Source: Daily Nation.

Original news wire here.

Kenya Women Finance Trust has become the first microfinance to be allowed by Central Bank to start accepting customer deposits under the Microfinance Act 2006.

Before the Act came into force in May 2008, microfinance institutions operating in Kenya other than commercial banks, had been prohibited by law from taking deposits from the general public.

These institutions have been funding their loan books largely from donor funds and loans from commercial institutions.

Be regulated
The Act now provides them with an opportunity to take deposits, to be regulated and to provide a wider range of financial products including savings and deposits, lending and money transfer.

In a statement on Thursday, Kenya Women Finance Trust said being awarded the deposit-taking licence was a “major milestone.” “KWFT finally has the approval to facilitate provision of financial services long awaited by the women of this country,” said the institution.

The microfinance has 144 field offices countrywide. It said it would soon announce the first deposit taking branch and “consequent roll out where our esteemed clients can bank.” The Act provides for protection of customers’ deposits to a maximum of USD 1,300 (Sh100,000) by the Deposit Protection Fund as is the case with commercial banks.

This is meant to promote depositors’ confidence in deposit-taking microfinance institutions. Among other requirements, deposit-taking licensing regulations require institutions granted the nod to operate countrywide within Kenya and to maintain at all times a minimum core capital of at least USD 804 thousand (Sh60 million). Smaller microfinance institutions operating within a district or a town will be required to retain capital of at least USD 268 thousand (Sh20 million).

Non-deposit taking microfinance institutions are not allowed to accept deposits from the public or to intermediate clients’ funds that they may retain as collateral according to the law. They are instead required to open joint accounts with clients at institutions licensed to take deposits and hold such funds in trust. They are also not allowed to act as intermediaries or borrow against such funds.

All licensed and operating deposit-taking microfinance institutions are required to prominently display at their place of business the words “deposit-taking microfinance” and licence.