Microlender eyes long-term deposits with higher rate

Microlender Maisha Microfinance has launched a savings product offering an 11.25 percent interest rate in a bid to build up its stock of longer-term deposits.

The mobile based product dubbed M-Fanisi is a fixed deposit account that is also targeting low income earners by allowing savers to set aside amounts from as little as Sh500.

Lenders in the market offer fixed deposit rates averaging 6.4 percent, Central Bank of Kenya (CBK) data shows.

Lenders have been competing for a slice of the bigger pile of cash that Kenyans are holding on to in an uncertain economic environment that has made many wary of making investments.

CBK data shows fixed deposit accounts gained Sh64.8 billion in the quarter ending June, translating to an increase of about Sh720 million every day in the period.

“The best way to safeguard one’s investment from unprecedented and volatile market movement is by investing in a fixed deposit account,” said Maisha Microfinance chief executive officer Ireneus Gichana.

Maisha Microfinance grew its market share in the microfinance banking sector from 3.4 percent in 2019 to 4.8 percent last year, with its customer deposits rising from Sh446 million in 2019 to Sh781 million in 2020.

The fixed deposit accounts accrue higher interest based on the duration agreed upon between the individual and the bank, but also incorporate a penalty for those looking to break their accounts before the pre-agreed period.

Kenyan investors have had limited options for investments following the slowdown of economic growth on adverse effects of the coronavirus pandemic.

Demand at home and in export markets had slumped for the better part of last year as consumers stayed indoors to avoid catching the coronavirus and because of government containment measures, forcing firms and the rich to freeze investments plans.