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Kenyan microfinance has shown resiliency despite local droughts and high inflation rates that afflicted the nation in 2008 and 2009. With the Kenyan government and the Central Bank of Kenya emphasizing financial access as a key to modernizing the economy, the sector has been strengthened by progressive policies and innovative approaches to delivering financial services. A large deposit base, along with the existence of well-developed MFIs, have allowed financial and operational expenses to remain relatively low and have led to some of the highest profitability measures in the SSA region. A detailed explanation of growth trends as well as relevant policy measures taken by the government can be found throughout the Kenya Country Briefing:

• Overview: Innovative forms of microfinance and progressive government policies have helped to make Kenya’s microfinance sector one of the most developed in Sub-Saharan Africa. Leading contributors to this dynamic are M-Pesa’s success in mobile banking, the passing of the Finance Act of 2010 allowing for agent banking, and the development of effective credit bureaus throughout the country.
• Supply & Demand: A strong culture of savings has meant that MFI outreach to depositors has far outweighed outreach to borrowers, although overall loan portfolio and total deposits have both increased steadily since 2008. High product-line diversification has allowed MFIs to evolve to meet customer needs, although growth has primarily targeted an urban clientele.
•  Funding: Deposits account for nearly 70% of the funding base for the sector, with the savings of microdepositors contributing the majority of these funds. Kenyan microfinance also benefits from the confidence of many international lenders, although the largest national source of microfinance credit is Kenya itself. 
•  Performance: The ability to maintain low financial and operational expense ratios has made Kenyan microfinance fairly profitable with an ROA of over 5% in 2010. High PAR levels do however raise concerns about the riskiness of the overall portfolio, and whether profitability can be sustained over time.

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