UNVEILING MICROFINANCE INDUSTRY IN KENYA PRESENTED BY OMAR.S. NZOMO MICROFINANCE SPECIALIST KENYA

MICROFINANCE INSTITUTIONS IN KENYA MICROFINANCE INSTITUTIONS IN KENYA Equity Bank Equity Bank K-rep Bank K-rep Bank Faulu Kenya Faulu Kenya Small and micro enterprise program (SMEP) Small and micro enterprise program (SMEP) Kenya Women Finance Trust. (KWFT) Kenya Women Finance Trust. (KWFT) WEDCO WEDCO BIMAS(Business Initiatives and Management assistance) BIMAS(Business Initiatives and Management assistance) Micro Kenya Micro Kenya Micro Enterprise Support Trust (MESPT) Micro Enterprise Support Trust (MESPT)

MICROFINANCE INSTITUTIONS CONT….. Jamii Bora Trust Jamii Bora Trust Elite Microfinance Elite Microfinance Sunlink (Microfinance Partners) Sunlink (Microfinance Partners) Jitegemee Trust Jitegemee Trust KADET KADET YEHU Microfinance (CHOICE) YEHU Microfinance (CHOICE) Agakhan foundation-First microfinance Agency- Kenya Agakhan foundation-First microfinance Agency- Kenya

MICROFINANCE INSTITUTIONS ECLOF(Kenya Ecumenical church loan fund) ECLOF(Kenya Ecumenical church loan fund) Pride Kenya Pride Kenya Window Window WEEC(Women Economic Empowerment Consortium) WEEC(Women Economic Empowerment Consortium) RAFOD RAFOD Kenya Post Saving Bank Kenya Post Saving Bank K-REP Development agency K-REP Development agency SNV SNV OTHERS OTHERS Coast Pefa Coast Pefa Full Scale Business Trust Full Scale Business Trust

MICROFINANCE OPERATIONS Two of the institutions transformed into a bank to collect deposit and offer other banking services to the population considered unbankable - K-rep and Equity Two of the institutions transformed into a bank to collect deposit and offer other banking services to the population considered unbankable - K-rep and Equity The rest operate as either a microfinance institutions,Trusts or NGO’S. The rest operate as either a microfinance institutions,Trusts or NGO’S. Currently five institutions have scaled up their out reach and have country wide networks Currently five institutions have scaled up their out 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 and town centres. The rest are limited in some areas in Districts and town centres. The main operations are loans and savings with those turned into banks having extra srvices like forex and remittances The main operations are loans and savings with those turned into banks having extra srvices like forex and remittances

OPPORTUNITIES Kenya has a population of 30 million and per capita income of us $260.Its the 20 th poorest country in the world. Kenya has a population of 30 million and per capita income of us $260.Its the 20 th poorest country in the world. 49% of Rural population and 29% of the urban population live under conditions of absolute poverty. 49% of Rural population and 29% of the urban population live under conditions of absolute poverty. Unemployment rate is between 25-35%. Unemployment rate is between 25-35%. It is estimated that 3.8 million Kenyans depend on informal associations and groups for services country wide. It is estimated that 3.8 million Kenyans depend on informal associations and groups for services country wide.

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

CURRENT POSITION There are estimated 3460 legally constituted microfinance providers as of June There are estimated 3460 legally constituted microfinance providers as of June savings and credit co-operatives savings and credit co-operatives. 56 microfinance Institutions. 56 microfinance Institutions. 4 commercial Banks (k-rep, Equity, post bank and co-op Bank) 4 commercial Banks (k-rep, Equity, post bank and co-op Bank) 2 building societies. 2 building societies.

ACHIEVEMENTS The industry has a networking umbrella-AMFI (Association of microfinance Institutions) The industry has a networking umbrella-AMFI (Association of microfinance Institutions) The draft microfinance bill to regulate the industry is in parliament awaiting passage. The draft microfinance bill to regulate the industry is in parliament awaiting passage. Country wide awareness creation during the International Year of Micro credit Country wide awareness creation during the International Year of Micro credit Faulu Kenya then Equity Bank were listed in the stock market. Faulu Kenya then Equity Bank were listed in the stock market. Microfinance Diploma course is now offered at Strathmore college. Microfinance Diploma course is now offered at Strathmore college.

