Transition Mode

By Jaclyn Berfond, KF8 Kenya

As one of the last of the KF8 class to arrive in the field – Nairobi, Kenya to be exact – these last two weeks have certainly been a time of transition for me. So you can imagine my surprise, and comfort, when I found that both the MFIs I will be working with – the Small and Micro-Enterprise Programme (SMEP) and Faulu Kenya – were going through their own transitions…

Before I jump into that, however, let me first introduce myself as a newcomer to the Kiva Fellows blog. My name is Jaclyn, and I come from New York, via Geneva, Switzerland. I have been passionate about microfinance for many years, and I am now very excited to have the opportunity to work with not one, but two microfinance institutions here in Kenya!

In the two weeks since I arrived, I have had all sorts of new experiences; eating nyama choma (roast meat) and ugali (a maize-based dish), taking my first matatu (informal taxi vans which are known for loud music and squeezing in as many people as possible), and driving over some of the roughest roads I have ever experienced to visit borrowers in rural towns, Nairobi slums and everything in between. But beyond this very personal (and exciting) transition to a new country, a new culture, I have also been able to learn a little bit about the transition of microfinance going on here in Kenya.

Around 2000, the Kenyan government began looking closely at the microfinance sector – at the importance of providing financial services to those that had been denied access in the past, at the opportunity for alleviating the poverty, at the need to support fledgling MFIs, and at the possibility that an unregulated sector could be dangerous in the wake of several scandals surrounding fraudulent organizations calling themselves MFIs. By May 2008, a new Microfinance Act had come into effect, allowing the Kenyan Central Bank to license, regulate and supervise “deposit-taking microfinance businesses,” defined as institutions that provide loans or other facilities to micro or small enterprises and low income households, and that receive money by way of deposits or interest on deposits. This law not only allowed for the formalization of the microfinance sector, but also allowed select licensed MFIs to begin offering savings products to clients. It was seen as a way to expand financial services for the “unbanked,” as well as promote a culture of saving in Kenya.

So where do SMEP and Faulu fit into this picture? SMEP is a growing MFI here in Kenya, currently reaching about 50,000 clients through 17 branches offices across the country. As with so many up-and-coming MFIs, SMEP began out of a charity – a program of the National Council of Churches of Kenya (NCCK) – and slowly grew into a full-fledged independent MFI, offering a wide variety of financial services. With only about 35 staff in the Nairobi head office, I was immediately welcomed into the SMEP family, introduced to each department and given a personal meeting with all of the management team. Beyond the warm hospitality (where I have been offered upwards of four cups of Kenyan tea a day!) the main topic of conversation in each of these meetings was “transition.” You see, SMEP was one of nine MFIs in Kenya to have applied to become a licensed Deposit-Taking Microfinance Institution. They are expecting their letter of approval any day, and I could just feel the excitement that this move was generating. In the past, MFIs in Kenya had operated largely outside the formal banking system, and SMEP felt that this had prohibited the type of organizational growth they were seeking. A license from the Central Bank would legitimize them in the eyes of their clients, and more importantly in the eyes of potential clients…allowing them to reach even more Kenyans!

In addition, SMEP rightly felt that the license would allow them to further emphasize the importance of saving. To date, SMEP could only take deposits as collateral on a loan, and this limited the organization’s ability to encourage their clients to save – seen as a crucial component of using microfinance to alleviate poverty. The new license will allow SMEP to offer savings accounts, with interest, thereby allowing SMEP and its clients to grow together. Recognizing the importance of this move, all departments at SMEP are in full transition mode in order to ensure that they will meet the requirements for the new license. I truly hope that the letter of approval comes during my time here!

All this anticipatory excitement surrounding transition did not prepare me for my experience upon entering Faulu Kenya, which on June 16^th became the first MFI in Kenya to officially receive the new Deposit-Taking Microfinance Institution license (as was noted on a large sign hanging above the reception desk in their head office)! Faulu is a leader in the Kenyan microfinance world. With over 90 branches throughout the country, serving over 225,000 clients, Faulu has grown immensely from its roots as a pilot program of Food for the Hungry International. Faulu can be seen everywhere, from the purple buildings it brands along the highway out of the city, to the staff walking around proudly in their purple and orange t-shirts. And with the new license, Faulu is prepared to really take off. On my first day, as we drove to meet with borrowers, we made a pit-stop at the site of what will hopefully become one of Faulu’s new “bank” branches. As I stood in a dusty old building, with Faulu’s newly appointed Kiva coordinator, the local branch manager, and a real estate agent discussing location, price, and the possibility of painting the building purple, I could tell this was a new era for Faulu and all were excited to be a part of it!

In general, I think this represents a really exciting time for microfinance in Kenya and I am so happy I get to witness the transition firsthand!

I also wanted to say a quick word on how I came to be working with two microfinance institutions, a bit different than the typical Kiva Fellowship. The Kiva team has been doing such a great job of bringing on new partner MFIs that both SMEP and Faulu joined within the past month! As a soon-to-be-deployed fellow, I was asked to spend some time with both organizations, getting them started posting on Kiva – and all the other fun stuff that comes with a new partnership! We had a very exciting week, with both SMEP and Faulu posting their first entrepreneurs to the Kiva website. I am certain that working with two organizations will only further enrich my Kiva Fellowship experience, which I am so excited to have the opportunity to share with you!

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Jaclyn Berfond is serving as a Kiva Fellow in Kenya, working with two new Kiva field partners – The Small and Micro-Enterprise Programme (SMEP) and Faulu Kenya. Click here to view currently fundraising loans from SMEP, and here to see currently fundraising loans from Faulu.

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