An overview of developments & trends of financial landscape Financial services play a catalytic role and is among

the key six drivers of Kenya economy.

The government committed to creating a vibrant and competitive sector by promoting high-level savings and financial investment needs by:

Undertaking legal and institutional reforms to make the sector more competitive.

Reform the banking sector to facilitate consolidation of small banks into larger and stronger ones.

Streamlining informal financial savings and credit cooperatives and MFIs

Credit referencing mechanisms.

Deepening financial markets by raising institutional capital through pension funds, expanding bond and equity markets as well tapping international sources of capital.

Financial service providers are diverse and key regulations are focused on inclusion.

CBK develops laws, regulations and guidelines that govern commercial banks, microfinance banks, CRBs, mortgage companies and others in the banking sector.

CBK also focuses on access thus bringing financial inclusion into the main stream.

Following the introduction of mobile money, the National Payment Systems (NPS) regulations were passed into law in 2014, hence providing the first formal legal framework for mobile money services.

There are 44 Commercial banks, 14 remittance providers,86 Forex Bureaus,3 CRBs,12 MFBs, 45 Credit-only MFIs,5 Mobile money operators, 53 Insurers and 199 Saccos

Financial sector regulation in Kenya Safeguarding financial system stability is an integral

part of preserving monetary and microeconomic stability.

CBK regulates and supervises all financial institutions, payments and settlement systems.

Regulation and supervision of MFIs in Kenya. There are two categories: MFBs and Credit-only MFIs.

MFBs are regulated by CBK. Microfinance Act, 2006 and the Microfinance (Deposit Taking Institutions) Regulations 2008 issued thereunder sets out the legal, regulatory and supervisory framework for the microfinance industry in Kenya.

The principal object of the Microfinance Act is to regulate the establishment, business and operations of microfinance institutions in Kenya through licensing and supervision.

The Act enables Microfinance banks to mobilise savings from the general public, thus promoting competition, efficiency and access and play a pivotal role in deepening financial markets and enhancing access to financial services and products by majority of the Kenyans.

Credit-only Regulations

Credit only MFI covers the largest microfinance providers in Kenya. The category remains unregulated though the Microfinance Act 2006 mandates the minister for finance to issue regulations for this category.

AMFIK has drafted the regulations and discussions are on going. Once enacted the regulations intends to promote a strong and viable credit only microfinance industry in Kenya in order to enhance economic growth by contributing to poverty reduction in both rural and urban areas in Kenya.

Promote growth of the financial sector in Kenya by ensuring that credit only microfinance business is conducted in a safe and sound manner.

Establish clear and transparent criteria for the submission and evaluation of applications for engaging in Credit micro finance business in Kenya.

Oversee the safety and health of the credit only microfinance sector in Kenya by initiatives such as adoption of common standards of governance.

Facilitate participation in the credit only microfinance sector by institutions that are efficiently managed and properly governed.

While we await the regulation AMFIK has developed a code of conduct and ethics which guides the members on best practices. All members subscribe to the code.

Transparency: The microfinance Act as well as the proposed credit only regulations

requires that all MFIs disclose and present the financial statements and books of account, pricing and any other fee that a client needs to know about.

Broadly the Consumer Protection Act 2012 has provision for the same. It further provides for dispute resolutions and mechanism. This is also provided for in the Microfinance Act as well as proposed credit-only regulations.

• Over-indebtedness: Under the Credit Reference Bureau Act 2013 all financial institutions including MFBs are required to share both positive and negative client information through licensed credit bureaus. The data is submitted on monthly basis to CRBs.

• For credit only MFIs institutions are sharing information on full file under the Credit Information Sharing initiative. To this end 20 institutions have fully subscribed.

Interest Rates Due to high cost of capital and their sources, there is no

specific interest rate cap that MFIs are required to observe and therefore interest rates vary from institution to the other.

It is further determined by other factors such as competition as well as demand and supply.

Financial Inclusion. Monetary policy cannot work effectively when large

proportion of the population is excluded.

Financial inclusion for the poor will solve poverty problem sustainably hence the need to build strong institutions and foster financial systems sustainability.

Kenya has embraced financial innovations and these has enhance d, efficiency, coverage and reduce transaction costs.(electronic money transfers).

Conclusion. Regulation and supervision of the microfinance sector

is expected to lead to quality growth, broaden funding base, outreach, innovation and quality products, competition and initiate the process of integrating the unregulated institutions into formal financial systems.