An Equity Bank branch in Nairobi. The bank was assigned an AA-rating, a
stable outlook, by Global Credit Rating agency in 2012. FILE
By GEOFFREY IRUNGU
Deposit-taking microfinance institutions (DTMs)
have raised their deposit levels by Sh5.4 billion to Sh15.4 billion,
helping them to cut reliance on borrowing to lend.
Data released by the banking sector regulator
shows total borrowings by the microfinanciers came down to 34 per cent
of their total funding sources in 2012, compared to 43 per cent in 2011.
On the other hand, deposits represented 48 per
cent of the DTMs’ total funding sources, in a balance sheet shift that
is expected to help borrowers get cheaper loans.
“This is an indication that customer deposits have
become an important funding source for DTMs, business and therefore the
institutions are relying less on borrowed funds,” the Central Bank of
Kenya said in its latest supervision report on banks and DTMs.
But the CBK noted that a good amount of the
deposits was in loan guarantees, meaning the deposits are held until the
loan is paid in full and can then be withdrawn.
“However, a considerable amount of the deposits
are attributable to customers’ loan guarantee funds. Loan guarantee fund
is the cash collateral representing funds that must be contributed by
borrowers as a condition for receiving a loan and may be withdrawn in
the event that all group members have repaid outstanding loans. The
challenge for the institutions is to maintain the momentum by developing
innovative strategies for deposit mobilisation,” said the CBK.
The Association of Microfinance Institutions
(AMFI) is currently engaging the CBK to allow the DTMs issue their own
cheques and operate current accounts as part of mobilising deposits.
“It has been a sort of culture change because
clients were only used to the microfinance as avenues for borrowing, not
saving. So MFIs have been doing sensitisation of their clients to save
with them,” said Patrick Lumumba, a senior programmes officer at the
AMFI.
Mr Lumumba said many DTMs have realised the need
to use ATMs to win and maintain clients especially as part of mobilising
deposits.
Central bank data shows that Kenya Women’s Finance
Trust has the largest market share of 61.5 per cent of the total
followed by Faulu, which holds 23.7 per cent and the third is SMEP with
9.4 per cent.
The DTMs market share is based on a weighted
composite index comprising assets, deposits, capital size, number of
deposit accounts and loan accounts.
In terms of assets alone, KWFT holds Sh21.3
billion against the Faulu’s Sh8.2 billion and SMEP’s Sh2.5 billion—out
of the industry total of Sh34.2 billion. This means the top three DTMs
hold 93.7 per cent of the total industry assets.
Other DTMs are Rafiki, Remu and Uwezo holding Sh1.9 billion, Sh193 million and with Sh91 million, respectively, in gross assets.
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