THE 2022 KENYA MICROFINANCE INDUSTRY REPORT LAUNCHED

Leading Pan-African credit rating agency and researcher partners with AMFI-K in developing and launching an informative and educative report for microfinanciers

By George Gichuki

Agusto and Co. in partnership with the Association of Microfinance Institutions -Kenya (AMFI-K) recently released the 2022 Kenya Microfinance Industry Report.  Its theme was: ‘Advancing growth of microfinance institutions in the face of the changing business environment.’ The report covered: an overview of the Kenyan Microfinance Industry, the competitive landscape and analysis of the basis of competition, the regulatory environment and evaluation of the upcoming regulations, an assessment of the financial condition of the industry, key developments and trends in the industry, key success factors and risk areas, a strengths, weaknesses, opportunities and threats (SWOT) analysis on the industry, industry risk rating as well as its outlook. 

Vibrant

Kenya’s microfinance industry is among the most vibrant in Africa. It comprises microfinance banks (under the regulation of the Central Bank of Kenya), credit only microfinance institutions and wholesale microfinance institutions.  The industry’s total assets were approximately Kshs. 250 billion as of the end of December 2021.   Welcoming the speakers during the launch of the key report, Mr. James Mugambi, Chairman, AMFI-K board said: “The importance of sharing data cannot be overemphasized; it is in this kind of report that we are able to identify information challenges that impede market development.”

In her virtual presentation, Mrs. Yinka Adelekan, the Group Managing Director, Agusto and Co. observed: “We have assessed the impact of the upcoming regulations which will play a critical role in providing direction to the industry, bringing about transparency, especially for the credit only microfinance institutions that have remained unregulated.”

Target market

The key note address was given by Dr. Rose Ngugi, Executive Director, Kenya Institute for Public Policy Research and Analysis (KIPPRA) who observed that the micro, small and medium enterprises (MSMEs) sector provides 80% of the job opportunities in Kenya. The sector is the main target market for microfinance banks and institutions. “As an institution, we have tried to come up with an index for MSMEs, in order to evaluate the kind of environment that they operate in,” she said.  Lauding AMFI-K as well as Agusto and Company for launching the critical report, Dr. Ngugi said that currently, it is hard to find data regarding credit only microfinance institutions since unlike the microfinance banks, the former are not regulated.  As the regulator of microfinance banks, the Central Bank of Kenya (CBK) gives regular and up to date   reports regarding their performance.

Launch

While launching the report, Mr. Ikechukwu (Ike) Iheagwan, the Regional Director, East Africa, Agusto and Co.  outlined its key findings.  Among them were: imminent restructuring of the industry as most fringe credit-only microfinance institutions  may be unable to comply with the new regulatory directives ( digital credit providers licence) from  CBK and they may therefore be forced to merge or be acquired by stronger institutions, the proposed microfinance industry regulations being championed by AMFI-K will provide a supervisory framework to guide the credit only microfinance institutions and provide credibility to the industry and heightened business risks relating to delinquencies, governance as well as changes in the regulatory and environment due to the forthcoming elections could have an impact on the industry’s near term performance.

Caroline Karanja, Chief Executive Officer, AMFI-K, thanked the industry’s stakeholders who graced the event and promised to make sure that the report would reach all the members.