reflects on his time at Yale University, his greatest challenges, and successes as the Governor of the CBK; he gave advice to scholars pursuing economics as a discipline.
1. Please tell us something about your background or early life.
I was born and raised in Kenya. My dad worked in the education department and my mum was a teacher. I think that is one of the reasons [why] I got a passion for reading. Our parents pushed us to be good in school and exemplary in our work, but they also instilled in us a sense of discipline and respect for others and having religion as an important factor in our lives. I was always interested in sciences, and then electrical and electronic engineering. But just before joining the University of Nairobi I realised that electrical engineering was not for me and got more interested in economics which I thought then would give me wider scope for uplifting people’s lives.
2. Tell us about your time at Yale University. What are some of your favorite memories from your time at Yale?
My time at Yale was very exciting, especially being in the Economics Department, in addition to the usual travails of a graduate student. I remember the first semester in terms of focusing on work and getting to know my classmates. There was also the cultural shock of being in the U.S. for the first time. I remember attending the Yale-Harvard game in the fall of ’87 and was it cold! It was the coldest day that I had faced until then, sub-zero with the wind-chill factor. I do not remember who won, as survival was the only thing on my mind.
The other memories are of course the professors, and I particularly remember Jim Tobin’s Macro class, Bill Brainard, TN, Bob Shiller, and others. I remember the seminar discussion of the stock market crash of October ’87, and the new focus on circuit-breakers. The strong policy angle in our studies was very exciting. Of course, I remember the friends I made at the time, and who are now all over.
3. When faced with a challenge or adversity on the job, where do you derive your resilience, inspiration, or strength from?
First and foremost is an appreciation of the challenge that you are facing and the recognition that you have the capacity to deal with it. This instils a sense of confidence. Importantly, that confidence is anchored on my technical ability - that I have had good training - and good resources, such as a good support structure and knowledgeable staff. Second, a sense of a higher purpose beyond the resolving the problem or overcoming the adversity: for instance, seeing the millions of people whose lives will change if the problem is solved. In a sense, I take counsel from the rallying call, “For God, for Country and for Yale!”
4. What leadership qualities are essential for success as a central banker?
Firstly, you should be technically well grounded. This allows you to break down the matter before you to its essential elements and present it with a simplicity of expression. Secondly, I take inspiration in being a leader that sees and communicates the big picture. It is important to have a vision, and to my mind, that is the difference between being a manager and a leader. For instance, our vision in the Central Bank goes beyond price stability and includes our wider mandate. A leader is also a strong communicator to all stakeholders, well beyond generalities. We strive to communicate that vision to a broad range of stakeholders, also on things that resonate with them. Thirdly, a leader should understand the limits of his teams, working with them in line with the vision but also understanding how to build them. Honestly, central bankers have a good example to follow. I do not remember the context but sometime around 1990, Bill Brainard remarked to me that Janet Yellen (another Yalie!) is the one to watch. She has certainly not disappointed!
5. What is the greatest challenged you have faced as the governor of the Central Bank of Kenya (CBK)?
The greatest challenge I ever faced is closing the mid-sized Chase Bank Ltd. in April 2016. The bank was connected with virtually every corner of the country, in terms of the people, sectors and more. It did not help that this came a few months after we closed two other banks. But there were significant deficiencies in the bank which led to our decision to close it. That is a decision we did not take lightly, given its adverse impact on the population and the sector in the short term. This jolt also set us on a path to strengthen the sector, which in hindsight has been highly beneficial in the context of the COVID-19 pandemic.
6. How do you see the role of communication in building public support and understanding? And how have you been able to communicate the CBK’s policies to the public?
The key is to communicate with the stakeholder as best as you can through the available medium. While there may appear to be limited immediate benefits, such engagements will yield significant benefits through time as appropriate communication reinforces public trust and credibility, the key currency for central banks. To me, communication by central banks is less about accountability and more about strengthening credibility and the efficacy of policy. Our actions necessarily affect a wide swath of the public and therefore support of these policies enhances their effectiveness. We have had to explain unpopular decisions and views to different stakeholders. We have been using both the traditional (OpEds, interviews, press conferences, etc.) and social media channels, but I much prefer direct engagements because I receive feedback from the audience. We have also been reaching out in other ways to specific segments of our population, such as meeting with private sector CEOs, students, and other groups.
7. What are some of your priorities as a governor as we look forward to post-pandemic economic recovery?
We must first recognise that most institutions and people have very limited buffers, and therefore very limited room for manoeuvre as we go into the post-pandemic period. It is therefore important to carefully manage these limited buffers and avoid a crisis or crash landing. Second, is making sure that the markets remain operational and effective. We have begun seeing questions about how the markets are operating in some jurisdictions. Third, is the need to provide critical support to the small and medium sized enterprises (SMEs). For us in Kenya, the SME sector is and will continue to be the backbone of the economy, especially in terms of employment. However, SMEs also need to transform themselves, e.g., the standards they adhere to, recordkeeping, etc. Finally, but importantly, is continuing the transformation in the banking sector. This transformation is to make the sector more resilient in four areas: strengthening their business models; customer-centricity; risk-based pricing; and greater transparency
8. What role do you see technology playing in fostering financial inclusion in Kenya?
Technology has been a key driver for the improvements we have seen in financial inclusion. Between 2006 and 2019, financial inclusion in Kenya increased from 26 percent to 84 percent—remarkable by any measure and driven by the mobile money revolution. In turn, a completely new space has opened up an entirely new ecosystem that is technology-based. While financial inclusion will continue to improve, it is no longer about access but about use. Consequently, the questions we are looking at are about usage, and our intention is to continue to transform Kenya by democratising financial services.
9. Many countries in Africa face a significant gap between the number of young people seeking employment and the limited employment opportunities available to them. Which interventions or mechanisms are most critical to helping correct that imbalance?
It is very good that youth in Africa have very high expectations, the same as youth anywhere - why shouldn’t they? When we interact with them as employers, friends, mentors, parents, we should recognize their high expectations and also that they are at the beginning of their journey, and so they may not have acquired the necessary elements. Policy interventions should focus on providing opportunities such as supporting their innovation and entrepreneurship, as well as providing them with resources. Financial resources are critical but equally important are other resources such as training on critical skills. The direction is clear—a large share of jobs that will be created in the next fifty years will be on the African continent.
10. Kindly name a book that has had a profound impact on you?
Undoubtedly that would be the Bible. Incidentally, while every Yalie knows that a copy of the Gutenberg Bible is kept in Beinecke Library, I never once visited that library. We had at home an Anthology of English Literature that I read frequently when I was in high school. That Anthology cemented my interest in reading and opened doors to new worlds.
11. What advice would you give to scholars pursuing economics as a discipline?
They must maintain their interest in society, with the discipline to impact positively and help uplift the lives of everyone around them. This is what it is about when you consider policy questions such as the allocation of resources. You should cultivate broad interests, not just by reading but also other activities such as attending classes in other areas.