7 out of 14 of Kenya’s licensed microfinance institution are under acquisition as the sector looks to provide an entry to the Kenyan market for investors, says a recent report.
Microfinance has been popular in Kenya since the ‘90s, and includes different types of businesses targeting the bottom of the pyramid. There are regulated microfinance banks, savings, and cooperative organizations (SACCOs), and credit-only institutions. The microfinance banks have deposit-taking licensing from the Central Bank of Kenya while the SACCOs offer savings and some lending.
According to the report, the micro-banks are facing significant losses exacerbated by emerging technologies including competition from digital lenders.
According to a Central Bank of Kenya Supervision report, as of December 31, 2022, microfinance banks (MFBs) reported a total pre-tax loss of KES 980 million ($7.1 million). This represents an increase from the loss of KES 877 million ($6.49 million) recorded as of December 31, 2021.
Below are recent acquisitions of micro-banks in Kenya:
- In the most recent acquisition, the Central Bank of Kenya (CBK) announced the purchase of Maisha Microfinance Limited by Cactus Cantina Investments Limited (Cactus Cantina) effective May 1, 2023.
- The Competition Authority of Kenya (CAK) also recently approved the acquisition of a 51 percent stake in SMEP Microfinance Bank by a US Christian faith-based nonprofit organisation, Hope Advancement Inc, in May 2023. Hope Advancement, an investment arm for Hope International, acquired the majority stake in the micro lender for $4.65 million ( KES 642.9 million), deepening acquisitions in Kenya’s microfinancing sector.
5 banks were under acquisition by the end of 2022.
- Key Microfinance Bank, formerly Remu, completed a deal in 2022 that saw LOLC Mauritius, a firm that is wholly owned by LOLC Holdings – a Sri Lankan firm – pay KES 237.41 million to acquire 73.29% stake.
- In 2022, Century Microfinance Bank was given a greenlight to be acquired by Branch International Ltd. Branch, a California-headquartered financial technology firm with offices in Lagos, Mumbai, and Nairobi with an 84.89% stake for KES 230 million.
- Choice MFB, a Kajiado-based firm started by Kenyans in diaspora also ceded 85% stake in 2022 to Wakanda Network Ltd, a private limited company incorporated in London.
- Uwezo, another MFB, was in May 2021 fully acquired by Salaam African Bank – a Djibouti lender.
- In February 2023, BitKE reported that Umba, an Irish and Nigerian fintech, was entering the Kenyan Market after it purchased a controlling stake in Daraja Microfinance Bank. This granted the company authorization to provide complete banking solutions in Kenya which includes:
1.) Opening and operating current accounts
2.) Opening and operating interest-bearing savings accounts
3.) Opening and operating fixed deposit accounts
4.) Offering lending and payments services
Some local players are obviously adding their business capabilities by acquiring microfinance banks. Moreover, in March 2022, the Central Bank of Kenya published fresh regulations requiring all digital lenders to apply for licenses within 6 months. So far only 22 lenders have been successful in acquiring new licenses out of 381 applications.
It is also noteworthy to mentiond that in 2015, the Central Bank of Kenya put a moratorium on licensing of new banks.
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