Microfinance deposit, loan accounts drop to decade low


The Central Bank of Kenya offices in Nairobi. FILE PHOTO | NMG

Microfinance banks’ number of active deposit and loan accounts has dropped to over a decade low as large banks and digital lenders raid their turf through innovative products.

The 14 Central Bank of Kenya (CBK)-regulated microfinance banks last year lost 396,800 or 37 percent of their active deposit accounts, drifting far apart from the peak of 2013 when they held 1.946 million accounts.

The fall in deposit accounts also came in the period that active loan accounts fell by 46,900 or 17.8 percent to 219,400—the lowest in over eleven years.

The mounting microfinance losses has seen core capital nearly half from Sh10.4 billion in 2016 to Sh5.49 billion at the end of last year.

CBK data shows the value of loan book shrunk by Sh2.48 billion to Sh44.18 billion but deposits increased by 12 percent to Sh49.3 billion.

Microfinance banks lost Sh1.66 billion deposits between 2015 and 2017 on the back of increased preference for large banks following the collapse of Chase, Imperial and Dubai Bank in quick succession.

Banks depend on deposits to finance loan book in order to earn interest income and therefore a fall in any of the two affects the performance. The microfinance banks’ pre-tax loss last year rose from Sh339 million to Sh2.2 billion— the worst ever and the fifth consecutive year without a profit.

Four micro financiers reported profits, while the remaining 10 registered losses, with the main contributors to the loss-making position being Kenya Women Microfinance (Sh1.5 billion) and Faulu Microfinance Bank (Sh476 million).