9 microfinance banks licensed in Kenya

October 24, 2014
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CBK Governor Njuguna Ndung'u says three additional institutions had been granted letters of intent, which are approvals in principle pending their finalisation of infrastructural set up/FILE
CBK Governor Njuguna Ndung’u says three additional institutions had been granted letters of intent, which are approvals in principle pending their finalisation of infrastructural set up/FILE
NAIROBI, Kenya Oct 24 – The Central Bank of Kenya (CBK) has so far licensed nine microfinance banks with 96 branches and 67 marketing offices as at July 2014.

Collectively, they had 1.47 million deposit accounts valued at Sh32.04 billion with an outstanding loan portfolio of Sh34.77 billion.

CBK Governor Njuguna Ndung’u says three additional institutions had been granted letters of intent, which are approvals in principle pending their finalisation of infrastructural set up.

Ndung’u says the CBK will continue to initiate various changes to allow microfinance banks expand their reach and depth cost effectively, while ensuring the stability and soundness of the financial system.

He said that the microfinance industry will increasingly play a pivotal role in deepening the financial markets by expanding access to affordable and appropriate financial services and products to majority of Kenyans.

“Within the microfinance industry, we not only operationalised the Microfinance Act, 2006 and Regulations 2008, but we have amended it over the years to provide an enabling environment for microfinance banks to grow and develop.”

“Among the reforms we have already initiated include giving microfinances a chance to participate in the National Payments System that includes the Kenya Electronic Payment and Settlements System (KEPSS), designed to process large value and time critical payments on a real time basis; and the Automated Clearing House (ACH), owned by the Kenya Bankers Association and operationally managed by the Central Bank of Kenya,” he said.

He said microfinance banks can now apply to the CBK to offer an expanded and diversified product range including money remittances and foreign exchange transactions.

“Besides their current product offerings, microfinance banks will be expected to maintain a Cash Reserve Ratio (CRR) under Section 38 of the CBK Act. As you may be aware, CRR is the ratio that determines the amount of deposits that Central Bank requires licensed institutions to hold as reserves. CBK uses the CRR as a statutory instrument to regulate the appropriate stock of money supply in the economy. CRR is a direct instrument of monetary policy,” he stated.

Also, microfinance banks will be expected to observe the Kenya Banks Reference Rate (KBRR) as they price their products. The introduction of KBRR is expected to increase transparency (disclosure) in pricing credit lending and enhance the transmission of monetary policy signals through banks lending rates.

Microfinance banks will also participate in the proposed Kenya National Switch, an initiative proposed by the Kenya Bankers Association (KBA) which is expected to provide a single switch for the retail payments sector including banks, payment cards and mobile money transfers.

Ndung’u was speaking on Friday at the Citi Micro-Entrepreneurship Award (CMA) hosted jointly by Citibank Kenya and the Association of Micro Finance Institutions (AMFI).

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