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Banking for Smallholders and Options
for Financial Transfers
Presented During the first Green Water
Credit Stakeholders workshop, Kari
11th -12th October , 2006
5/23/2017
By Moses Banda
What Is Microfinance?
Microfinance is the supply of loans, savings, and
other basic financial services to the poor. People
living in poverty, like everyone else, need a diverse
range of financial instruments to run their businesses,
build assets, stabilize consumption, and shield
themselves against risks. Financial services needed by
the poor include working capital loans, consumer
credit, savings, pensions, insurance, and money
transfer services. E g. Payments For Environmental
services.( PES)
By Moses Banda & Benson
Kimithi
What Is Microfinance-Cont?
The poor rarely access services through the formal
financial sector. They address their need for financial
services through a variety of financial relationships,
mostly informal. Credit is available from informal
commercial and non-commercial money-lenders but
usually at a very high cost to borrowers. Savings
services are available through a variety of informal
relationships like savings clubs, rotating savings and
credit associations, and mutual insurance societies
that have a tendency to be erratic and insecure.
By Moses Banda
What Is Microfinance-cont?
Financial services for the poor have proved to be a
powerful instrument for poverty reduction that
enables the poor to build assets, increase incomes,
and reduce their vulnerability to economic stress.?
However, with nearly one billion people still lacking
access to basic financial services, especially the very
poor, the challenge of providing financial services to
them remains. Convenient, safe, and secure deposit
services are a particularly crucial need.
By Moses Banda
What is K-rep Bank?
 K-Rep Bank is a licensed commercial bank that specializes in
microfinance. It is the first micro-finance commercial bank in
Kenya. Microfinance is a development intervention that has
evolved overtime to operate on a commercial viable basis and
aims at providing banking and financial services to lowincome and poor people.
 The bank is distinguished from other commercial banks or
financial institutions, by its social mission of addressing
poverty by supporting employment, income generation and
savings mobilization activities of low-income & poor people,
as a means of building an asset base for poor house-holds.
By Moses Banda
Share holding
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K-rep bank major share holders
International Finance Corporation (IFC)
The African Development Bank (ADB)
The Netherlands Development Finance
Corporation
Treodos
Shore Bank
Shore cap international
K-rep group
By Moses Banda
Products
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Main Investment Products:
Microfinance Loans.
Retail Loans.
Wholesale (SACCO) loans.
Special Projects.
Deposit Products i.e. Savings Accounts, Current Accounts,
Term Deposit Accounts, Foreign Currency Accounts, Investment clubs savings
accounts, Mshahara Account etc
By Moses Banda
Experience of outline principle of microfinance
 Our experience and the outline principle of microfinance can
be applied as a financial intermediation in other sectors of the
economy. Some of the ideas that we have are the following: The approach should be a market based mechanism because
they ensure sustainable provision of services.
 What is more important here is that the development of
market-based solution requires donors to build up the
infrastructure, institutions & systems for such solutions.
By Moses Banda
Experience of outline principle of microfinance-cont
 It is equally important to identify what aspect of these
solutions are “public goods” and seek appropriate donor
intervention to put them into place because market-based
approaches cannot effectively subsidize/finance aspects that
are of public good nature. e.g.. – Roads infrastructure.
 Donors/Governments are also important for changing culture
and public perceptions that certain services can only be
provided by Government and public institutions. The
government can only create the conducive environment for
private investments to thrive.
By Moses Banda
Does Donor crowd out market based approaches
In essence, donor is cheap money – provided through
grants or concessionary loans. There is some
evidence that this cheap money can “crowd out”
efforts by communities towards more market based
approached. For example, in Kenya, there are cases
of peri -urban communities organizing themselves to
self-finance water projects, and saving upwards of
20% of capital costs.
By Moses Banda
Does Donor crowd out market based
approaches.. Cont
With arrival of “free” money or in kind
donations, mobilization of community savings
plummeted. Likewise, some organizations that
seek to facilitate market-based and “bottom
up” approached have noted difficulties
entering markets in countries where grantbased (whether through bilateral agencies or
NGOs) approaches are dominant.
By Moses Banda
How can Donors effectively lever market based
mechanism?
In recent years, calls for guarantees and the creation
of revolving funds to stimulate investment in the
water sector have increased, resulting in the creation
of such funds in many middle income countries. For
small towns, which pose considerable governance and
capacity risks, these mechanisms could be very useful
to increase the attractiveness of water and sanitation
investments, particularly to support local utilities,
small scale private entrepreneurs, and financial
intermediaries (whether domestic Banks, Micro-credit
funds, or if regulation allows NGOs)..
By Moses Banda
How can Donors effectively lever market
based mechanism? ..cont
• The practical application of these mechanisms
can be challenging. Given the poor levels of
capacity in governance, issues of inflation,
debt ceilings, Currency risk , High cost of
guarantees , Revolving funds require servicing
in order to revolve hence may be an issue for
many utilities. The more reason why we need
partnering and synergy between the
Government, the private sector and the Donor
community.
By Moses Banda
Should Donors be used as a market-based mechanism?
In conclusion therefore the experience of K-rep bank
in financial intermediation can be applied in other
sectors of the economy, and Green Water Credits
programme is not an exception. K-rep Bank will be
willing to be part of this initiative.
By Moses Banda
• END OF PRESENTATION
Thank you
Q& A
By Moses Banda