Kenyan MFIs Struggle with Displaced Clients and Staff
Waithaka, W.

The recent outbreak of political violence in Kenya is expected to severely impact the country's vibrant microfinance sector. Microfinance, which accounts for nearly 80% of lending to small businesses in Kenya, is facing a large number of loan defaults after a majority of borrowers lost businesses in the riots that followed the disputed outcome of last month's presidential election.

K-Rep Development Agency, a key player in the microfinance market, said its lending programs had suffered a massive setback in Nairobi’s Kibera slums that bore the brunt of the skirmishes. “Two of our clients were killed and 22 hospitalized, putting at risk about Sh10 million [US$145,000] in loans to their businesses,� said Aleke Dondo, the managing director. MFIs are looking at various options including refinancing and rescheduling loan repayments to help clients rebuild their businesses. For business owners who are too traumatized to resume operations, one MFI is considering offering counseling of displaced clients.

Some of the MFIs and banks that lend to microbusinesses have reported disruption of their programs due to movement of staff or inability of some workers to return to work. A more serious issue for MFIs is the risk from defaulters who are unable to restart their businesses because they have been displaced or injured in the skirmishes. As a result of the unrest the MFIs are expected to lose a significant fraction of their interest income, ultimately impacting their profits.

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