One of Kenya’s oldest microfinance institutions, which draws its membership from church associations, has acquired a licence to take deposits, making it the fourth micro-lender to come under the banking sector regulator.
Small and Micro Enterprise Programme (SMEP), which was founded by the National Council of Churches of Kenya (NCCK), joins Faulu, Kenya Women Finance Trust and Uwezo Ltd among micro-lenders licensed by the Central Bank of Kenya to take deposits from the public.
SMEP was formed in 1975 as a relief arm of NCCK and currently has 87,500 clients and an outstanding loan portfolio of approximately Sh1.1 billion.
Faulu was the first small lender to be licensed in May last year, in a move that sought to open up more funding avenues for the micro-financiers who were previously prohibited from taking any deposits from the public.
Micro-financiers that already have CBK’s licence, however, say tapping deposits from the public has not been easy, and they mostly have to rely on loans from large development finance institutions.
“Deposit mobilisation takes time as we have to educate our existing clients and market ourselves. Institutions that have transformed before are still borrowing,” said Phyllis Mbungu, chief executive of SMEP.
The institution received Sh100 million from development financier Oikocredit last week and Sh300 million from Standard Chartered Bank last month, amounts which it intends to grow its loan portfolio.
Ms Mbungu expects SMEP’s branch network of five outlets and NCCK’s country-wide membership to help it mobilize resources.
“We have an advantage over those who have gone before us as NCCK has goodwill among the churches through which we intend to mobilise deposits. We already have five branches ready for deposit taking,” she said.
The five branches are Mombasa, Tumaini house Nairobi, Nakuru, Mwea and Maua.
Though it boasts of being among the oldest microfinance institutions in the country, SMEP delayed in obtaining the deposit taking licence as it had to dilute the shareholding of NCCK to below 25 per cent as required by the Micro Finance Act.
CBK’s target is to spread financial inclusion in Kenya through licensing of micro-lenders to take deposits.
A recent World Bank survey said 34 per cent of Kenyans are excluded from access to financial services, a five percentage point gain from the rate of exclusion reported in a sector survey done three years ago.
“Deposit taking micro financiers (DTMs) will address entry barriers in areas that have not been well served by mainstream financial institutions. The CBK expects that DTMs will offer demand driven, affordable and convenient products to their market niches,” said Central Bank in a statement.