News Column

KWFT Sheds Market Share to Competition, New Entrants

June 19, 2014

James Waithaka

Entry of three new players in the microfinance banking arena and aggressive competition from existing ones ate into Kenya Women Finance Trust's market last year.

The Bank Supervision Report 2013 shows KWFT, the country's largest microfinance bank with Sh21.75 billion in net assets, clung to a market share of 53.19 per cent, contracting from 61.5 per cent in the previous year.

SMEP Ltd, owned by the National Council of Churches of Kenya, also suffered the fate of reduced market share as KWFT, shedding 1.52 percentage points last year from 9.4 per cent in 2012. SMEP has Sh2.49 billion in net assets.

MFBs increased to nine in 2013 compared to six in the previous year. Century Ltd, Sumac Ltd - both licensed late 2012 - and U&I Ltd (May 2013) were the latest entrants into the Central Bank of Kenya's market share radar last year. They joined Uwezo Ltd in the small microfinance banks category.

"One microfinance bank was licensed during the year and had an asset base of Sh80 million as at December 31," CBK said in the report.

CBK measures market share based on a weighted composite index comprising assets, deposits, capital, deposit accounts and loan accounts. A microfinance bank is classified as large if market share is five per cent and above, medium if 1-5 per cent, and small if below one per cent.

The number of large microfinance banks rose to four last year as Rafiki Ltd, a subsidiary of medium-sized lender Chase Bank, clawed some market share to cross the threshold with 7.73 per cent. Rafiki, with Sh3.68 billion in net assets, is the fourth largest MFB.

Faulu Kenya Ltd, the second largest MFB in the country, also upped its market share by 2.94 percentage points to 26.64 per cent in the period. Faulu Kenya has Sh12.43 billion in net assets.

Collectively, the four large MFBs control 95.44 per cent of the market with Sh40.36 billion in assets.

A sector analysis report released last year by AMFI (Association of Microfinance Institutions) and MicroFinanza Rating said competition is increasing in the deposit taking microfinance market segment as new entrants venture into the market.

"However, market share concentrations of the three largest DTMs (now renamed as MFBs) only slightly fell from 100 per cent to 98.9 per cent in the last period of analysis," the report stated, referring to the 2009-2011 period.

Total assets for microfinance banks increased to Sh41.35 billion from Sh32.41 billion in 2012, a 27.6 per cent leap.

CBK said lending "remained the most critical activity" for MFBs, with net advances accounting for 66 per cent of their total assets compared to 48 per cent in 2012. MFBs advanced Sh27.48 billion to customers in the period from Sh19.91 billion in the previous year.

Customer deposits in the sector increased to Sh24.75 billion, making up 60 per cent of MFBs' total liabilities in the period, which means they relied more on deposits as funding sources than external borrowing, which declined to 22 per cent (Sh8.97 billion).

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Source: AllAfrica

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