By Victor Juma, Business Daily Africa -
It is joining Faulu and Kenya Women Finance Trust, which got deposit permits in May 2009 and April 2010 respectively. Uwezo will take deposits from a restricted region — Starehe division in Nairobi.
The law requires different capital levels depending on reach. The minimum core capital requirement for nationwide and community deposit-takers is Sh60 million and Sh20 million in that order.
“While a nationwide DTM (deposit-taking institution) may establish operations in any part of the country, those of a community DTM are restricted as prescribed by law,” read a part of a statement from the Central Bank.
A community-based institution “is mainly focused on a target market that seeks accessible and efficient financial services.”
By taking deposits, the micro lenders will be able to reduce their cost of operations which can in turn lead to lower lending rates.
According to a recent study by Financial Sector Deepening (FSD), about 90 per cent of MFIs depend on debt funding from domestic and international sources.
This has made them charge interest rates higher than banks as they seek to repay the debts while maintaining profit margins in the business of lending to the bottom of the pyramid.
Despite their high interest rates, MFIs have remained the most preferred source of credit after friends and family, a fact analysts attribute to flexibility and superb customer service.
MFIs are expected to play a more active role in grassroots finance with the creation of 47 counties that will receive substantial revenue allocations from the central government.
CBK said the first two deposit-taking micro-lenders had deposits amounting to Sh7.3 billion and a loan portfolio of Sh14.8 billion by September. The two have a combined 597,633 active deposit accounts.
“The Central Bank of Kenya will continue to reform policy and regulation with the aim of enhancing the level of financial inclusion in Kenya,” the regulator said, adding that it is reviewing guidelines to incorporate DTMs in the recently launched credit information sharing plan.
Banks have started sharing information on loan repayments, a move that is expect to significantly cut down on defaults and reduce the level of loan loss provisions, which will free more cash for lending.
However, MFIs face the challenge of managing lending risk given the inherent exposure to low income borrowers who have thin assets to secure debt.
The regulator also announced plans to allow DTMs to venture into agency banking using technology-based platforms, a move that would further boost access to financial services in the rural areas. Most MFIs are concentrated in Nairobi.
By Matilda Nzioki, Standard Media -
Dr Jennifer Riria, a distinguished micro-finance banker and gender specialist, is the chief executive officer of Kenya Women Group.
She lets us in on what the award winning and the country’s largest micro-financing institution Kenya Women Finance Trust (KWFT) has been up to. She has spent her adult life building and contributing to systems on women’s empowerment and development.
|Dr Riria: Photo: Courtesy|
KWFT recently changed the company name to Kenya Women Holding Limited.
EVE: What are the roles of the company?
RIRIA: We focus on the non-financial aspect of the women’s lives, as money is not everything. The institution is focused on empowering and advocating for women. We give financial literacy—like how to make your money work for you.
We also hope to give women a platform to speak in one voice regardless of where they come from. At KWFT, we focused on poverty alleviation, but now we are incorporating financial capacity building of women and empowering them to be better placed economically.
KWFT, which is now a wholly owned subsidiary of the Kenya Women Holding Company Limited (KWH), will continue assuming the role of providing financial services. KWH owns KWFT a 100 per cent.
Kenya Women Group will continue serving poor families through women. All the activities run under my leadership as the CEO.
EVE: What are some of the company activities?
RIRIA: The organisation understands the life cycle needs of low-income women from the time they are young, through to their active years, up to old age. We are also linking women with the outside world, instead of having their lives focused on their villages.
Currently, we have a pilot programme in Kisumu, where we have led the women to own ponds to curb the ‘sex for fish’ menace among other ventures.
KWFT recently received its license from the Central Bank to start accepting customer deposits.
EVE: What are the advantages of banking with KWFT-DTM (Deposit Taking Microfinance) over other banks?
RIRIA: The bank is feminine. It is a woman’s institution, owned by the women. We have considered products that suit women first before looking at profitability.
In the banking halls, there are mother’s rooms, ladies’ rooms, and even an express lane for pregnant, old and disabled women.
So far we have banking halls in Eldoret, Kakamega, Mombasa, Nairobi and Nyeri, and we are looking at having 20 of them by April next year.
We are finalising plans with Kenswitch, so that our clients can access their money via the Kenswitch ATMs.
EVE: How does one join Kenya Women Group?
