Microfinance lenders seek law review on capital requirements
Business
By
Graham Kajilwa
| May 02, 2026
Microfinance institutions are seeking a revision of the laws and regulations that govern their business to ease the cash reserves and deposit requirements for licensing.
The lenders argue that the stringent requirements imposed on them by the Microfinance Act and reporting standards make the business environment tougher for them.
As such, the Association of Microfinance Institutions of Kenya (AMFI-K) says it has been difficult for new microfinance banks to set up locally.
This leaves the market open to foreign players who have the financial muscle to meet the 20 per cent cash or near-cash liquidity ratio and the four per cent deposit required by the Central Bank of Kenya (CBK).
Simon Kamore, AMFI-K vice chair, says that when the industry was lobbying for the Microfinance Act in 2006, some items were included, so the law is not as it was originally drafted.
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Previously, the intention was for microfinance institutions to be known as deposit-taking microfinance institutions. However, more stipulations were added when the name changed to microfinance banks, putting them under the purview of the CBK.
“There are issues there. I guess it remains for us to continue lobbying for those regulations to be relaxed so that they are different from those for commercial banks,” he said.
“For now, when you get a microfinance licence, it is difficult to break even in the short run.”
Kamore noted that new microfinance banks have not emerged since these regulations came into effect.
“The 14 have remained there for more than 10 years. We are being overregulated,” he said.
He pointed out the discrepancies in reporting, as microfinance institutions are required to classify a loan as non-performing after 30 days, while commercial banks have up to 90 days.