UNVEILING UNVEILING MICROFINANCE MICROFINANCE

INDUSTRY IN KENYAINDUSTRY IN KENYAPRESENTED BY OMAR .S. PRESENTED BY OMAR .S.

NZOMONZOMO

MICROFINANCE SPECIALIST MICROFINANCE SPECIALIST KENYAKENYA

MICROFINANCE INSTITUTIONS MICROFINANCE INSTITUTIONS IN KENYAIN KENYA

Equity BankEquity Bank K-rep BankK-rep Bank Faulu KenyaFaulu Kenya Small and micro enterprise program (SMEP)Small and micro enterprise program (SMEP) Kenya Women Finance Trust. (KWFT)Kenya Women Finance Trust. (KWFT) WEDCOWEDCO BIMAS(Business Initiatives and Management BIMAS(Business Initiatives and Management

assistance)assistance) Micro KenyaMicro Kenya Micro Enterprise Support Trust (MESPT)Micro Enterprise Support Trust (MESPT)

MICROFINANCE INSTITUTIONSMICROFINANCE INSTITUTIONS

CONT…..CONT….. Jamii Bora TrustJamii Bora Trust Elite MicrofinanceElite Microfinance Sunlink (Microfinance Partners)Sunlink (Microfinance Partners) Jitegemee TrustJitegemee Trust KADETKADET YEHU Microfinance (CHOICE)YEHU Microfinance (CHOICE) Agakhan foundation-First microfinance Agakhan foundation-First microfinance

Agency-KenyaAgency-Kenya

MICROFINANCE INSTITUTIONSMICROFINANCE INSTITUTIONS

ECLOF(Kenya Ecumenical church loan fund)ECLOF(Kenya Ecumenical church loan fund) Pride KenyaPride Kenya WindowWindow WEEC(Women Economic Empowerment WEEC(Women Economic Empowerment

Consortium)Consortium) RAFODRAFOD Kenya Post Saving BankKenya Post Saving Bank K-REP Development agencyK-REP Development agency SNVSNV OTHERSOTHERS Coast PefaCoast Pefa Full Scale Business TrustFull Scale Business Trust

MICROFINANCE OPERATIONSMICROFINANCE OPERATIONS Two of the institutions transformed into a bank to Two of the institutions transformed into a bank to

collect deposit and offer other banking services collect deposit and offer other banking services to the population considered unbankable - K-rep to the population considered unbankable - K-rep and Equity and Equity

The rest operate as either a microfinance The rest operate as either a microfinance institutions,Trusts or NGO’S.institutions,Trusts or NGO’S.

Currently five institutions have scaled up their Currently five institutions have scaled up their out reach and have country wide networksout reach and have country wide networks

(K-rep, Equity, KWFT, Faulu and SMEP.)(K-rep, Equity, KWFT, Faulu and SMEP.) The rest are limited in some areas in Districts The rest are limited in some areas in Districts

and town centres.and town centres. The main operations are loans and savings with The main operations are loans and savings with

those turned into banks having extra srvices like those turned into banks having extra srvices like forex and remittancesforex and remittances

OPPORTUNITIESOPPORTUNITIES

Kenya has a population of 30 million and Kenya has a population of 30 million and per capita income of us $260.Its the 20per capita income of us $260.Its the 20thth poorest country in the world.poorest country in the world.

49% of Rural population and 29% of the 49% of Rural population and 29% of the urban population live under conditions of urban population live under conditions of absolute poverty.absolute poverty.

Unemployment rate is between 25-35%.Unemployment rate is between 25-35%. It is estimated that 3.8 million Kenyans It is estimated that 3.8 million Kenyans

depend on informal associations and depend on informal associations and groups for services country wide.groups for services country wide.

QUOTEQUOTE

““Micro enterprise are supposed to Micro enterprise are supposed to play a crucial role in the creation of play a crucial role in the creation of jobs in Kenya. However we recognize jobs in Kenya. However we recognize that the sector’s growth potential is that the sector’s growth potential is inhibited by several constraints. These inhibited by several constraints. These includes poor access to markets, lack includes poor access to markets, lack of credit and a poor policy of credit and a poor policy environment………….” President environment………….” President Kibaki first adress to parliament.Kibaki first adress to parliament.

CURRENT POSITIONCURRENT POSITION

There are estimated 3460 legally There are estimated 3460 legally constituted microfinance providers as constituted microfinance providers as of June 2003.of June 2003.

3897 savings and credit co-operatives.3897 savings and credit co-operatives.56 microfinance Institutions.56 microfinance Institutions.4 commercial Banks (k-rep, Equity, 4 commercial Banks (k-rep, Equity,

post bank and co-op Bank)post bank and co-op Bank)2 building societies.2 building societies.

ACHIEVEMENTSACHIEVEMENTS

The industry has a networking umbrella-The industry has a networking umbrella-AMFI (Association of microfinance AMFI (Association of microfinance Institutions)Institutions)

The draft microfinance bill to regulate the The draft microfinance bill to regulate the industry is in parliament awaiting passage.industry is in parliament awaiting passage.

Country wide awareness creation during Country wide awareness creation during the International Year of Micro credit 2005.the International Year of Micro credit 2005.

Faulu Kenya then Equity Bank were listed Faulu Kenya then Equity Bank were listed in the stock market.in the stock market.

