Caroline Karanja, CEO, AMFI-K.

Association takes timely measures as pandemic disrupts its members’ business

By George Gichuki

Kenya has one of the most vibrant microfinance sectors in sub- Saharan Africa. It serves over six million households. In addition, it has employed more than ten thousand staff members where loan officers represent 60% of this number. Further, microfinance holds over Kshs. 100 billion outstanding gross loan portfolio and a non-performing loan book of 11% of the gross. To start with, Covid-19 has greatly affected the sector because the social distancing guideline that is meant to check the spread of the pandemic has made it hard for microfinance institutions (MFIs) to meet their clients especially those lending to groups. Collections and disbursements which are executed during the group meetings have been severely affected. Moreover, the adoption of enhanced alternative banking channels such as elimination of mobile charges to the clients has increased the cost of doing business.

“Notwithstanding the challenges above, micro and small enterprises (MSMEs), which mainly operate in the informal sector form the bulk of the sector’s clientele,” says Caroline Karanja, the chief executive officer of the Association of Microfinance Institutions – Kenya (AMFI-K) adding that their business has been slowed down by the low turnout of customers who fear being infected by the deadly coronavirus.

By the same token, imports and exports across the world of both raw materials and finished products have not been spared. To that end, businesses and individuals who have had loans with microfinance institutions continue to face difficulties in repaying them. “Mass withdrawal of savings and change in the spending pattern continue to pose threats to the sector as people navigate through the Covid-19 pandemic,” says Ms. Karanja.

At the onset of the Covid-19 pandemic, AMFI-K took precautionary measures to ensure continuity of operations while mitigating the risks posed by the pandemic. In order to protect the staff members, their families as well as the general public, the association was constrained to working with two staff members in the office every week on a rotational basis. “This was in line with the social distancing guideline and it ensured that our operations were not paralyzed,” Ms. Karanja further says.

Business recovery and continuity

The Covid-19 pandemic has affected businesses negatively in all sectors of the Kenyan economy. The Microfinance sector that is a key contributor to poverty reduction, employment and wealth creation as well as the growth of the gross domestic product (GDP) has also been adversely affected across the country. AMFI-K has therefore adapted some strategies and interventions that are aligned to its activities.

To start with, the association has embarked on capacity building. To that end, it has taken an active role in circulating various guidance notes and tools to its members which have been received from different partners. They include: guidelines for MFIs in their definition of a continuity plan, guidance note on pandemic planning for the banking sector issued through a banking circular No. 5 of 2020 from the Central Bank of Kenya, tools for Covid-19 management, client interview tool in order to understand their issues better, inviting members to informative webinars as well as report on the impact of Covid-19 on the lives of low-income households shared from different partners in different regions. By the same token, AMFI-K ensured that its members participated in the review of the draft credit information sharing (CIS) code of conduct.

Most importantly, AMFI-K is developing an e-learning platform and redesigning its website to be used in delivering online courses which include (but not limited to) webinars, seminars, complaint mechanism, video clips, portable document format (PDF) among other form of outputs. “The website is expected to get a face lift with the ability to address new digital needs and provide greater access to information based on current web trends and technology,” says Ms Karanja.

Secondly, through advocacy and lobbying, AMFI-K is undertaking a review of its code of conduct in order to address the pertinent issues in the sector. This includes the CBK press release that prohibited unregulated digital and credit-only lenders from submitting credit information on their borrowers to the credit reference bureaus (CRBs).

Apart from receiving information on business continuity plans from partners, the association is also exploring avenues for liquidity interventions, guarantees and emergency debt funds from the government, development partners and commercial banks to cushion its members against liquidity constraints which might arise as a result of prolonged pandemic period.



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