ACHIEVEMENTS Cont…… Some microfinance Institutions are members of Some microfinance Institutions are members of international forums like MIXMARKET-Sunlink, K-rep Bank, Equity Bank, SMEP, Faulu,Window, RAFFOD, WEEC,KADET. international forums like MIXMARKET-Sunlink, K-rep Bank, Equity Bank, SMEP, Faulu,Window, RAFFOD, WEEC,KADET. K-Rep Bank received the CGAP (Consultative Group To Assist the Poor) Award for the second time running. K-Rep Bank received the CGAP (Consultative Group To Assist the Poor) Award for the second time running. The government has created a rural finance Department at the central Bank of Kenya. The government has created a rural finance Department at the central Bank of Kenya. A microfinance unit has been established at the Ministry of Finance. A microfinance unit has been established at the Ministry of Finance.

MAJOR CONSTRAINTS Unsupportive legal and regulatory environment Unsupportive legal and regulatory environment Limited Donor funding. Limited Donor funding. Little support from the government. Little support from the government. Lack of right technical skills for the managers and staff of these institutions. Lack of right technical skills for the managers and staff of these institutions. Poor infrastructure are hindering the operations of these institutions. Poor infrastructure are hindering the operations of these institutions. Lack of capital. Lack of capital.

WAY FORWARD Speedy passage of the microfinance bill to provide a legal and regulatory framework for the industry. Speedy passage of the microfinance bill to provide a legal and regulatory framework for the industry. Government should support the industry by maintaining macro economic stability and avoid policies that cap interest rates. Government should support the industry by maintaining macro economic stability and avoid policies that cap interest rates. Donors should recognize the performance of this industry and capacity build emerging microfinance institutions by providing grants and technical assistance to assist them reach operational and financial self sufficiency needed to sustain large scale growth. Donors should recognize the performance of this industry and capacity build emerging microfinance institutions by providing grants and technical assistance to assist them reach operational and financial self sufficiency needed to sustain large scale growth.

Way forward Cont…… The government should foster competition in the microfinance industry by minimising tough registration requirements and also create an attractive investment environment for the private investors both local and international. The government should foster competition in the microfinance industry by minimising tough registration requirements and also create an attractive investment environment for the private investors both local and international. The government should hire microfinance practitioners to come up with a training curriculum to start offering microfinance courses in all academic levels (degree, diploma and certificates) The government should hire microfinance practitioners to come up with a training curriculum to start offering microfinance courses in all academic levels (degree, diploma and certificates)

Way forward The government should improve the rural infrastructure to enable these institutions to operate in these areas and reach out to the poorest of the poor. The government should improve the rural infrastructure to enable these institutions to operate in these areas and reach out to the poorest of the poor. Improve the capacity of AMFI to enable it attract more members and also ensure good practices in the industry. Improve the capacity of AMFI to enable it attract more members and also ensure good practices in the industry.

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

AMFI-KENYA Association of microfinance institutions of Kenya. Association of microfinance institutions of Kenya. It was registered in march It was registered in march Its mission is to develop a microfinance framework that serves poor and low income people in Kenya. Its mission is to develop a microfinance framework that serves poor and low income people in Kenya. Its long term objective is to ensure that the microfinance legislation is passed by parliament and to increase membership in the network among Microfinance Institutions. Its long term objective is to ensure that the microfinance legislation is passed by parliament and to increase membership in the network among Microfinance Institutions.

AMFI-KENYA Its members include institutions of different legal structures such as co- operatives,NGO’s and Banks. Its members include institutions of different legal 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 donors It collaborates with government and donors It was formed to provide a guidance in regulating the microfinance industry. It was formed to provide a guidance in regulating the microfinance industry. It was involved in the formulating and drafting the microfinance bill. It was involved in the formulating and drafting the microfinance bill. It currently has 23 member institutions. It currently has 23 member institutions. Member institutions have operated for more than 3 years and are required to submit their audited accounts annually. Member institutions have operated for more than 3 years and are required to submit their audited accounts annually.

MICROFINANCE BILL This is a bill drafted to provide a legal and regulatory framework for the microfinance industry. This is a bill drafted to provide a legal and regulatory framework for the microfinance industry. The bill touches on the governance, licensing and operational requirements of the microfinance institutions. The bill touches on the governance, licensing and operational requirements of the microfinance institutions. It is currently in parliament awaiting the passage. It is currently in parliament awaiting the passage.