The Transformation of Microfinance in Kenya
This policy brief discusses various issues related to the transformation of microcredit programs into commercial banks in Kenya, with particular focus on Kenya Rural Enterprise Programme (K-Rep) that decided to transform into a microfinance bank in 1994.
K-Rep began as an intermediary NGO that provided on-lending, training, and technical assistance to local NGOs. Since transformation, K-Rep has quadrupled its gross income. The paper discusses strategic and operational issues raised by the creation of K-Rep Bank. It also discusses issues related to the regulation and supervision of microfinance banks in Kenya. Key conclusions include:
- K-Rep transformed into a microfinance bank in order to become institutionally and financially sustain able through improved governance and increased profitability;
- K-Rep faced several strategic, operational and regulatory challenges in the process of transformation;
- Transformation has helped K-Rep access additional sources of capital, particularly from client savings, thereby reducing dependence on donor funds;
- Transformation has also helped the bank expand market outreach and recycle client savings to microenterprises.
The paper predicts that transformation of microcredit programs will facilitate the provision of additional financial services to low income populations in Kenya.
