MPs urged to lower proposed capital requirement for microfinance banks

The Association of Microfinance Institutions of Kenya (AMFI-K) has called for changes to the Microfinance (Amendment) Bill, 2026, urging Parliament to lower the proposed minimum core capital requirement for microfinance banks from Sh250 million to Sh125 million, warning that the higher threshold could hinder the growth and sustainability of smaller lenders.

The proposals were presented to the National Assembly Departmental Committee on Finance and National Planning during the second day of stakeholder engagement on the Bill.

While lauding the Central Bank of Kenya's efforts to strengthen the regulatory framework for microfinance banks through the proposed legislation, AMFI-K said the law should strike a balance between effective regulation and the operational realities of the sector.

In a memorandum signed by the Association's Chief Executive Officer Caroline Karanja, AMFI-K said its recommendations were aimed at creating a practical, transparent and sustainable regulatory environment for the industry.

"We believe the proposed recommendations will help ensure a practical, transparent and sustainable regulatory environment for the sector," the Association said in its submission to the committee.

The Association noted that Kenya's Vision 2030, read alongside the Bottom-Up Economic Transformation Agenda (BETA), identifies the microfinance sub-sector as a key driver of universal financial inclusion, adding that an enabling legal framework is essential to achieving that goal.

AMFI-K also urged lawmakers to increase the single-borrower lending limit from the proposed five per cent to 10 per cent of core capital, arguing that the current threshold limits microfinance banks from extending larger loans to creditworthy customers whose businesses have expanded over time.

The Association further proposed easing board composition requirements, expanding the range of acceptable collateral to include digital assets, patents, livestock and social media monetisation, and amending tax laws to recognise microfinance banks as financial institutions. It said the current tax framework has left nearly Sh1 billion in unrecoverable tax assets.

Committee Chairperson Kuria Kimani welcomed the submissions, saying the Committee was committed to developing a law that addresses the needs of the sector.

"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," Kimani said.

The Committee is expected to review the proposals alongside submissions from other stakeholders before it is tabled for debate in the National Assembly.