Kenya’s 14 microfinance banks’ net loss jumped 77.5 percent to Sh1.3 billion as at December last year compared to a similar period the previous year mainly on reduced income.
A new report by the Central Bank of Kenya (CBK) shows that the Sh569 million rise in loss after tax from Sh734 million in the prior year, came as customer deposits and income dropped while expenses increased.
The drop in income was as a result of a fall in customer deposits by eight percent to Sh46 billion in December 31,2022 from Sh50.4 billion the previous year.
“The decline in deposits was due to transfer of funds to alternative attractive investments due to the overall increase in interest rates,” CBK’s Bank Supervision Annual Report 2022 stated.
Total income marginally dropped 1.6 percent to Sh13.18 billion while expenses grew 1.3 percent to Sh13.1 billion, compounding woes for micro financiers.
During the period under review, four institutions reported profits, while the remaining 10 registered losses.
The main contributors to the loss position are Maisha Microfinance Bank Limited and Rafiki Microfinance Bank Limited, which reported net losses of Sh498 million and Sh314 million, respectively.
Faulu Microfinance Bank closed three branches while LOLC microfinance bank and Salaam microfinance bank opened one branch apiece during the period.
The sector closed four marketing offices during the period under review, bringing down the total marketing offices from 63 in 2021 to 59 in 2022.
Further, the sector engaged 140 new specific third-party agents and closed 229 agents, leading to a decline of agents from 1,010 in December 2021 to 921 in December 2022.
The industry has faced stiff competition from mobile lenders amid increasing uptake of financial services through mobile, a shift also pushing commercial banks to adopt digital solutions to widen their reach.
Microfinance bank’s net loans decreased by two percent from Sh40.1 billion in 2021 to Sh39.3 billion in 2022 on account of increased competition.
