KWFT licensing boon for small scale borrowers

Small scale borrowers are likely to get cheaper credit following the licensing of the second deposit-taking microfinance (DTM) institution — the Kenya Women Finance Trust.

The trust — which will assume the name Kenya Women Finance Trust Deposit Taking Microfinance Limited (KWFT DTM), joins Faulu Kenya which was licensed a year ago.

Another eight firms are waiting for similar licences.

The two institutions can leverage on the cheaper deposits from their customers, a development that should also lead to cheaper credit for the same customers.

KWFT DTM had to raise its borrowings by a massive 49 per cent or Sh1.1 billion to Sh3.3 billion in 2008 in order to continue giving out loans.

With access to cheaper deposits, the bank would probably borrowed much less.

For fixed deposits, the average annual interest rate is 4.89 per cent.

The licensing of the two and other MFIs is critical to credit access for the micro-, small and medium enterprises (MSMEs) which are the largest employers but have traditionally been shut out of the credit market by mainstream financial institutions that have a bias for corporates.

The formal employment sector employs only about two million people while those in informal employment — excluding self-employed agriculture workers — account for about nine million.

KWFT, headed by Jennifer Riria, made a 140 per cent increase in profit of Sh545 million before tax in 2008 compared to Sh227 million in the previous year.

It could easily be one of the most profitable MFIs as it was the 17 largest amongst the 43 commercial banks operational as at the end of the year.

In that year, the 16th position was taken by Family Bank with Sh576 million profit before tax.

Shareholders’ funds

KWFT’s assets stood at Sh9.5 billion at the end of 2008 with revenues hitting Sh1.9 billion in the same year.