Micro-funding, macro results
In an exclusive interview with Banker Africa, Mwangi Githaiga, Managing Director of Kenya Women Microfinance Bank (KWFT) spoke about what the future the microfinance industry looks like for Kenya
The World Bank’s most recent Kenya Economic Update in October of 2016 projected a 5.9 per cent growth in 2016, with that number rising to six per cent in 2017. One of the drivers of this growth has been the growth in financial services and the access to credit. The informal economy makes up a significant portion of employment in Kenya. In 2016 the Kenya National Bureau of Statistics reported that informal sector employment had risen by six per cent and accounted for 82.8 per cent of total employment outside of small-scale agriculture and pastoralist activities. Microfinance provides a way to help those in the informal economy move to the formal economy, as well as increase standards of living and provide new economic opportunities.
“The Kenyan population is growing and many people have started businesses due to the fact that white collar jobs have become scarce… A majority of businesses in Kenya are microenterprises which are still experiencing growth. Most of them have limited hard securities needed for one to access financing,” said Mwangi Githaiga, the Managing Director of the Kenya Women Microfinance Bank (KWFT). “This is a limiting factor to most of the businesses and therefore, microfinance institutions have come in to cater for this category.”
Githaiga noted that the focus at KWFT is on empowering women, and has specifically focused on partnering with women in the creation of their wealth. KWFT gives its women clients an opportunity to become shareholders in the bank—with the institution incorporating 50 per cent of its ownership to its women clients. This allows them to earn dividends, in addition to the access to credit and saving services that KWFT provides.
“The institution has also offered a platform for women especially those without collaterals to start businesses,” continued Githaiga. “This is a great achievement as many women can now access financing to expand their businesses, make decisions and participate in economic activities.”
One of the problems facing Kenyan banking and finance institutions, as well as in Africa in general, is education. Potential customers may not realise that access to these kinds of banking products exists, or how it can help raise their standard of living. Githaiga comments that KWFT attempts to solve this issue by investing heavily in free financial literacy training to all of its clients, with the focus being on utilising their finances to improve the living standards of women and their families.
“In addition, KWFT in partnership with Kenya Women Holding encourages women to network and share business ideas by being members of the Business Club,” said Githaiga. “This Club organises important business forums for our clients where they receive training on business skills. In the said forums they interact, share knowledge with each other as well as take advantage of opportunities to tour different countries to learn more about thriving business ventures.”
The impact technology has had on the microfinance space cannot be understated. “Investment in technology has enhanced the delivery of banking products and services more conveniently and effectively than ever before,” he added. These technologies have helped to cut costs, as well as improve efficiency. Githaiga appreciates mobile banking, ATMs and agency banking as key developments for KWFT. The institutions mobile banking system is used by over 100,000 clients which allows them to carry out withdrawals, funds transfers, buy airtime, enquire their balances, pay utilities as well as request for a mini statement.
“KWFT investing in technology has led to development of diverse and advanced products and services in many portfolios including agribusiness, clean and renewable energy products therefore presenting our clients with technologically advanced products,” added Githaiga. “Through technology, the Institution has been able to forge operational partnerships which have improved customer satisfaction and also minimised the transaction costs.”
KWFT has also made deliberate efforts to focus on rural regions, where 80 per cent of its clients live thus ensuring that they have access to financial services.
Agency banking is one way in which banking and finance institutions have attempted to reach potential customers that may not have been viable before. Githaiga commented that, “The KWFT Agency Banking Business Model helps in ensuring that KWFT has an even deeper penetration into remote, rural and peri-urban areas thereby enhancing financial inclusion and reduction of rural— urban migration which contributes to the high unemployment rates in the urban centres.”
Githaiga adds that having a strong branch network of 245 offices is an important component in solving the challenges of servicing customers in rural areas by building offices in deep rural centres.
Finally, for financial services to be desirable to rural communities, the cost needs to be in line with the capabilities of the client. “As a microfinance institution, KWFT’s key competitive advantage is the business model which aims to minimise the cost of accessing financial services by taking services to the clients door step at no extra cost. The services are offered by 3,000 well trained and motivated KWFT staff who are able to serve its clientele across the country,” said Githaiga.