Microfinance banks (MFBs) plunged further into the red, signalling a tough business operating environment for micro-lenders who have been losing customers to mobile lending platforms.

Of the seven microfinance banks that published their results, only Faulu and Sumac Microfinance reported growth in profit. The three others were stuck in the loss-making zone as they grappled with heavy operating costs against dwindling returns.

Uwezo, Maisha, Caritas, and Daraja continued their loss-making streak in what analysts have attributed to the difficulty in navigating structural changes occasioned by digitisation of the financial sector. 

Net-loss by Uwezo Microfinance nearly tripled to Sh27 million in the financial year ending December 30, from Sh9.4 million in the previous financial year. This is as interest on loans declined while administrative costs and provision for bad loans went up.

The microlender’s interest in the loan portfolio declined to Sh24.7 million, from Sh25.4 million. Other administrative costs increased to Sh24.5 million from Sh16.9 million.

Maisha Microfinance saw its losses triple to Sh119 million from Sh42.3 million after the micro-lender increased its provision for bad loans by a whopping 690 per cent.

Maisha’s provision for loan impairment in the period under review increased to Sh61 million from Sh7.7 million in the financial period ending December 2017.

Caritas losses after taxes increased from Sh70.9 million to Sh85.4 million.

Although Daraja Microfinance slashed its loss by 36 per cent, it still remained in the red after making a loss after tax of Sh43.8 million in the period under review - from a net loss of Sh59.7 million in the previous period. 

Daraja’s interest on loans went up by 38 per cent to Sh17.4 million from Sh12.6 million.  Its staff costs also declined to Sh23.9 million from Sh29.7 million.

Faulu, the largest deposit-taking microfinance, saw its profit increase by increased by more than three-quarters to Sh190.44 million from Sh104 million as it significantly reduced its provision for bad loans. “Our future focus as a customer-led retail and traders’ bank is to continue evolving digitally by offering our customers relevant financial solutions,” said Remu in a statement.

U & I Microfinance saw its net profits decline to Sh9 million from Sh11 million.

Loan book

Sumac Microfinance Bank grew its profits by 16 per cent to Sh5.36 million from Sh4.6 million after an impressive expansion of its loan book.

Eight of the 13 MFBs regulated by CBKs are yet to publish their audited results - though they have all since furnished the regulator with a copy of the results in line with the requirements of the Microfinance Act.

However, unlike commercial banks which should publish results within three months after the end of a financial year, MFBs have an extra one month to do so.

In recent years, numbers for the 13 MFBs have not been impressive with deposits dissipating and their loan books shrinking.

Their pre-tax losses increased to Sh935 million by the end of June 2018, compared to a loss of Sh171 million in June 2017, according to figures from CBK.

This was an earth-shattering decline of 450 per cent that stretched the loss-making streak by CBK-regulated micro-lenders to three consecutive financial years.

Another report by the regulator shows that by the end of 2017, about 70 per cent of MFBs recorded losses - bringing into question the viability of a financial sub-sector that not long ago was hailed as a panacea for financial exclusion in the country.

Kenya Women Microfinance, the biggest MFB and one of those which did not slide into the loss-making zone, however, saw its profit decline by 92 per cent to Sh18.7 million from Sh224 million in December 2016.

Only Faulu survived the loss-making whirlwind, registering a profit growth.