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November 15, 2018

Central Bank raises number of micro lenders to eleven

The Central Bank of Kenya. Photo/Monicah Mwangi
The Central Bank of Kenya. Photo/Monicah Mwangi

The Central Bank has licensed the eleventh micro-finance bank even as deposits in the fledgling financial segment decline.

Choice MFB, based in Kajiado North, has been cleared to offer community micro-finance banking business, joining Uwezo, U&I and Daraja MFBs already operating under this category.

Other micro lenders among them Faulu Kenya, Kenya Women, Smep, Remu, Rafiki, Century and Sumac MFBs have a national network.

The entry of Choice comes at a time when the regulator's latest industry performance report for the first quarter 2015 shows that deposits with MFBs are on a decline.

It indicates that the ten MFBs, formerly deposit-taking micro-finance banks, were heavily relying on customer deposits to raise funds for lending.

Their portfolio in long term loans stood at Sh4.9 billion, representing a Sh2 billion drop from last December's Sh6.9 billion, the quarterly data indicates.

Borrowing by the micro lenders slumped by almost a third in the three months to March 31, “signalling increased reliance on deposits as a source of funding customers' loans”, the CBK said.

Deposits however contracted quarter-on-quarter to Sh32.5 billion in March, a drop of Sh200 million from December's Sh32.7 billion.

The micro lenders issued Sh800 million more in loans to Sh40.8 billion in the review period.

Choice targets pastoralists, flower farm workers, the micro, small and medium enterprises, non-governmental organisations and higher learning institutions in Kajiado and its environs.

“Marginalised communities and institutions including pastoralist communities and micro, small and medium enterprises still represent a large percentage of the unbanked population in Kenya,” the CBK said in a statement Friday. “Improved access to financial services promotes the fundamental freedoms of choice and financial literacy thereby enhancing the decision making process and economic opportunities available to Kenyans.

Central Bank said it is committed to supporting reforms to “develop effective legal, regulatory and supervisory frameworks that support innovations to enhance the development of MSE financing and growth”.


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