There are generally two types of Microfinance companies in Kenya.
- Deposit taking Micro Finance companies.
- Non Deposit taking Micro Finance Companies.
How to register a deposit taking micro-finance in Kenya?
Deposit taking Microfinance companies are licensed and regulated by the Central Bank of Kenya. To register a Microfinance company. The Registrar of companies needs approval from the Central Bank in order to process the registration of the company.
Thereafter, upon fulfilling the laid down processes and requirements, the Central Bank of Kenya shall license the Company.
Procedure for Registration of a deposit taking Microfinance in Kenya
1. Approval of Name
- Propose at least 3 preferred names of Companies.
- Submit the proposed names to the Central together with a brief concept proposal on the proposed Micro finance Bank, indicating evidence of sources and availability of capital.
- The proposed name must incorporate the words “Micro finance Bank” e.g. XYZ Micro finance Bank Limited.
- The name approval is valid for 12 months from the date it’s issued by the Central Bank.
2. Registration of Micro finance Limited Company.
Upon issuance of the approval letter from the Central Bank of Kenya. The applicant can the Proceed with the Registration of the Company normally at the Registrar of Companies.
The Nominal Capital of a deposit talking company shall be set at Kshs 20,000,000 for a community Micro Finance and Kshs 60,000,000 for a Nationwide Micro Finance.
Limited company Process here ...
Registration of a company in Kenya.
3. Application for License.
After the company is duly registered and a certificate of incorporation issued, You can commence with the application for Licensing by an application to the Central Bank of Kenya as follows.
- Complete and submit a certified Application Form 1 to CBK accompanied by all supporting documents, including:
- Certified copy of the Certificate of Incorporation.
- Certified copy of the tax Personal Identification Number (PIN) certificate.
- Certified copy of the registered Memorandum and Articles of Association indicating Nominal share capital of at least Kshs 20 million for a community Micro finance and Kshs 60 million for a nationwide micro finance bank business. For community micro finance bank business, indicate the area of operation as District or Division; if operating in a city, attach the supporting Government administrative map(s).
- Verified official notification of the company’s registered place of business, including the prospective places of business (Head Office, branches, agency and outlets, if any).
- Pay a non-refundable application fee of Kshs 5,000 to the Central Bank by Bankers Exchequer or by such other mode of payment as the Central Bank may prescribe.
- A declaration witnessed by an advocate or Commissioner of Oaths indicating that the proposed entity has no existing scheme of arrangement with its creditors.
- Provide evidence of minimum core capital Kshs 20 million and Kshs 60 million for a community and “nationwide micro finance bank business, respectively.
- Evidence should be reflected in a bank statement of a licensed bank indicating the earmarked funds accompanied by a letter from the bank and/or Government of Kenya Treasury Bills and Bonds not under lien.
- Evidence should either be in the name of the company and/or the promoters/ shareholders of the company.
- The promoters/shareholders should give the Central Bank authority to verify the authenticity of the bank statement directly from the bank.
- The promoters/shareholders should provide the distribution or allocation (ultimate beneficiaries, citizenship, amount and percentage) of core capital to each individual promoter/shareholder and/or company, indicating significant shareholders/promoters (owning at least 10% of the share capital).
- Certified statements indicating that the entity and each of the shareholders and officers are tax compliant. The current Tax Compliant Certificate should be provided.
- Prepare and submit a comprehensive feasibility study and business plan covering but not limited to:
- Executive summary;
- Governance structure including ownership;
- Audited financial statements, (where applicable) and projected financial statements for at least three years;
- SWOT analysis;
- economic and financial markets environment;
- financial sector structure and environment;
- institutional analysis;
- potential market survey
- scope of proposed business activities and marketing strategy;
- capital, liquidity and portfolio quality;
- proposed projected financial statements and analysis;
- legal and regulatory compliance function, and
- proposed infrastructure and internal controls;
- High level outlines of the proposed Risk management policies and procedures and internal control systems manual.
- Duly complete and submit the “Fit and Proper Forms” for all significant shareholders (at least 10% shareholding) and proposed directors accompanied by supporting documentation (certified) including..
For individual natural persons:
- Curriculum Vitae and certified copies of academic and professional certificates.
- Evidence and disclosure of the source of funds e.g. certified copies of bank statements, fixed deposits and/or government securities.
- Certified copies of National Identity Card and Personal Identification Number (PIN) certificate.
- Total number and the percentage of shares to be acquired and evidence of the consideration given or to be given for the same.
- Four recent color passport size photographs, of which at least one must be certified.
- Names of three independent referees who have known the proposed shareholder/officer for at least 5 years, giving detailed contacts including postal addresses, e-mail and telephone numbers.
- A recent (i.e. not more than three months since issuance) credit report from a licensed credit reference bureau.
- A declaration witnessed by an advocate indicating that none of the funds the shareholder seeks to invest are from proceeds of crime as required in Section 4.6 (a) of the Application Form (Significant shareholders).
- An affidavit that none of the proposed directors or significant shareholders holds or owns a similar position in any other micro finance bank in Kenya (Directors) licensed under the Micro finance Act, 2006.
