Kenya’s Microfinance Banks (MFBs) sank deeper into loss territory making a combined KSh2.4 billion loss before tax as at December 31, 2023, compared to a loss of KSh980 million as at December 31, 2022.
- According to Central Bank of Kenya, seven institutions reported profits, while the remaining seven institutions registered losses.
- The main contributors to the loss position are Kenya Women Microfinance Bank Limited, Faulu Microfinance Bank Limited, and Rafiki Microfinance Bank Limited, which reported losses before tax of KSh938 million, KSh719 million, and KSh434 million, respectively.
- The decline in the performance of the sector is attributed to an increase in expenses by 6 percent from KSh13.1 billion in 2022 to KSh13.9 billion in 2023, and a decline in revenue by 3 per cent from KSh 13.2 million in 2022 to KSh12.8 million in 2023.
The key expense drivers were impairment losses on loans and staff costs that increased by 957 per cent and 18 percent respectively from KSh114 million and KSh3.7 billion in 2022 to KSh1.2 billion and KSh4.3 billion respectively in 2023, owing to loan write offs and an increase in staff costs.
On the other hand, fees and commissions from the loan portfolio and non-operating income recorded the most significant decline from KSh1.1 billion and KSh509.2 million in 2022 to KSh919.3 million and KSh19.8 million respectively in 2023.
Fee income declined due to competition from commercial banks and digital lenders that resulted in a reduction in advances by 4.7 percent in 2023. In addition, non-operating income declined as one MFB disposed of its property holding, thus reducing rental income.
Further, the sector reported a reduction in return on equity by 24 per cent to stand at negative 35 per cent, while the return on assets declined by 3 per cent to negative 4 per cent.
The ratios of core and total capital to total risk weighted assets declined by 3 per cent and 4 per cent to 10 per cent and 12 per cent, respectively, due to the loss of KSh2.4 billion incurred by the sector in 2023.
While the sectors’ capital ratios were marginally within the minimum requirement of 10 per cent and 12 per cent respectively, 3 institutions were non-compliant.
The sector’s liquidity stood at 63 per cent as at December 31, 2023. One institution was non-compliant with the statutory minimum liquidity ratio of 20 per cent.
The microfinance sector’s branch network increased by two in the year under review, bringing the total number of branches to 115. LOLC MFB, Salaam MFB and Caritas MFB opened one branch each in the period, while Branch MFB closed one branch.
The number of marketing offices reduced to 50 in 2023 from 57 in 2022 as the sector opened 10 and closed 3 marketing offices.
Further, the agency network declined to 677 in 2023 from 921 in 2022 as the sector engaged 35 new specific third-party agents and closed 263 agents.
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