20142014 SECTOR SECTOR REPORT REPORT ONON THE THE MICROFINANCE MICROFINANCE SECTOR SECTOR ININ KENYAKENYA THIRD EDITION || OCTOBER 2014 THIRD EDITION || OCTOBER 2014 Experience and innovation that knows no boundaries Through advanced business intelligence solutions fo r consumers and commercial businesses, TransUnion (previously Credit Reference Bureau Africa), can help you break through boundaries and move ahead. With i nnovative data solutions, analytics and sophisticated decisioning technology, we help you build more efective strategies, improve customer relationships and grow your bottom line. We’re providing customised solutions that allow loc al microfinance organisations to benefit from lower operational costs, improved tu rnaround time and a more streamlined document management process. We’re prou d to continue building stronger economies, both here and around the world. For more information, please contact Kanini Mativo: + 254 20 202 1299 or +254 722 20 5072 | e-mail [email protected] Visit www.transunionafrica.com © 2014 TransUnion. All Rights Reserved. Association of Microfinance Institutions-Kenya The Association of Microfinance Institutions-Kenya (AMFI) is a member-based institution, registered in 1999 under the Societies Act by the leading MFIs in Kenya, with the aim to build the capacity of the Kenyan microfinance industry. AMFI-K is membership ranges from large, mature banks to relatively smaller MFIs, Deposit taking Microfinance Institutions, Sacco’s, developmental institutions, wholesalers and retailers as well as micro-insurance providers. Vision: To be the network of choice that promotes a conducive environment for microfinance providers in Kenya” The Mission To champion the aspirations of microfinance institutions through advocacy, capacity building, linkages and research” Strategic Objectives The strategic objectives emerge from a review of AMFI’s current business environment and discussions with members, and are as follows: ° To enhance collective action by MFIs and other stakeholders for a conducive policy and regulatory environment for microfinance in Kenya; ° To strengthen the capacity of MFIs in delivering appropriate and sustainable microfinance services to low income people, through organization and coordination of workshops and training sessions and effective systems for information collection, analysis and dissemination (incl. data bases, print and electronic media); ° To enhance collaboration, linkages and partnerships between AMFI, its members and other development actors and stakeholders, both locally and internationally, and set standards and increase professionalism in the industry; ° To strengthen the internal capacity and funding base of AMFI and its Secretariat in providing value-adding services to its members and the industry at large. ° To realize the five key objectives, AMFI-K has developed its activities in the following main areas: Strategic pillars These key result areas are: 1. Policy Advocacy and Lobbying 2. Capacity Building 3. Networking and Linkages 4. Research and Knowledge Management AMFI-K is a key actor in supporting a healthy expansion of the vibrant microfinance industry in Kenya, and the network is committed to continue to strengthen its role as an advocacy, coordination, and capacity building body for the microfinance industry Contacts: Chief Executive Officer Association of Microfinance Institutions- Kenya Methodist Ministries Centre; First Floor. Oloitoktok Road Lavington. PO BOX 10701-00100, Nairobi Telephone: 020 2106090 / 2; 020 386 2378; 020 386 4053; Cell 0737 409 059. Email: [email protected]. Website: www.amfikenya.com BOARD OF DIRECTORS Nat Robinson-Treasurer AMFI Jeff Njagi Chairman AMFI and CEO Adet Kachi CEO YEHU Mwangi Githaiga Managing MESPT Director of Kenya Women Juhudi Kilimo Company Limited Lydiah Kibaara General Manager Anne Gathuku GM Greenland Charles Njoroge-CEO Lydia Njoroge CEO Fedha Letshogo Opportunity Kenya AMFI SECRETARIAT Ben Nkungi Chief Executive Juddie Mmosi Social Shadrack Mithika Finance Alex Gabriel Data Perfomance Manager AMFI Manager AMFI Analyst AMFI Nancy Chotero PA and Caroline Karanja Programmes Admin Manager Manager Admin ENHANCING SUSTAINABLE FINANCIAL INCLUSION THROUGH FULL-FILE CREDIT INFORMATION SHARING Kenya’s financial services sector has over the last couple of years made tremendous strides – especially in terms of innovation- earning an indelible mark globally. The MFI sector has been part of this ‘financial revolution’, more so in the provision of financial services to the unbanked and under-banked populations. Among other the key initiatives aimed at strengthening the growth and stability of the MFI sector is the introduction of the Credit Information Sharing mechanism in orDer to address the problem