Microfinance Banks cut pre-tax losses to Sh877m
Microfinance banks’ performance improved in the year ended December 31, 2021 as the sector more than halved its losses, with Faulu, Rafiki and Maisha remaining the main loss-making centres, Central Bank of Kenya (CBK) data shows.
The sector reported a combined loss before tax of Sh877 million as at December 31, 2021, compared to a loss of Sh2.2 billion as at December 31, 2020. “Four institutions reported profits, while the remaining 10 institutions registered losses,” CBK said in the latest banking supervision report. The main contributors to the loss position are Faulu Microfinance Bank Ltd, Maisha Microfinance Bank Ltd and Rafiki Microfinance Bank Ltd which reported losses before tax of Sh522 million, Sh178 million and Sh153 million respectively.
The sector’s capital levels increased in 2021, owing to capital injection by shareholders of Faulu, Rafiki and Uwezo who contributed Sh1.1 billion, Sh500 million and Sh300 million respectively.
As a result, the ratio of core capital to total risk weighted assets increased from 10 per cent in December 2020 to 13 per cent in December 2021, while the ratio of total capital to total risk weighted assets increased from 13 to 16 per cent.
“While the sectors’ capital ratios were within the minimum requirement of 10 per cent and 12 per cent respectively, five institutions were non-compliant,” the report noted.
Liquidity ratio
The sector’s liquidity ratio stood at 78 per cent as at December 31, 2021. One institution was non-compliant with the statutory minimum liquidity ratio of 20 per cent.
Microfinance sector’s branch network declined in the year under review, with the number of branches standing at 115. Faulu MFB closed six branches and opened one branch during the period.
The sector established two marketing offices and closed 28 others during the period under review, bringing down the total marketing offices from 89 in 2020 to 63 in 2021.
Similarly, the sector engaged 288 new specific third-party agents and closed 553 agents, leading to a decline of agents from 1,275 in December 2020 to 1,010 in December 2021.
“The improvement in the performance of the sector is attributed to a decline in total expenses by 7 per cent from Sh14 billion in 2020 to Sh12.9 billion in 2021,” CBK noted.
–John Otini
