From left- Rafiki DTM Chairman Zaf Khan, Nairobi County Governor Dr
Evans Kidero and Rafiki DTM Chief Executive Officer David Mavindu during
the opening of Rafiki House (dubbed ‘Youth Entrepreneurship Hub’) on
November 28, 2013. This will be the institution’s head office on
Biashara Street in Nairobi. The head office, opened by the Nairobi
Governor, is a culmination of the institution’s expansion projects since
it began its operation in 2011.
Photo/SALATON NJAU
Rafiki Deposit Taking Microfinance is
rolling up its sleeves to take on commercial banks as it embarks on the
next growth frontier
This follows adoption of changes
to the Microfinance (Amendment) Bill of 2013, which proposed a raft of
amendments to the Microfinance Act of 2006 allowing Deposit Taking
Microfinance Institutions (DTMs) to widen their services and operate
like commercial banks.
Rafiki’s general manager, Mr
George Mbira said whereas DTMs are regulated as much as commercial
banks, they have been limited in the services they offer.
He said DTMs will be the biggest winners in the changes to the law.
“We
are going to be called microfinance banks and not DTMs, which has been a
hard name to sell to our customers,” he said in an interview at his
office.
“The law will also allow us to operate a current account and be part of the national payments systems,” said Mr Mbira.
AMENDMENTS FREE MICROFINANCERS
After
the amendments to the Microfinance Act 2006 now awaiting presidential
assent, DTMs will also engage in foreign exchange business that was
previously the domain of commercial banks.
Previously, DTMs had to incur additional costs by carrying out such businesses through banks.
They will also be free to contract agents to distribute their services.
Rafiki,
which is fully owned by Chase Bank, is not leaving anything to chance
and has already secured approval from the Central Bank to launch the
service.
Mr Mbira said such restrictions have made it difficult for DTMs to compete effectively with commercial banks.
He added that it has been difficult for them to attract customers and investors.
The
new law will also allow sharing of information between DTMs, commercial
banks, non-deposit taking MFIs and other financial institutions,
reducing the risk of defaults emerging from award of numerous advances
by different lenders to individuals with no record of credit history.
The new law will, however, push up DTMs’ capital requirements to a minimum of Sh200 million from the current Sh60 million.
They have four years to meet this threshold.
RAFIKI SET TO RISE
Rafiki’s capital is now at Sh500 million, which is way above the minimum threshold.
And
having been in the market for only two years compared to some of its
competitors that have been around for almost 40 years, Rafiki is now
seeking to rise to the top spot in terms of market share in a few years
from its current fourth position among DTMs.
Currently,
there are only nine microfinance institutions that are licensed by the
Central Bank to mobilise deposits from the public.
These
include Faulu, Kenya Women Finance Trust, SMEP, Remu, Rafiki, UWEZO,
Century, SUMAC and U&I Deposit Taking Microfinance institutions that
have largely been competing against one other.
Whereas
DTMs are poised to benefit immensely from the law, the government is
yet to put in place regulations for non-deposit taking microfinance
institutions that are registered under the Societies Act.
These also present some competition in the sector.
By
the end of this year, Rafiki will have used Sh300 million in expansion
activities that would see its branch network reach 18.
By 2016, Mr Mbira said the institution will invest more in creating visibility especially in the counties.
It plans to have 60 branches in 25 Counties from 10 currently by 2016.
It plans to roll out agency banking services in February next year.
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