RIRIA: To enjoy our services, one has to be a member. It costs Sh200 to join and one renews with Sh100 every year. If one is a small income earner, they can join as a chama. We offer loans as low as Sh10,000.
EVE: Any challenges the organisation faces?
RIRIA: The culture of cashing in on everything has caught up with women. Some try to sue us when we use photos that they have authorised us to use.
There are others who refuse to pay their loans. They also use the media to say that the institution is making them poorer.
EVE: What are your plans?
RIRIA: This year, we intend to work with other partners on an empowerment intervention. We want to make a lasting impact on women. We also want to introduce a mentoring programme focused on the girl-child. Another thing that we are looking at is introducing other subsidiaries of KWFT. It is my dream to go regional and empower women from the larger East Africa Community.
From Vanguard Nigeria -
The Association of Microfinance Industry (AMFI) has adopted rules designed to govern and promote accountability among its members.
AMFI Chairperson, Dr. Jennifer Riara, said rising concern worldwide on the effectiveness of microfinance to fight poverty had prompted the signing of the new regulation that was witnessed by 43 of its members.
“There has been growing concern about our activities, and the thin line between poverty eradication and profit making continues to confuse members of the public,” said Riara at a news briefing.
“What we have signed would help streamline our operation and instil a sense of professionalism in meeting the objective of reaching out to the 80 per cent of the un-banked members of the society,” she said
Dr. Riara said signing of the commitment note would help divert the growing perception of mission shift in the industry.
World over, majority of the microfinance institutions are seen to be moving from eradicating poverty to making profits from the poor.
Kenya, she reckons, has not remained untouched by this emerging concern and the industry is finding itself increasingly under scrutiny from partners, the Government and the society in general.
She said the pact was a clear indication that microfinance in Kenya does not experience ‘mission shift’ in its operations and is focused on taking financial services to the marginalised communities.
The note signed includes defining criteria and the process of bringing in new members, code of conduct among several key governance areas.
In 2008, the govern-ment legitimised microfinance by enacting the Microfinance Act 2006. Presently, only two microfinance institutions – Faulu Kenya and the KWFT Microfinance – are regulated under the Act out of hundreds of institutions operating in the country.
Women entrepreneurs are to undertake business mentorship and leadership training organised by the Kenya Women Holding— an offshoot of the microfinance institution that offers them formal banking services.
Studies have shown that many small businesses have stagnated at their infancy stages because the owners lack business skills to efficiently manage their operations, including finding the right markets for finished goods.
A survey conducted by the company showed there was lack of skills among its clients who are mainly involved in small businesses hence the need to develop a curriculum that the entrepreneurs would be taken through using grants from unilateral donor institutions .
The business training will complement the lending and savings services that are now offered through the Kenya Women Finance Trust Deposit Taking Microfinance Limited (KWFT DTM) and is expected to increase the credit appetite among the clients and raise the average loan size which now stands at about Sh40,000.
Dr Jennifer Riria, the group CEO of Kenya Women Holdings, says that the challenges that most entrepreneurs face in running their businesses are non-financial since they relate to the daily operations of businesses and that providing them would empower women to become business leaders.
“This is a result of a Training Needs Assessment Survey conducted among our clients that has clearly identified the need for focusing on non-financial life cycle challenges that women face daily,” said Dr Riria during the company’s AGM held on Saturday.
The modules would be delivered through a network of trainers who will be working with target groups whose training needs have already been identified.
The training will include drawing up business plans, filing of VAT returns and product innovation through market research to understand the consumers’ needs.
KWH has a client base of about 400,000 individuals who are organised in small groups of about 10 working together to co-guarantee their members in accessing credit facilities and this has enabled the company to minimise the exposure to default risk.
The composition of the programme loan portfolio indicates that about 95 per cent of the loans are given for purposes of business services while five per cent is awarded to finance ventures in agriculture.
Apart from the social benefit that the training is expected to come with, the company expects to boost its loan repayment levels which stands at 98 per cent, but can be improved if the individuals who are beneficiaries of loans advanced by KWFT are armed with better skills for running their enterprises.
In what has been seen as a strategic approach to creating relationships and reducing the default rate, KWH has embraced a different approach to involve the clients in the operations of the company and ratification of key management decisions as witnessed in this year’s annual general meeting .
In the year ended December ,2009, KWFT disbursed Sh13.6 billion up from Sh9.1 reported for the previous year, indicating a huge credit appetite among the target groups which presents headroom for future lending that the company can exploit.
