Microfinance in Kenya: Growth and Regulatory Framework

Abstract

Although micro finance has played a significant role in providing a wide range of financial products and services, many microfinance institutions (MFIs) in Kenya still face major challenges with efficiently and effectively delivering microfinance services in the country. As the demand for these services continues to grow, the sector has been faced by many constraints, the major one being lack of a specific regulatory framework in respect of microfinance institutions. These and other factors have jeopardized MFIs sustainability and have compromised the delivery of microfinance services in the country. With the enactment of the microfinance legislation in June, 2008, much change is expected to the industry especially in respect of transparency and accountability, adoption of acceptable performance standards and promotion of professionalism to enhance service delivery. The aim of this research work is to contribute to the understanding of the significance of the microfinance institutions generally and more particularly in Kenya. It also aims at analysing the Kenyan regulatory framework and assessing its adequacy. The research work is therefore intended to inform the design of a more concrete regulatory policy in respect of microfinance institutions in Kenya.