Microfinance in Kenya consists of microfinance facilities and regulations in Kenya which has been developing since the mid 1990s. Legislation was passed in 2006 with the Micro Finance Act which became active in 2008. By 2010 there were 24 large micro finance institutions in Kenya, which provided US $1.5 billion to approximately 1.5 million active borrowers. With over 100,000 clients, Equity Bank Kenya had the largest share of business loans representing market share of 73.50% followed by Kenya Women Microfinance Bank with 12.06%. Most microfinance firms as in other countries have eligibility criteria which may include gender (as in the case for special women's loans), age (at least 18 years of age), a valid Kenyan ID, a business, an ability to repay the loan and be a customer of the institution.

Corruption is a major problem in Kenya. In 2010 Kenya ranked 154th (out of 178) on the International Corruption Index.[1] Political riots such as during elections in year 2007, which led to violence and economic disturbance. As a result of this political risk, the Portfolio at Risk rate increased during the riots during the elections in 2007.[2] And infrastructure issues, where despite the economy having risen at a real growth rate of 4% in 2011, banking infrastructure remains weak.[2]

Existing regulations

Central bank of Kenya
Central bank of Kenya

The banking system in Kenya is regulated by the Companies Act, the Banking Act, and the Central Bank of Kenya Act. In addition, there are several existing guidelines. The responsibility for monetary policy and the banking system is held by the Central Bank of Kenya, which also releases information about interest rates, banking guidelines, and the financial institutions.[3]

The Kenyan Micro Finance Act was adopted in 2006 and became active in 2008. With the adoption of this act, institutions could apply for micro finance licenses at the Kenyan Central Bank either as a national or community institution.[4]

In order to do so, these institutions must be registered as:

The four steps of approval for a micro finance institution are:

Existing institutions providing micro finance products

There are 24 large micro finance institutions in Kenya, which provide US $1.5 billion to approximately 1.5 million active borrowers in 2010. According to their gross loan portfolio, the five largest institutions are:

Those 24 institutions offer business loans on a large scale, specific agriculture loans, education loans, and loans for any other purpose. Additionally there are:

Most of the micro finance institutions offer business loans under different interest rates, duration and amounts. With 101,334 clients, Equity Bank has the largest share of business loans. With 50,000 clients, K-Rep Bank is the second largest institution, followed by Jamii Bora, as the third largest bank for business loans and servicing 37,400 clients. Specializing in loans for women, the KWFT (Kenya Women Finance Trust) holds by far the largest market share, with loans to 334,188 clients.

The educational loans market is narrow, which can be observed by the major player’s client base: KADET services only 220 clients, followed by the Kenya ECLOF (211 clients), SISDO (202 clients), and the Adok Timo (173 clients). The same is true for asset finance loans. The Equity Bank has the largest market share (2,853 clients) and Family Bank the second largest (2,000 clients) in asset financing.

Out of approximately 40 million Kenyans, about 14 million are not able to receive proper financial service through formal loan application services, and 12 million more Kenyans have no access to financial service institutions at all. Further, one million Kenyans are reliant on informal groups for receiving financial aid.[7]

Conditions for micro finance products

Key challenges

See also


  1. ^ a b Transparency International: Corruption Perception Index 2010 Results. http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results
  2. ^ a b c d e Mfi upgrading initiative : Kenya. "Archived copy". Archived from the original on 2013-06-03. Retrieved 2015-09-25.CS1 maint: archived copy as title (link)
  3. ^ Center for financial inclusion: Summary of Client Protection in Kenya. http://www.accion.org/Page.aspx?pid=1419
  4. ^ Curtis, Lori: Microcapital story: Kenyan Microfinance Trade Association Puzzled as Only Two MFIs Participate in New Friendly Regulation. http://www.microcapital.org/microcapital-story-kenyan-microfinance-trade-association-puzzled-as-only-two-mfis-participate-in-new-friendly-regulation/
  5. ^ Kenya Central Bank: The A-Z of licensing a deposit taking microfinance institutions. http://www.centralbank.go.ke/downloads/bsd/appforms/MFI/A-Z%20of%20Licensing%20a%20DTM.pdf
  6. ^ Data are taken from the websites of the institutions, http://www.mftransparency.org/data/countries/ke/ and http://www.mixmarket.org/mfi/country/Kenya
  7. ^ Mfo upgrading initiative : Kenya. "Archived copy". Archived from the original on 2013-06-03. Retrieved 2015-09-25.CS1 maint: archived copy as title (link)
  8. ^ "The banks to avoid when you are seeking loans". www.nation.co.ke. Retrieved 2015-11-26.
  9. ^ "How Mobile Loans Apps calculate Credit Score Rating for lending limits". Kenyayote. 2019-09-10. Retrieved 2020-11-28.
  10. ^ Hospes, Otto; Musinga, Muli; OngÕayo, Milcah: An Evaluation of Micro-Finance Programmes in Kenya as Supported through the Dutch Co-Financing Programme. http://www.gdrc.org/icm/country/Kenya-finalreport.pdf