of information asymmetry between lenders and borrowers. Preparations to roll-out CIS among the MFI sector commenced in November 2011 as a joint effort between AMFI-K and the Kenya Credit Information Sharing Initiative (KCISI), which was set up to champion the introduction of CIS in Kenya. In 2013, legal reforms were undertaken to facilitate full-file data sharing by commercial banks and microfinance banks. The Credit Reference Bureau Regulations 2013 were published in January 2014. This opened a new chapter in the CIS mechanism by among others, allowing both commercial banks and microfinance banks to share information on their full loan books, away from traditional approach of sharing default data only amongst commercial banks. Other changes included lower data retention rules, prelisting notices, and a host of other consumer protection rules. Through a circular released by the CBK, the Regulations became effective from February 2014 and since then, commercial and microfinance banks have successfully shared full-file information for eight months. In order to prepare for full-file data sharing, all commercial and microfinance banks participated in test runs for five months between April and August 2013. The Data Specifications Template was also revised to improve and standardize information extraction and submission by both banks and microfinance banks. Notably, all the microfinance banks participated consistently and had higher data acceptance rates as compared to the banks throughout the pilot exercise. Moreover, microfinance institutions participated in the 2nd Regional Conference on CIS Held on 24th -25th September with 328 delegates representing central banks, credit providers, credit reference bureaus (CRBs) and other credit professionals from over 15 countries in Africa. The 2013 conference theme was “Credit Information Sharing: Unlocking Access to Affordable Credit.” In addition to promoting public awareness about CIS, the conference reviewed progress made in implementing CIS in different countries, with particular focus on policy, regulatory and technological aspects that influence the evolution of CIS across Africa and around the world. It was a highly successful two days of learning, interaction and networking despite the fact that the conference was held only a few days after Nairobi suffered a major terrorist attack. At this Conference, the Association of Kenya Credit Providers (AKCP), registered in April 2013, was launcheD by the Governor of the Central Bank. AKCP is a voluntary non-profit entity that aims to promote the highest standards of CIS in Kenya. It brings together all credit providers in Kenya interested in sharing credit information on the principle of reciprocity and who subscribe to a Code of Conduct for timely and accurate transfer of credit information to credit bureaus, fair treatment in the granting of credit and accurate reflection of debt exposure and payment behaviour at any point in time. Service Level Agreements with credit bureaus will govern all aspects of data submission and data quality, to be monitored by AKCP on behalf of its members. The objectives to be pursued through the Association include: 1. Expansion of the spectrum of credit provider participation 2. Effective self-regulation 3. Developing Alternative Dispute Resolution (ADR) for effective consumer complaints resolution within institutions and mediating on escalated disputes 4. Undertake capacity building and general sensitization on CIS 5. Research and knowledge generation on best practices, etc 6. Lobbying for CIS reforms in policy and legislation 7. Fund-raising for CIS projects Key activities for members going forwarD include: ñ Industry-wide capacity building trainings for all MFIs and other members, in partnership with the CRBs ñ Engagement with the Central Bank of Kenya and MFI sector consultations to review loan classification and other challenges facing MFI participation in CIS ñ Work with the credit-only MFIs preparing to join the mechanism, some of which have already piloted and are currently waiting to go live ñ Go-live for Tier 1 MFIs ñ Operationalization of AKCP’s five-year strategic plan and the ADR Center ñ Preparations to bring the Sacco industry into the CIS mechanism. In conclusion, as the mechanism expands to factor in non-bank information, it will also contribute to financial inclusion, particularly for unbanked people who have built a credit history using alternative data sources. By the end of 2014, it is envisaged that more MFIs will join the CIS mechanism. This will in turn contribute greatly to AMFI’s mandate of promoting access to appropriate and sustainable financial services for the low-income people in Kenya. Mr. Jared Getenga, Interim CEO, Association of Kenya Credit Providers