Microfinance rules to suppress profit greed

The Association of Microfinance Industry (AMFI) has adopted rules designed to govern and promote accountability among its members.

AMFI Chairperson, Dr. Jennifer Riara, said rising concern worldwide on the effectiveness of microfinance to fight poverty had prompted the signing of the new regulation that was witnessed by 43 of its members.

“There has been growing concern about our activities, and the thin line between poverty eradication and profit making continues to confuse members of the public,” said Riara at a news briefing.

“What we have signed would help streamline our operation and instil a sense of professionalism in meeting the objective of reaching out to the 80 per cent of the un-banked members of the society,” she said

Dr. Riara said signing of the commitment note would help divert the growing perception of mission shift in the industry.

World over, majority of the microfinance institutions are seen to be moving from eradicating poverty to making profits from the poor.

Kenya, she reckons, has not remained untouched by this emerging concern and the industry is finding itself increasingly under scrutiny from partners, the Government and the society in general.

She said the pact was a clear indication that microfinance in Kenya does not experience ‘mission shift’ in its operations and is focused on taking financial services to the marginalised communities.

The note signed includes defining criteria and the process of bringing in new members, code of conduct among several key governance areas.

In 2008, the govern-ment legitimised microfinance by enacting the Microfinance Act 2006. Presently, only two microfinance institutions – Faulu Kenya and the KWFT Microfinance – are regulated under the Act out of hundreds of institutions operating in the country.