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Microfinance overview

microfinance overview

Microfinance in the EAC Region

East African Community PortalCustoms UnionCommon MarketMonetary UnionPolitical FederationPDFPrintE-mail

Microfinance Institutions (MFIs) and Savings and Credit Cooperatives (SACCOs) also known as Semi-formal financial institutions constitute one of the financial sub-sector providing the financial services within the EAC region.  MFIs & SACCOs are among the financial institutions which significantly contribute to financial inclusion across the EAC countries.

The latest financial access data across the EAC countries show that 8.8 % of Burundians in 2012, 34 % of Kenyans in 2013, 19.2 % of Rwandans in 2012, 43.5 % of Tanzanians in 2013, and 34 % of Ugandans in 2013 have access through MFIs & SACCOs.

Microfinance institutions and SACCOs have played and will continue to play a pioneering role demonstrating that there is a market at the lower-end of the market. Indeed, the mainstream banks had previously seen the lower-end of the market as “un-bankable” until emergence and growth of microfinance institutions. The explosive growth of Microfinance banks such as Equity Bank in Kenya and Centenary Bank in Uganda has not escaped the attention of mainstream banks that are now increasing their expansion at the lower end of the market previously taken as unattractive.

In all EAC countries, Microfinance institutions established the National Associations: Tanzania Association of Microfinance Institutions (TAMFI), Association of Microfinance Institutions of Uganda (AMFIU), Association of Microfinance Institutions of Kenya (AMFI-K) and

Burundi Microfinance Institutions Network (RIM). The five national associations have established in June 2012 the East African Microfinance Network (EAMFINET) with the overall objective to foster the microfinance industry integration across the region through the establishment of a basis for technical cooperation on specific programs and projects as the members may agree from time to time.

In order to foster the industry integration through technical cooperation, the specific objectives of the EAMFINET include, among others:-

(i)    Develop a common industry development strategy with the objective of mobilizing domestic, regional and international finance for the development of the microfinance industry,

(ii)    Harmonize and implement an appropriate regulatory structures to facilitate broad-based participation in the microfinance businesses,

(iii)    Harmonize microfinance policies and laws on cross border business, taxation, accounting and auditing, financial and reporting standards,

(iv)    Develop of a framework for cross border dispute resolution,

(v)    Develop of national and regional information data banks to support microfinance industry,

(vi)    Initiate measures to prevent money-laundering activities, etc.

The need of harmonization of legal and regulatory frameworks for Microfinance Sector in the EAC is a paramount priority of the Financial Sector Development and Regionalization Project under its component (ii) of Harmonization of financial laws and regulations against the common standards. Standardizing laws, regulations and practices will facilitate the expansion of the microfinance activities under a fair competition in integrated financial markets while promoting the cross border business, reducing the costs of doing business and increasing access to financial services and products.

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