Microfinance Diploma course is now Microfinance Diploma course is now offered at Strathmore college.offered at Strathmore college.

ACHIEVEMENTSACHIEVEMENTS

Cont……Cont…… Some microfinance Institutions are members of Some microfinance Institutions are members of international forums like MIXMARKET-Sunlink, K-international forums like MIXMARKET-Sunlink, K-

rep Bank, Equity Bank, SMEP, Faulu,Window, rep Bank, Equity Bank, SMEP, Faulu,Window, RAFFOD, WEEC,KADET.RAFFOD, WEEC,KADET.

K-Rep Bank received the CGAP (Consultative K-Rep Bank received the CGAP (Consultative Group To Assist the Poor) Award for the second Group To Assist the Poor) Award for the second time running.time running.

The government has created a rural finance The government has created a rural finance Department at the central Bank of Kenya.Department at the central Bank of Kenya.

A microfinance unit has been established at the A microfinance unit has been established at the Ministry of Finance.Ministry of Finance.

MAJOR CONSTRAINTSMAJOR CONSTRAINTS

Unsupportive legal and regulatory Unsupportive legal and regulatory environmentenvironment

Limited Donor funding.Limited Donor funding.Little support from the government.Little support from the government.Lack of right technical skills for the Lack of right technical skills for the

managers and staff of these institutions.managers and staff of these institutions.Poor infrastructure are hindering the Poor infrastructure are hindering the

operations of these institutions.operations of these institutions.Lack of capital.Lack of capital.

WAY FORWARDWAY FORWARD

Speedy passage of the microfinance bill to Speedy passage of the microfinance bill to provide a legal and regulatory framework provide a legal and regulatory framework for the industry.for the industry.

Government should support the industry Government should support the industry by maintaining macro economic stability by maintaining macro economic stability and avoid policies that cap interest rates.and avoid policies that cap interest rates.

Donors should recognize the performance Donors should recognize the performance of this industry and capacity build of this industry and capacity build emerging microfinance institutions by emerging microfinance institutions by providing grants and technical assistance providing grants and technical assistance to assist them reach operational and to assist them reach operational and financial self sufficiency needed to sustain financial self sufficiency needed to sustain large scale growth.large scale growth.

Way forwardWay forward

Cont……Cont…… The government should foster competition The government should foster competition

in the microfinance industry by minimising in the microfinance industry by minimising tough registration requirements and also tough registration requirements and also create an attractive investment create an attractive investment environment for the private investors both environment for the private investors both local and international.local and international.

The government should hire microfinance The government should hire microfinance practitioners to come up with a training practitioners to come up with a training curriculum to start offering microfinance curriculum to start offering microfinance courses in all academic levels (degree, courses in all academic levels (degree, diploma and certificates)diploma and certificates)

Way forwardWay forward

The government should improve the The government should improve the rural infrastructure to enable these rural infrastructure to enable these institutions to operate in these areas institutions to operate in these areas and reach out to the poorest of the and reach out to the poorest of the poor.poor.

Improve the capacity of AMFI to Improve the capacity of AMFI to enable it attract more members and enable it attract more members and also ensure good practices in the also ensure good practices in the industry.industry.

QUOTEQUOTE

““Microfinance institutions and the Microfinance institutions and the savings and credit co-operative savings and credit co-operative societies play an important role in societies play an important role in our economy. There is a need to our economy. There is a need to encourage and promote them by encourage and promote them by creating a conducive and enabling creating a conducive and enabling environment as well as setting up a environment as well as setting up a regulatory framework” Hon Mwiraria regulatory framework” Hon Mwiraria former finance ministerformer finance minister

AMFI-KENYAAMFI-KENYA

Association of microfinance institutions of Association of microfinance institutions of Kenya.Kenya.

It was registered in march 1999.It was registered in march 1999. Its mission is to develop a microfinance Its mission is to develop a microfinance

framework that serves poor and low income framework that serves poor and low income people in Kenya.people in Kenya.

Its long term objective is to ensure that the Its long term objective is to ensure that the microfinance legislation is passed by microfinance legislation is passed by parliament and to increase membership in parliament and to increase membership in the network among Microfinance Institutions.the network among Microfinance Institutions.

AMFI-KENYAAMFI-KENYA

Its members include institutions of different legal Its members include institutions of different legal structures such as co- operatives,NGO’s and Banks.structures such as co- operatives,NGO’s and Banks.

It has an executive committee of 4 members.It has an executive committee of 4 members. It collaborates with government and donorsIt collaborates with government and donors It was formed to provide a guidance in regulating It was formed to provide a guidance in regulating

the microfinance industry.the microfinance industry. It was involved in the formulating and drafting the It was involved in the formulating and drafting the

microfinance bill.microfinance bill. It currently has 23 member institutions.It currently has 23 member institutions. Member institutions have operated for more than 3 Member institutions have operated for more than 3

years and are required to submit their audited years and are required to submit their audited accounts annually.accounts annually.

MICROFINANCE BILLMICROFINANCE BILL

This is a bill drafted to provide a legal This is a bill drafted to provide a legal and regulatory framework for the and regulatory framework for the microfinance industry.microfinance industry.

The bill touches on the governance, The bill touches on the governance, licensing and operational licensing and operational requirements of the microfinance requirements of the microfinance institutions.institutions.

It is currently in parliament awaiting It is currently in parliament awaiting the passage.the passage.