Branchless Banking to Enhance Microfinance Operations
Thursday, January 28, 2010
Players in the microfinance industry are looking forward to the establishment of branchless banking so that they can reach more people countrywide without the cost of erecting brick and mortar outlets.
The planned changes to the legislation governing the setting up of financial institution branches ,which will allow for the establishment of branchless banking or agency banking, is expected to provide microfinance institutions with a leverage to extend their reach at minimal cost.
“The establishment of branchless banking will allow us to reach more people, especially in the rural areas where the majority are unbanked ,” said Lydiah Koros, the chairperson of the Association of Microfinance Institutions (AMFI).
Ms Koros said agency banking will transform the industry by offering financial services through easy -and simple- to -use devices such as point of sale (POS) terminals and at the customers doorsteps .
Current rules on the establishment of branches for commercial banks and MFIs require brick and mortar, steel and glass structures before services can be rendered.
This pushes up the costs of operation as financial institutions are forced to put up structures in order to roll out services.
“The new regulation on agency banking will boost MFIs as we don’t have the wherewithal resources to put up branches across the country to match our rapid customer growth base”, said Ms Koros who is also the Chief Executive Officer of Faulu Microfinance. This development comes as Kenya prepares to host the Africa-Middle East Micro-credit Summit in April.
The meeting, which will be attended by over 2,000 delegates from over 40 countries from Africa and the Middle East, is expected to show case Kenya’s best practice and innovation in offering of microfinance services to the poor.
Its the first to be held in Africa and has received sponsorship of Sh9 million from Craft Silicon, a local leading software solutions vendor.