Capital FM (Nairobi)

Kenya: Sh1.6 Billion Share Offer to Boost Micro-Finance Firm

Small and Micro Enterprise Programme Deposit-Taking Microfinance Limited (SMEP DTM) is hoping to use proceeds of the ongoing Sh1.6 billion share offer for ICT investments and infrastructure upgrades.

SMEP DTM Chief Executive Officer Phyllis Mbungu said the money raised will be used to raise the working capital in order to boost its lending capacity in the market and promote its deposit taking products as the company gears towards transforming into a fully licensed commercial bank in Kenya.

"The licensing of SMEP by the Central Bank of Kenya means the institution has had to ensure that it meets its growing market demands by expanding its business units, upgrading its information technology hub and enhancing the company's asset base," she said.

"Another reason we're offering our shares is because there's a need to dilute the shareholding of the National Council of Churches of Kenya (NCCK) as the only beneficial shareholder, in line with the requirements of the Microfinance Act," she explained.

The share offer began on October 16 and is set to conclude on November 30. Mbungu explained that NCCK was offloading part shareholding to comply with the Microfinance Act, which requires no shareholder to own more than 25 percent of their total shares.

The Microfinance Act 2006 sets out the legal, regulatory and supervisory framework for the microfinance industry in Kenya and it became operational with effect from May 2, 2008.

The principal object of the Microfinance Act is to regulate the establishment, business and operations of microfinance institutions in Kenya through licensing and supervision and it enables Deposit Taking Microfinance Institutions licensed by the Central Bank of Kenya to mobilise savings from the general public, thus promoting competition, efficiency and access.

Finance Minister Robinson Githae noted that the initiative will be implemented due to the need for enhanced access to financial services to Kenya's bankable, who remain totally outside the scope of these services because of high costs.

"The financial sector transformations and reforms being undertaken are based on the three pillars of stability, efficiency and access and they are translating into increased financial inclusion, which consequently spreads financial services to the poor," he said.

"Financial inclusion actors globally believe that poverty can be reduced sustainably and consistently with access to finance, because it allows the poor to develop a savings base and enlarge their asset base, which helps them survive economic shocks and escape poverty," he explained.

SMEP DTM boasts over 150,000 clients with an outstanding loan balance of approximately Sh1.5 billion and Githae acknowledged that the organisation has come a long way since its inception in 1975 as a small project of the NCCK under the Small Scale Business Enterprise.

He explained that the project was initially aimed at providing the poor in a number of slum areas with food and later small business grants, before it was modified, developed and evolved into a micro credit company that was registered as a company in 1999.

"The transformation into a deposit taking microfinance institution has enabled SMEP DTM to offer savings products to its clients in addition to the loans products, while growing its resource base due to the build up of deposits base," he said.

"On its part, the government will continue to deepen structural reforms aimed at promoting access, efficiency and stability in the financial sector and we're also fast tracking implementation of financial sector reforms at the regional level to expand our financial market, while promoting financial integration and stability," he added.

He pointed out that over the past few years, the Ministry of Finance, through the Central Bank, has embraced policy reforms to build an adequate financial infrastructure to support the development and deepening of the sector.

"We expect SMEP DTM and other reputable financial institutions to take full advantage in developing deeper financial investments in the quest to meet the ever growing needs of our people to leverage on additional equity capital to offer financial services," he said.

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