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CBK nods to microfinance institutions

NAIROBI, Kenya, Jun 16 – The Central Bank of Kenya (CBK) has disclosed that it will in the next few months license about nine microfinance institutions that want to become deposit-taking organisations.

CBK Governor Prof Njuguna Ndung’u said on Tuesday that they had received several applications from such institutions and would give them the go-ahead as the Bank seeks to increase access to financial services in the country and cultivate a savings culture among Kenyans.

“The CBK has to date approved 26 business names which are in various stages of review and we do hope that we are going to license all those applications that are before us and even more for those who come in and fulfil the requirements as fast as possible,” he assured.

He pointed to the enactment of the Microfinance Act (2006) and the Regulations (2008) last year which provide a framework for the operations of the industry and emphasised that it would also provide a platform for them to meet the needs of their customers

The Act became operational in May 2008 and provides a mechanism for protecting customers’ deposits to a maximum of Sh100, 000 through the Deposit Protection Fund.

The Governor challenged players to take advantage of the ICT development in the country to break down the barriers in the financial sector and ensure the entry of more financial excluded Kenyans into the formal system. 

He referred to the new concept of branchless banking which is slowly taking root in the country and appealed to financial institutions to take it up as it has the backing of government officials and other policy makers.

Such initiatives, he added, would go a long way in deterring people from investing in ‘get-rich-quick’ schemes through which many Kenyans have lost billions of shillings.

A recent survey indicates that the number of people without access to formal banking services has declined by about 5.3 percent to 32.7 percent over the last two years.

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Prof Ndung’u spoke when he issued the first deposit-taking license to Faulu Kenya which will allow the institution mobilise deposits from the public.

Faulu’s Managing Director Lydia Koros said they would not only be able to provide a wide range of credit and savings products but their 220,000 clients – who are mainly the ‘economically active poor’- would now have an assurance that their money is safe.

“We have been getting money from commercial banks and then on-lend it and that comes with expenses. But now (with the license), we are able to get money from the same people who are doing business and then intermediate it within that business sector,” she explained.

Mrs Koros said they would take advantage of the branchless banking solutions which provide innovative and affordable delivery channels and does not require the institutions to put up costly infrastructure to reach the majority of the excluded population in all remote areas in the country.

“This is an agency model where we will partner with the provider of services at the village level,” the MD said.

In the meantime however, the MFI has two banking branches that have been approved by the CBK as it gears into offering a wide range of financial services and revealed that six more outlets would be opened in the next few weeks.

The implementation of these measures, she added, would enable them to reach one million customers by next year.

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