The Association of Microfinance Institutions of Kenya (AMFI-K) has lauded the efforts by the Central Bank of Kenya in strengthening the regulatory framework for Microfinance Banks through the Microfinance (Amendment) Bill, 2026.
The association, which submitted its memorandum during the second day of stakeholder engagements on the Bill by the Departmental Committee on Finance and National Planning on Wednesday, July 22, 2026, advocated for key policy adjustments to safeguard the growth, sustainability, and operational realities of the sector.
“We believe the proposed recommendations will help ensure a practical, transparent, and sustainable regulatory environment for the sector,” they told the Committee.
In the memorandum signed by Chief Executive Officer Caroline Karanja, the industry group highlighted the sub-sector’s alignment with national development frameworks.
“Kenya’s Vision 2030 as read alongside the Bottom-Up Economic Transformation Agenda (BETA) recognises the microfinance sub-sector as a pivotal element in achieving universal financial inclusion by 2030. To achieve this, it is critical to ensure that suitable laws are in place so as to facilitate this noble objective,” the submission noted.
Concerns on Microfinance (Amendment) Bill, 2026
Among the primary concerns raised by the association is the proposed increase of the core capital requirement for microfinance banks to Ksh 250 million within five years. AMFI-K recommended lowering this threshold to Ksh 125 million to avoid stifling smaller and emerging operators.
The Association also urged lawmakers to raise borrowing limits to enable institutions to support growing businesses. Under the current and proposed regulatory environment, single-borrower exposure is capped at 5 per cent of core capital. AMFI-K called for an increase to 10 per cent, emphasising that the current cap restricts Microfinance Banks from supporting high-value customers nurtured/incubated over time, as they outgrow the limit, resulting in an inability to extend larger facilities to creditworthy borrowers, hence loss of revenue.
Addressing operational and governance burdens, AMFI-K voiced concern over strict board composition mandates that require at least two-thirds (or three-fifths in the new Bill) non-executive directors.
The Association recommended reducing the non-executive board requirement to one-third, noting that this change will enhance operational agility, lower governance costs, and allow microfinance institutions—especially smaller ones—greater flexibility in board composition while still maintaining oversight.
To support financial inclusion and adapt to modern lending practices, the association advocated for expanding recognised loan collateral under the Movable Property Security Rights Act. AMFI-K urged regulators to accept assets such as digital assets, patents, livestock, and social media monetisation.
“Most micro-loan customers provide chattels as the only form of collateral,” the association stated, emphasising the need to keep pace with advancing times.
In addition, the association urged the lawmakers to address systemic tax issues by explicitly recognising microfinance banks as financial institutions under the Banking and Income Tax Acts. AMFI-K noted that current exclusions have left nearly KES 1 billion locked in unrecoverable tax assets.
Recommendations on Microfinance (Amendment) Bill, 2026
Other key recommendations submitted by the lobby group to the Committee include extending the period before classifying loans as non-performing from 30 days to 90 days, reducing the daily Cash Reserve Ratio (CRR) from 3 percent -4.25 per cent to 1 per cent to 2 per cent, requiring search warrants before Central Bank inspections, and providing clear registration frameworks for credit-only microfinance entities.
In their concluding remarks, AMFI-K affirmed its readiness to engage further with the Committee to ensure the final statutory framework supports a balanced, stable, and inclusive financial ecosystem in Kenya.
Committee Members led by the Chairperson Kuria Kimani noted it was crucial to receive submissions from the Sector, as the Committee would not be desirous of the enactment of a law that is not implementable.
“We are glad to receive your submissions since you’re the key stakeholders who will be affected by the enactment of this law. We shall scrutinise your submissions to ensure that we end up with a law that will transform this sector,” stated MP Kimani.