For Companies, Firms or Other Corporate Entities Incorporated in Kenya:
- Certified copy of the Certificate of Incorporation of the company or Certificate of Registration of Business or other entity.
- Certified copy of the Memorandum and Articles of Association, Partnership Agreements or Constitution of the Association/body.
- Certified copies of the organization’s Personal Identification Number (PIN) certificate.
- Resolution of the Board of Directors or General Meeting authorizing the investment.
- Where the entity is regulated, the name and full contact details of the Regulator; Letter of no objection from the Regulator and a certified copy of license to operate.
- For entities that are already carrying on business other than that of a micro finance bank, audited financial statements for at least the last three years or since inception if the business has been carried on for less than three years.
- Evidence of availability and source of funds e.g. certified copies of bank statements, fixed deposit receipt, government securities.
- Total number of, and the percentage of, shares to be acquired and the consideration for the same.
- Ultimate beneficiaries of shares to be acquired.
Transforming entities/organizations incorporated in Kenya will provide the following additional requirements:
- Board and Annual General meeting resolution approving the transformation and the proposed investment (Business Plan approved by the board).
- Copies of audited financial statements for at least the last three years preceding the application, including the auditor’s report, if applicable. If the entity has been in operation for less than three years, submit audited financial statements for the years since inception.
- A due diligence report prepared by an external audit firm on the operational and financial performance, legal risks detailing a review of the adequacy of the management information system and internal control systems.
- The Applicant, upon receiving the name approval may apply before incorporating the new company by using the old name in brackets transforming to the new name e.g. XYZ Limited may use the name XYZ Limited (in Transformation to XYZ Micro finance Bank Limited) until it is licensed. No person shall use the approved name in its operations or engage in micro finance bank business until it receives a license from the Central Bank.
Foreign companies intending to set up a local subsidiary will be required to submit further information including but not limited to:
- A copy of the board resolution authorizing the entity to micro finance bank business in Kenya, and the designated persons who will represent the business in connection therewith.
- Historical background of the foreign entity.
- Signed declaration by the board of directors to adhere to the Micro finance Act and Regulations issued thereunder and other relevant Kenyan laws at all times during the validity of the license.
- Endorsement letter (or a letter of no objection) from the home supervisory authority.
Letter of Intent
Upon assessment and fulfillment of all the requirements in the foregoing stages, the Central Bank will issue a Letter of Intent, which is an approval in principle and advises the applicant on the next steps and requirements to be fulfilled before issuance of a license and approval to commence operations, including:
- payment of license fees to the Central Bank by bankers Exchequer or such other mode of payment that the Central Bank may prescribe (Kshs 150,000 for nationwide micro finance bank, and Kshs 100,000 for community micro finance bank).
- preparation of operating premises to meet prescribed standards [see inspection checklist in Form 4 of the First Schedule to the Micro finance (DTM) Regulations 2008] in readiness for inspection by the Central Bank.
- completion and submission of the “Fit and Proper” Forms for key senior managers (to be guided by the Central Bank) accompanied by all the supporting documentation, including but not limited to the following:
- Curriculum Vitae and any supporting documentation.
- At least three referees who should have known the proposed senior officer for at least five years and who should not be related to the officer, giving detailed contacts including their e-mail addresses and telephone numbers.
- Current and any previous employers and occupation(s) of the proposed officers giving detailed contact addresses including e-mail and telephone numbers.
- A recent (issued within the last three months preceding the date of submission) credit report from a licensed credit reference bureau.
- Two Color passport-size photographs and copies of identification documents (ID card and/or Passport) and PIN certificate. These should be certified by a registered Commissioner of Oaths. For non-Kenyan citizens, documents originally issued outside Kenya may be notarized in the jurisdiction in which the said documents were issued.
- A declaration that none of the proposed senior officers holds a similar position in another Micro finance bank(s) licensed under the Micro finance Act.
- Preparing and putting in place the proposed management information system (MIS) and other institutional structures required to conduct the micro finance bank business including but not limited to the following:
- Governance structures: Board, Senior Management and Committees.
- Deposit mobilization strategies/plans and marketing methodologies.
- Management Information Systems and infrastructure.
- Operations manuals – lending and credit administration; human resource development; investment policy; liquidity and funds management policies; accounting procedures; Management Information System; internal audit and controls; capital, planning and budgeting; Know Your Customer (KYC) requirements, operations and assets manuals.
- Risk management policies and internal control systems.
- A satisfactory inspection, upon invitation thereto, by the Central Bank, of the applicant’s proposed operating premises to examine compliance with the standards and operational readiness of the applicants to commence the business of the micro finance bank. .
In this stage, the Central Bank shall undertake a due diligence evaluation on the proposed management, an assessment on the adequacy of the MIS, internal controls and procedures.
Issuance of License.
The Central Bank, if satisfied that the applicant has met all the requirements of the above three stages, may then issue a license; the Central Bank will duly specify the institution by placing a notice in the Kenya Gazette, thereby legally authorizing the applicants to commence micro finance bank business.
If you would like to commence the registration of a Micro finance Bank in Kenya, please contact us.
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