Kenya has started review of the law on microfinance banking as it seeks to increase their role in providing financial services especially to the increasing number of small and medium scale enterprises, the Central Bank of Kenya (CBK) has said.
Kenya has 13 licensed microfinance banks, with the number expected to increase because of demand for services in the medium term.
CBK in its update released on Monday called for public consultation on the changes in law. Microfinance banks issued loans worth 430 million U.S. dollars in 2017, an increase from 270 million dollars in 2013.
"Following the enactment of the Microfinance Act and Regulations in 2008, the dynamics within the microfinance industry have changed significantly with the industry experiencing growth and transformation. Innovation and dynamism within the microfinance industry has increased and the industry has experienced growth in the number of customers and diversity in the range of services and products provided," according to the update.
CBK is credited with taking several initiatives that have enabled the number of Kenyans with access to financial services increase to 75 percent by 2016, according to financial access consultancy group FSD Kenya.
"Access to any form of formal financial service has dramatically increased from about 27 percent in 2006 to over 75 percent in 2016," said FSD Kenya in one of its studies.
Last year, Kenya was ranked top among 26 countries in financial inclusion in a report by Centre for Technology Innovation at U.S-based Brookings Institution.
In addition to licensing of mobile money services like M-Pesa in 2008, which is now being used by 30 million Kenyans, CBK started regulating microfinance banking in the same year in what it says was to "provide a platform for the broadening and deepening of access to financial services throughout Kenya, especially to the low-income populace and small and medium enterprises in urban and rural areas."
"To support the rapid growth of the microfinance banking industry, the existing microfinance legislative and regulatory framework calls for considerable review to suit the industry's current realities," noted the CBK update.
CBK called on the stakeholders in the industry to present their views of the proposed new law and regulations by March 15, to be incorporated in the comprehensive review that will be undertaken in September.