The approval of the Central Bank that allowed KWFT to become a deposit taking financial institution is also expected to reduce the interest rates that are applicable to credit because of the cheaper source of financing that deposits offer compared to loans that the institutions has been relying on.
Among the biggest lenders that the company has sought finances from include the local commercial banks which charge the institution an annual interest rate of about 12 per cent for medium term loans whose maturities range from three to seven years.
“We will reduce the lending rates once beginning July from the current 18 per cent because of the declining interest rates in the market,” said Ms Grace Nzou, a manager at the institution adding that customer deposits would offer the bank a cheaper source of financing whose benefits would be conveyed to the clients.
By Steve Mbogo, Business Daily Africa –
The M-Kesho bank account is causing jitters among micro credit institutions who fear losing current and prospective customers to the new service because of its easy accessibility through the mobile phone.
The M-account allows users to receive small loans currently limited to a maximum of Sh5,000.
Borrowers will be assessed based on their credit history of M-Pesa and later in repayment through M-Kesho.
They will apply for the loan via the phone and receive notification within minutes.
If they qualify, borrowers will receive the money on their phones which they can withdraw from the nearest M-Pesa agent.
This is a major shift from the practice of micro credit institutions that lend micro loans only to organised groups to curb the risk of default.
In the micro credit institutions model, applicants must belong to an organised group of at least four people, fill in loan application forms, list collateral they offer and wait for days before they are notified if they qualify.
Loanees are paid by cheque and have to wait for about four working days for the cheque to mature.
The commercial banks also take their cheque-handling charges from the loan amount.
Micro credit institutions include small financiers like Faulu Kenya, Kenya Women Finance Trust and savings societies known as Saccos.
Shylocks are informal micro credit players.
“We are concerned that M-Kesho may pull away some of our clients but this is a chance for other micro lenders to innovate,” said George Ototo, the acting managing director of the Kenya Union of Savings and Credit Cooperatives (Kuscco).
Key players in micro finance sector, including the Association of Microfinance Institutions of Kenya requested not to comment and gave divergent reasons for that.
Mr Moses Ochieng, a Financial Sector Specialist for East and Southern Africa working for British government international development arm, DFID said the new account “was a major win” for low income borrower because it offers them a choice from micro finance, Sacco or shyloks.
“Even under agency banking, agents cannot appraise loan applications and the process of channelling those applications through the commercial bank branch means banks are still not close to customers when it comes to giving loans.”
Successive research has showed that there is a huge opportunity to provide banking services for the poor because of limited penetration even in the face of micro finance and Sacco sector growth in the recent past.
For example, micro credit institutions excluding Saccos only reach about 1.1 per cent of the population
That opportunity was expected to be utilised prominently by the agency banking allowed by the Central Bank last month, but the entry of M-Kesho has widened the options for borrowers and has opened new frontier to increase penetration of banking and insurance services.
According to the Finaccess study conducted in 2006, about 38 per cent of adult Kenyans are unserved by financial system.
Only 19 per cent of Kenyans are served by commercial banks while eight per cent are served by semi-formal financial service providers such as microfinance institutions and Saccos
The remaining 35 per cent are served by informal financial service providers, ranging from Accumulating and Rotating Savings and Credit Associations to shopkeepers and money lenders.
But 17 per cent of the unbanked own a mobile phone, according to the FinMark Trust, creating an opportunity to use the phone to deepen access to financial services.
M-Kesho, a partnership between Equity Bank and telecom company Safaricom, means that the 17,000 agents of M-Pesa will now become banking and insurance agents for Equity Bank and there is opportunity to convert nine million M-Pesa accounts into savings accounts.
Analysts said although people who own mobile phones are most likely to have one or more bank accounts, the impact on deepening financial access will be high , especially because of new phone users driven by the declining cost of a mobile phone.
“It is only the weaker micro credit institutions that will feel the pinch,” said Mr Ochieng. “Others must innovate. They have a chance to use technology to be more efficient, reduce their operational costs and offer lower interest loans
Analysts said one of the options micro credit institutions have is to rise on the same mobile telephone infrastructure to offer services to their clients including partnering with other telecoms like Zain and YU to use their money transfer infrastructure.
Others forecast that micro credit institutions may be overtaken by commercial banks in seeking similar partnerships with telecoms.
Kenya Commercial Bank has previously expressed interest in such mobile-phone embedded accounts and the Cooperative Bank is also tipped as another most likely entrant.