In one of my first posts, I told the story of one microcredit borrower, Mary. Now, let’s look at the broader picture.
There are 18 million people in Kenya, about 60% of the population, who are considered low income. Even though these individuals run the majority of the 1.3 million micro and small enterprises (MSEs) that make up 20% of income generating activities and contribute 18% of Kenyan GDP, only 10.4% of MSE owners under take financial services. The government of Kenya has cited this exclusion as disadvantaging to the operations and expansions of such businesses. [1]
With microfinance gaining popularity throughout the world over, the proliferation of financial services for the poor in Kenya has been under way over the last several decades. Individuals and their businesses traditionally excluded from the formal financial system are now the target consumers of Microfinance Institutions (MFIs). Currently, there are over 100 organizations that offer microfinance services in Kenya.[2]
Unfortunately, as the microfinance field expands in Kenya consumer protection measures are not keeping up. What is equally important to the expansion of credit and saving opportunities in Kenya is the expansion of consumer protection and education initiatives to ensure that individuals know how to use these new financial services to make educated financial decisions to protect themselves from default and unethical banking practices.
Mary is one example of what can happen to one of the hundreds of thousands of microfinance clients when access to consumer education and consumer protection measures is lacking. The microfinance field targets low income individuals, who are traditionally most disadvantaged group, specifically when it comes to education. Thus, microfinance and consumer protection initiatives (specifically legislation) should always co-exist.
[1] [2] “Regulation and Supervision of Microfinance Institutions in Kenya” by George Omino. Accessed February 28, 2011. Published on March 2005 by The Microfinance Regulation and Supervision Resource Center within the Consultative Group to Assist the Poor. http://www.microfinancegateway.org/p/site/m//template.rc/1.9.27704
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