Central Bank of Kenya plans to review Micro Finance Act

Feb 19, 2010

Plans to review Kenya's Micro Finance Act have been announced by the country's Central Bank, according to the Kenya Broadcasting Corporation (KBC).

Professor Njuguna Ndungu, Governor of the Central Bank of Kenya (CBK), suggested that the amendments will make it less costly for the public to access finance from agents of microfinance institutions.

The Act will limit an individual's shareholding to 25 per cent of an institution's share capital.

It will also make the law more responsive to the needs of firms by enabling the use of the agency model, whereby institutions can establish grass roots partnerships with service providers.

Professor Ndungu pledged to build relationships with the microfinance sector through the country's Association of Microfinance Institutions.

This should bolster the regulatory status of microfinance institutions and inspire confidence among consumers.

He is quoted by the KBC as saying there is a need to "cultivate partnership[s] with the industry as well as experienced international players to create an enabling environment to build strong institutions that define appropriate incentives and encourage prudent behaviour".

Professor Ndungu also asserted that it is important for public deposits to be mobilised in order for microfinance institutions to broaden their reach.

Meanwhile, the CBK has expressed reservations about the length of time it is taking for microfinance institutions to secure a deposit-taking license.