Checklist for Obtaining a Deposit-Taking Microfinance Bank License in Kenya
Phase 1: Preparation and Initial Due Diligence
[ ] Understand the Legal Framework:
Thoroughly review the Microfinance Act, 2006.
Study the Central Bank of Kenya Act (Cap. 491).
Familiarize yourself with the CBK Prudential Guidelines and other relevant regulations for Microfinance Banks.
[ ] Define Your Business Model:
Clearly outline the proposed target market (e.g., individuals, micro, small, and medium enterprises).
Detail the financial products and services to be offered (e.g., savings accounts, credit facilities).
Develop a comprehensive 3 to 5-year financial projection and feasibility study.
[ ] Assemble a Competent Team:
Identify proposed significant shareholders, directors, and senior management.
Ensure all proposed individuals meet the “fit and proper” criteria as stipulated by the CBK (integrity, competence, and solvency).
[ ] Capital Requirements:
Confirm and make arrangements to meet the prescribed minimum core capital requirements for Microfinance Banks as set by the CBK. (This amount can be updated, so verify the current requirement).
[ ] Preliminary Consultation (Recommended):
Consider an initial informal consultation with the CBK to understand the process and expectations.
Phase 2: Formal Application Process to the Central Bank of Kenya (CBK)
[ ] Letter of Intent & Name Reservation:
Submit a formal letter of intent to the CBK.
Apply to the CBK for approval of the proposed name of the Microfinance Bank. The name should not be misleading or too similar to existing financial institutions.
[ ] Complete Application Forms:
Obtain the official application forms from the CBK (these are typically detailed and cover various aspects of the proposed MFB).
[ ] Prepare Supporting Documentation (This is extensive and may include, but is not limited to):
[ ] Legal Status & Incorporation:
Certificate of Incorporation/Registration for the applying entity.
Memorandum and Articles of Association (or equivalent constitutional documents).
Shareholding structure (details of all proposed shareholders).
[ ] Business Plan & Financials:
A comprehensive and viable Business Plan.
Detailed financial projections (balance sheet, income statement, cash flow) for at least three years.
Feasibility study.
Information on the source of capital.
[ ] “Fit and Proper” Documentation:
Detailed personal information and declarations for all proposed significant shareholders, directors, and senior management (CVs, financial statements, tax compliance certificates, credit reference bureau reports, police clearance certificates, etc.).
[ ] Operational & Governance Frameworks:
Proposed organizational structure and management chart.
Corporate governance policies and framework.
Risk management policies (credit risk, operational risk, liquidity risk, etc.).
Internal control procedures and audit plan.
Information Technology (IT) systems plan and security policies.
Customer service policies and dispute resolution mechanisms.
Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) policies.
Details of proposed business premises and infrastructure.
[ ] Payment of Fees:
Pay the non-refundable application fee as prescribed by the CBK.
[ ] Submit Application to CBK:
Lodge the complete application package with all supporting documents to the Central Bank of Kenya.
Phase 3: CBK Review and Approval Process
[ ] CBK Acknowledgment & Review:
The CBK will acknowledge receipt and review the application for completeness and compliance. They may request additional information or clarification.
[ ] Due Diligence & Vetting:
CBK will conduct thorough due diligence on the application, including background checks on shareholders, directors, and senior management.
Assessment of the business plan, financial viability, risk management frameworks, and operational readiness.
Possible site visits to proposed premises.
[ ] Interview(s):
Proposed directors and senior management may be required to attend interviews with the CBK.
[ ] Approval in Principle (AIP) / Letter of Intent to License:
If the CBK is satisfied, it may issue an “Approval in Principle” or a “Letter of Intent to License.” This is not the final license but indicates that the application is largely successful, subject to meeting certain pre-licensing conditions.
[ ] Meeting Pre-Licensing Conditions:
These conditions might include:
Injection of the required capital.
Setting up the approved premises and IT systems.
Hiring key staff.
Demonstrating operational readiness.
Any other conditions specified by the CBK.
[ ] Final Inspection by CBK:
CBK will conduct a final inspection to ensure all pre-licensing conditions have been met.
Phase 4: Issuance of License and Commencement of Operations
[ ] Issuance of License:
Upon satisfactory fulfillment of all conditions, the CBK will formally grant the Microfinance Bank license.
Payment of the official license fee will be required.
[ ] Publication in Kenya Gazette:
The granting of the license will be published in the official Kenya Gazette.
[ ] Commencement of Operations:
The Microfinance Bank can then commence operations in accordance with the Microfinance Act and CBK regulations.
[ ] Post-Licensing Compliance:
Ongoing compliance with all CBK prudential guidelines, reporting requirements, and regulatory directives.