By George Gichuki
The Kenyan microfinance sector is one of the most vibrant in Sub-Saharan Africa. It includes a diversity of institutional forms and a fairly large branch network to serve economically active, albeit low income earners. The business takes different forms ranging from microfinance banks ( regulated by the Central Bank of Kenya), institutions that are registered as non-governmental organizations, church based microfinance institutions, merry- go- round groups ( popularly known in Swahili as ‘chamas’), rotating savings and credit associations , accumulative savings and credit associations as well as investments groups.
Delivery of the microfinance products and services takes different forms from group lending, individual, corporate and non-formal lending. Wide coverage of the telecommunication services has enhanced lending to the marginalized areas which are characterized by illiteracy, poor infrastructure and a vicious cycle of poverty.
The economic pillar of Kenya’s Vision 2030 objective of enhancing deposit mobilization, increasing savings levels and improving the general quality of life for all citizens has seen the government introduce regulations through the Microfinance Act 2006 and subsequent amendments to ensure that the sector is able to meet its objective of serving the economically disadvantaged population.
The sector’s umbrella body is the Association of Microfinance Institutions – Kenya (AMFI-K). As the voice of the sector, AMFI-K has achieved key milestones since its inception. One of them is successfully lobbying for the enactment of the Microfinance Act and regulations which saw the establishment of microfinance banks. AMFI-K has a board drawn from the different categories of its membership including: microfinance banks, wholesale microfinance lenders and credit only microfinance institutions. In the same regard, it has a secretariat of five staff members, headed by a chief executive officer (CEO) who is currently Caroline Karanja.
A career banker, Caroline is a Bachelor of Science (international business administration –finance option) graduate from the United States International University – Africa (USIU-A. “My banking career was shaped while still at USIU-A when I got an opportunity to work at Citibank as an intern,” says Caroline. “Among other duties, I assisted in the processing of the Kenya Airways share issue which was floated to the public in March 1996 – this involved the creation and update of applicants’ database, “she adds.
After her one year internship, Caroline joined Commercial Bank of Africa (CBA) as a graduate trainee. The university had a partnership with the bank which opened doors for its graduates to join as trainees. She worked with CBA from 1998 to 2005.
In 2006, she joined AMFI-K as a coordinator. “That was an exciting time for me because the association was lobbying for the enactment of the Microfinance Act,” she recalls. “I was involved in this critical process where I learnt a lot about the sector given that I was coming from a background of corporate banking,” she adds.
The process of lobbying for the enactment of the Microfinance Act and regulations was industry led and championed by the secretariat. Caroline and the other members of the secretariat worked very closely with the key stakeholders and the leaders in the industry in order to actualize it. “These leaders mentored me a great deal and I learnt a lot from them about the importance of preparing and embracing any changes that may occur in an organization,” she avers.
In the same breath, she learnt various fundraising skills because by and large, AMFI-K’s operations are supported by membership subscription and revenue that is generated by activities that the association initiates. “As the coordinator, it was my responsibility to develop the membership of the association and inclusion by recruiting new players in the market who met our requirements, besides maintaining linkages with other microfinance networks regionally, “ she says. “ I would also Identify and develop relevant capacity building programmes for the members by continuously engaging them on a needs assessment as well as coordinating thematic workshops to ensure that they remained relevant in the market,” she adds.
Owing to her immense contribution in strengthening AMFI-K, Caroline was promoted to a programmes manager in 2008. The board confirmed her as the CEO in 2018 after acting in that position for one year. Besides being mentored by various leaders in the microfinance sector, Caroline attributes her meteoric career growth to the networks and partners she has worked with over the years. One of them is the Citi Foundation, the sponsor of the Citi Micro-Entrepreneurship Awards (CMA), a global event that promotes and illustrates how microfinance strengthens the entrepreneurial spirit in impoverished communities around the world. Some of the other key partners are: Semaine Africaine de la Microfinance (SAM), the organizers of the African Microfinance Week, African Rural and Agricultural Credit Association (AFRACA), a lead advocate and coordinator of rural and agricultural finance in Africa.
She has also attended various leadership courses locally and internationally. Moreover, she has moderated sessions in several international microfinance forums. This exposure has helped her to hone her leadership skills.
Over the years, Caroline has also become very passionate about the microfinance sector, especially because of its impact on transforming people’s lives. “Our members develop products that go a long way in assisting the bottom of the pyramid clientele (often shunned by the mainstream financial institutions because they are perceived as high risk borrowers) to alleviate their plight,” she underscores. “This experience really excites me and it has drawn me closer to the sector,” she adds.
One of the biggest hurdles that the sector faces according to the new AMFI-K’s CEO is partial regulation. “We have countless money lenders (shylocks) and pyramid schemes who are coming into the market disguised as genuine microfinance institutions and this has distorted the market,” she laments.
To overcome this hurdle, AMFI-K has continuously engaged the Central Bank of Kenya (which regulates all the thirteen microfinance banks in the country) and the National Treasury, in order to develop regulations for the credit only microfinance institutions. In addition, through its communication initiatives, the association sensitizes the public about its activities and membership.
As the leader of the AMFI-K team, one of Caroline’s major responsibilities is to ensure that all her staff members clearly understand the association’s vision and mission. “By so doing, they are able to know the association’s goals as they engage in their day to day work,” she emphasizes. In addition, she ensures that the team clearly understands the pillars that drive AMFI-K.
One of the association’s key roles is to build its members’ capacity and consequently, the team has to engage them continuously, in order to develop activities and programmes that serve their interests. “As the team leader, I therefore pay close attention to the ideas generated by the rest of the team as well as the feedback they share with me in my endeavor to drive the agenda of the association forward,” she avers.
The team holds a strategic meeting once per week in which they evaluate their performance and plan for various activities including workshops and training sessions for the members. “If we notice that we are under performing in a certain area, then we come up with solutions that will enable us to fill the gap,” Caroline emphasizes.
The road ahead
In the next five years, Caroline is determined to strengthen the association by coming up with initiatives that will make it more sustainable and inclusive. She is also optimistic that within that time frame, AMFI-K will have successfully lobbied for the development and implementation of regulations for the credit only microfinance institutions so as to eliminate regulatory gaps and raise the level of protection to consumers.
Currently, the sector is operating in an environment that is rapidly evolving because of innovations in technology – especially in mobile and internet banking. This has led to the emergence of risks like cyber crime which AMFI-K is addressing through sensitization workshops. The association is also sensitizing its members about the Movable Property Security Act and Regulations 2017 as well as the International Finance Reporting Standard (IFRS-9) which was adopted by all the lenders in the country effective the first of January 2018. The standard requires a lender to recognize a financial asset or liability in its statement of financial position when it becomes party to the provisions of the instrument.
The affable CEO is a very committed Christian. “I am a very prayerful person and I put God first in all my undertakings,” she says. Indeed, one of the items that clearly stand out on her neatly arranged work station is the Holy Bible. She is also an avid reader of inspirational books – mainly on business as well as personal and spiritual growth themes.