Every sector in the business of the banking and finance sector has some challenges they face in day to day operations. As such, organizations keep on hiring better task force to enhance their operations and stabilize their presence. There are several factors affecting the growth of Microfinance Institutions in Kenya. In this article, we shall list the main challenges facing microfinance institutions in Kenya today.
Regulation of Microfinance Institutions in Kenya
First, the regulation of microfinance institutions in Kenya is under the government Micro Finance Act that was passed in 2006. Today, there are multiple microfinance institutions in Kenya that offer credible products and services. For example, high microfinance interest rates in Kenya, easy and quick loans, and many more. In our previous article, we listed the best microfinance institutions in Kenya in 2020. Similarly, we also covered the number of commercial banks in Kenya in 2020.
There are numerous internal and external challenges facing microfinance institutions in Kenya today. Most microfinance institutions encountered challenges in funding, repayment default, as well as government regulations. In summary, below is a highlight of some of the challenges faced by microfinance institutions in Kenya in 2020.
Challenges Facing Microfinance Institutions In Kenya Today
- Political Challenges
Politics is one of the main factors that contribute to the challenges facing microfinance institutions in Kenya today. For example, post-election violence effects led to looting of properties, economic stagnation, loss of jobs, and many more.
- Lack of Infrastructure
The 2nd biggest challenge facing microfinance institutions in Kenya is the lack of sufficient infrastructure. This includes things like sufficient staff, ICT equipment, and advanced technology.
- Customer complains
Most customers have in recent years mentioned dissatisfaction from microfinance institutions, especially on their requirements. For example, some customers dislike weekly meetings, trained by young people than them, and so on. Another thing is that most customers dislike being witnesses or next of kin for people who are taking loans.
- Fraud of Finances
Financial fraud is the 4 in the list of challenges facing microfinance institutions in Kenya. Most accountants and managers reported misusing the institution’s funds. For example, using clients’ money in their personal issues and gain leading to the bankruptcy of the microfinance institutions in Kenya.
- Repayment default
Finally, repayment default is also one of the main challenges faced by microfinance institutions in Kenya currently. This is because most customers request for loans but end up failing to repay the debts.