Deposit growth lifts microfinanciers

 Mr George Mbira, Rafiki Microfinance Bank general manager. Photo/FILE
Mr George Mbira, Rafiki Microfinance Bank general manager. Photo/FILE 

Microfinance banks doubled their profits last year on the back of lower financing costs after a massive growth in deposits.

The nine registered deposit-taking microfinance institutions (DTMs) posted a net profit of Sh552 million up from Sh266 million in 2012.

“The sector was able to take more of the wallet share that the banks had from offering better savings rate, turnaround time and customer service,” said Rafiki Microfinance Bank general manager George Mbira.

The profit growth by the microfinance banks was six times faster than that of commercial banks which grew at 17 per cent.

KWFT continued its dominance in the sector, accounting for more than half of the industry profits, deposits and loans. The women-focused lender grew its profit after tax to Sh391 million from Sh173 million while its deposit rose to Sh12.9 billion.


Faulu Kenya came in second with profits of Sh165 million from Sh58 million which was accompanied by a 94.5 per cent increase in deposits to Sh8.7 billion.

The two were involved in aggressive deposit mobilisation last year by rewarding savers with attractive interest rates. The industry deposits grew by 61 per cent from Sh15.3 billion to Sh24.6 billion.

Deposit-taking microfinance institutions have recovered from the negative impact of stringent requirements by the Central Bank for them to mobilise deposits from the public.

Infrastructural investments and capital injections had seen their performance take a hit. Their improved performance has attracted new investors in the sector such as Fusion Capital and Old Mutual.

Last week, Fusion Capital, a private equity and fund management firm, announced it had invested at least Sh87 million in Remu DTM, to fund the lenders expansion plans. Old Mutual has received regulatory approval to buy a controlling stake in Faulu Kenya while Sumac DTM is in talks with strategic investors to raise Sh500 million through both debt and equity in September.

Chase Bank also pumped more capital into its subsidiary, Rafiki DTM, which saw the microfinancier’s issued capital rise to Sh500 million from Sh150 million.

This is in contrast to 2012 when efforts by church-owned SMEP DTM to raise Sh1.6 billion attracted a paltry Sh266 million.

Investor confidence in the sector has seen the public increase their savings in the institutions to Sh24.6 billion, reducing the reliance on borrowed funds which dropped by a third from Sh11 billion to Sh8.3 billion during the year.

The financing cost of the three large DTMs, KWFT, Faulu and SMEP dropped by 27 per cent to Sh1 billion from Sh1.37 billion a year earlier.

The microfinance banks converted from credit-only institutions to avoid the high costs of borrowed funds that forced them to lend at uncompetitive terms.