The activities of microfinance banks in Kenya are contributing to eradication of poverty. Kenya’s microfinance banks are gearing up to achieve a more profitable market structure.
The purpose of this article was to examine microfinance banks in Kenya. Stay tuned.
About microfinance banks in Kenya
The Central Bank of Kenya (CBK) licenses and regulates microfinance banks in Kenya. It works and operates under the Microfinance Act of 2006 and the Microfinance Regulations for Deposit Taking (MFIs of 2008).
Microfinance banks are banks provided to unemployed, employed, low-income citizens or people who have no other access to financial institutions. Microfinance banks give small business loans in line with the lending practices and ethics.
What is a Microfinance bank?
Microfinance bank is a bank that gives small loans to people. They are also banks licensed by the central bank of Kenya to provide business loans and services such as savings deposits and transfer to their customers.
How do microfinance banks work in Kenya
They finance through a microfinance institution or MFI and also include small financial organisations to large banks. In addition, the distinct features that differentiate them from commercial banks are its operation of giving small business loans to entrepreneurs.
They also finance some loans through keeping log books and other personal documents in exchange for funds.
12 Microfinance Banks in Kenya
There are over 24 large micro finance institutions in Kenya. These institutions offer business loans on a large scale, specific agriculture loans, education loans, and loans for other purposes. Twelve of the largest institutions are
1. Uwezo Microfinance Bank
They focus on providing both savings and loaning services, mainly to SMEs, individuals and farmers. Many farmers in Kenya have benefited from this platform.
Farmers and entrepreneurs who are eligible to apply are given loans to boost agricultural activities in the economy
2. Equity Bank Kenya
They have a market share of 73.50% and 715 969 active borrowers. Once you are eligible to get the offer, you will get your loan immediately.
Moreso, they render 10 different products and have penetrated the lending market.
3. Kenya women’s microfinance Bank (KWFT)
Most borrowers who obtain KWFT loans are women, entrepreneurs, salaried employees and farmers. They have a market share of 12.06% and have a unique way of designing special loans for women. These loans can also be obtained through the KWFT Mobile app
4. K-Rep Bank
They offer 5 different products to eligible citizens. Once you have an account with them and you want to start up a business, they are ready to help with loan.
5. Faulu Microfinance Bank
Faulu microfinance bank has a market share of about 3.56%, They have active borrowers to whom they offer 6 different products.
They are one of the biggest microfinance banks in Kenya that offer loans with excellent customer services.
6. Jamii Bora
Jamii Bora has gone a long way in the finance industry by offering loans to many individuals in the country. They render finance services without any reservations. Once you are eligible, you are good to go.
7. Century Microfinance Bank Limited
They focus on providing credit to agribusinesses in Kenya. Many businesses have benefited from them and many are still to benefit.
8. Momentum Credit
They focus on providing structured working capital solutions to individuals and SMEs. Once you have the zeal to successed, momentum credit is ever ready to help you with loans.
9. Rafiki Microfinance Bank Limited
They major on offering diasporas banking, loan products and savings to its clients. Clients who go to Rafiki to borrow have never regretted it.
10. SMEP Microfinance Bank
It focuses on asset financing, retail banking, group banking, provision of credit to businesses and church banking. They provide different aspect of banking to citizens.
11. Choice Microfinance Bank Limited
They are microfinance bank with a difference and you have the option of depositing it via M-Pesa using Paybill. They provide loan and savings options.
It helps link Kenyan diaspora investments to local people’s needs for small credit facilities.
12. Sumac Microfinance Bank Limited
It is a deposit taking and loaning microfinance bank whose headquarters is along Koinange Street, Nairobi, Kenya.
Eligibility for microfinance bank loan
- Be 18 years and above
- Have a valid Kenyan ID
3 Features of Microfinance banks
The features of Microfinance bank include:
- The loans advanced are smaller when compared to commercial banks
- The absence of asset-based collateral, unlike banks
- Their daily operations are simple.
9 ways on how to start a Microfinance Bank in Kenya
Having considered starting a microfinance bank in Kenya, there are steps to follow. They are:
- Have an unrestricted view of what you want and make plans towards achieving it
- Start working towards forming a legal entity for your business
- Present a copy of your personal tax identification pin certificate
- Present a certificate copy of registered memorandum and articles of association. This will show the capital of at least Ksh. 20,000,000 or ksh.60,000,000.
- Open a business account for all transactions
- Check out for all accounting records and meet up with all
- Go for all needed permits and licenses
- Get your microfinance insurance
- Define your business and start up
Who can start up a microfinance bank in Kenya?
Microfinance banks can be established by:
- Individuals or persons
- Groups of individuals or persons
- Community associations
- Corporate entities or foreign investors
6 Objectives of microfinance banks in Kenya
- Make funds and financial services accessible to customers who have little or no access to financial services.
- Provide synergy of the informal sub-sector into the economy’s financial platforms.
- Serves and delivers to micro, small and medium entrepreneurs (MSMEs).
- Contribute to rural financial transformation.
- Create employment opportunities, thus enhancing standard of living.
- Promote a system for microfinance banks to network, share views and experiences.
The Kenyan microfinance bank sector is active and vibrant. It has so many branches who are ready to serve the poor and the needy neglected by other commercial banks.
They also play a major role in the economy’s building and development. They power the poor through provision of funds.
Moreso, the microfinance banks are regulated and so work by sets of rules and regulations. The microfinance act (2006) and the microfinance regulations (2008) set out the legal, regulatory, and supervisory framework for the microfinance industry in Kenya.