MICROFINANCE FUTURE BAKING FOR POOR KENYANS

According to the Central Bank of Kenya (CBK), 32.7 per cent of Kenyans are excluded from financial access, while more than 50 per cent of the population are un-banked.

Globally, 3 billion people in developing countries have little or no access to formal financial services that can help them increase their income and live-hood, World bank report points out.

“This is why micro-finance represents the future of banking,” says Dr Joshphat Mboya, a microfinance lecture at Strathmore University,explaining, “this is why most commercial banks are on the rush to serve micro-finance typical clients, the low income earners, the poor who are the majority in the society.”

Micro-finance is one of the sub-sector the government is targeting in the realization of Vision 2030, said Mr Peter Gatere,Assistant Director at the CBK during a one day conference dubbed "Better Business Kenya 2011" that was hosted by ACCA fraternity, for Kenyan to access financial opportunities.

Gatere says majority of Kenyans have been sidelined by commercial banks for long from low income earnings, chronic unemployment, discontinuous or casual work history, inhibiting cultural values, low level of education and financial literacy.

The CBK director says the 43 registered microfinance institutions (MFI) have demonstrated their viability to provide financial services to the poor on commercial basis. “They encourage self-sufficiency and entrepreneurship among the low income earners by providing loans notwithstanding existence of conflict between access and costs.”

However, one of the challenge facing MFIs is dealing with the young generation whose social fabric of unity is withering with time, says Martin Bikuni, Director - Enterprise Risk Services, Risk Management Group Ltd, this will increase credit risk management among the MFIs.

Recent research indicates that 80 per cent of Kenyan college and university students are considering self-employment option after their graduation. But, Bikuni warns that unless they develop positive attitude towards team work - accessing MFI loans will be a challenge.

One of the outstanding feature of MFIs is their acceptance of household assets as collateral for loan consideration, says David Kitusa,Chairman, Association of Microfinance Professionals (AMFP)and Regional Representative for Anglophone Africa, KIVA, thus they are transforming behavior of young people who will be otherwise be unemployed and boosting women self-esteem by enabling them to run their own business – hence better housing and clean water access.

The public was warned to watch out of the schemes that are posturing as MFIs such as the pyramid schemes to reap poor Kenyans. They public has been called to confirm with the government on schemes promising "get rich fast."

The MFIs were challenged to harness modern technological tools, ICT applications such as cloud to enhance their service delivery and save costs. Anne Kimani, Head of Finance, Faulu Kenya challenged MFIs to streamline put in place right financial system for sustainable management of funds.

Any financial institution which develops suitable and appropriate products for the sidelined majority will be a success, says Mboya, “that is why mobile money transfer is popular as MFI.”