THE A-Z OF LICENSING MICROFINANCE BANK

The steps to follow in applying for a microfinance bank licence are as shown below:

Stage 1: Approval of Name

a) Contact the Central Bank of Kenya at an early stage for a preliminary meeting to
discuss licensing requirements and related issues.
b) Propose and book, in descending order of preference, at least three business names
with the Registrar of Companies and Business Names.
c) Submit the proposed names to the Central Bank in descending order of preference
accompanied by a brief concept paper on the proposed Microfinance Bank, including
evidence of sources and availability of capital. This should be done before
incorporation of the proposed entity as a company limited by shares.
d) The proposed name must incorporate the words “Microfinance Bank” e.g. XYZ
Microfinance Bank Limited
e) The name approval is valid for 12 months from the date it’s granted by the Central
Bank within which you should have received a licence to carry out microfinance bank
business.
Stage 2: Application for Licence
a) Complete and submit a certified Application Form [Form 1 of the First Schedule to
the Microfinance (Deposit Taking Microfinance Institutions) Regulations 2008] to
CBK accompanied by all supporting documents, including:
i. Certified copy of the Certificate of Incorporation.
ii. Certified copy of the tax Personal Identification Number (PIN) certificate.
iii. Certified copy of the registered Memorandum and Articles of Association
indicating core capital (at least Kshs 20 million or Kshs 60 million for community
and nationwide microfinance bank business, respectively). For community
microfinance bank business, indicate the area of operation as District or Division;
if operating in a city, attach the supporting Government administrative map(s).
iv. Verified official notification of the company’s registered place of business,
including the prospective places of business (Head Office, branches, agency and
outlets, if any).
v. Pay a non-refundable application fee of Kshs 5,000 to the Central Bank by
Bankers cheque or by such other mode of payment as the Central Bank may
prescribe.
vi. A declaration witnessed by an advocate or Commissioner of Oaths indicating that
the proposed entity has no existing scheme of arrangement with its creditors.
b) Provide evidence of minimum core capital (Kshs 20 million and Kshs 60 million for a
“community” and “nationwide” microfinance bank business, respectively):
i. Evidence should be reflected in a bank statement of a licensed bank indicating
the earmarked funds (attach letter from the bank) and/or Government of Kenya
Treasury Bills and Bonds not under lien.
 ii. Evidence should either be in the name of the company and/or the promoters/
shareholders of the company.
iii. The promoters/shareholders should give the Central Bank authority to verify the
authenticity of the bank statement directly from the bank.
iv. The promoters/shareholders should provide the distribution or allocation
(ultimate beneficiaries, citizenship, amount and percentage) of core capital to
each individual promoter/shareholder and/or company, indicating significant
shareholders/promoters (owning at least 10% of the share capital).
v. Certified statements indicating that the entity and each of the shareholders and
officers are tax compliant. The current Tax Compliant Certificate should be
provided.
c) Prepare and submit a comprehensive feasibility study and business plan covering but
not limited to:
i. executive summary;
ii. background;
iii. governance structure including ownership;
iv. audited financial statements, where applicable and projected financial
statements for at least three years;
v. SWOT analysis;
vi. economic and financial markets environment;
vii. financial sector structure and environment;
viii. institutional analysis;
ix. potential market survey;
x. scope of proposed business activities and marketing strategy;
xi. capital, liquidity and portfolio quality;
xii. proposed projected financial statements and analysis;
xiii. legal and regulatory compliance function, and
xiv. proposed infrastructure and internal controls;
xv. High level outlines of the proposed Risk management policies and procedures
and internal control systems manual.

d) Duly complete and submit the “Fit and Proper Forms” for all significant shareholders
(at least 10% shareholding) and proposed directors accompanied by supporting
documentation (certified) including:-
For individual natural persons:
i. Curriculum Vitae and certified copies of academic and professional certificates.
ii. Evidence and disclosure of the source of funds e.g. certified copies of bank
statements, fixed deposits and/or government securities.
iii. Certified copies of National Identity Card and Personal Identification Number
(PIN) certificate.
iv. Total number and the percentage of shares to be acquired and evidence of the
consideration given or to be given for the same.
v. Four recent colour passport size photographs, of which at least one must be
certified.
 vi. Names of three independent referees who have known the proposed
shareholder/officer for at least 5 years, giving detailed contacts including postal
addresses, e-mail and telephone numbers.
vii. A recent (i.e. not more than three months since issuance) credit report from a
licensed credit reference bureau.
viii. A declaration witnessed by an advocate indicating that none of the funds the
shareholder seeks to invest are from proceeds of crime as required in Section 4.6
(a) of the Application Form (Significant shareholders)
ix. An affidavit that none of the proposed directors or significant shareholders holds
or owns a similar position in any other microfinance bank in Kenya (Directors)
licenced under the Microfinance Act, 2006.
For Companies, Firms or Other Corporate Entities Incorporated in Kenya:
i. Certified copy of the Certificate of Incorporation of the company or Certificate
of Registration of Business or other entity.
ii. Certified copy of the Memorandum and Articles of Association, Partnership
Agreements or Constitution of the Association/body.
iii. Certified copies of the organization’s Personal Identification Number (PIN)
certificate.
iv. Resolution of the Board of Directors or General Meeting authorizing the
investment.
v. Where the entity is regulated, the name and full contact details of the
Regulator; Letter of no objection from the Regulator and a certified copy of
licence to operate.
vi. For entities that are already carrying on business other than that of a
microfinance bank, audited financial statements for at least the last three years
or since inception if the business has been carried on for less than three years.
vii. Evidence of availability and source of funds e.g. certified copies of bank
statements, fixed deposit receipt, government securities.
viii. Total number of, and the percentage of, shares to be acquired and the
consideration for the same.
ix. Ultimate beneficiaries of shares to be acquired.
Transforming entities/organizations incorporated in Kenya will provide the
following additional requirements:
i. Board and Annual General meeting resolution approving the transformation and
the proposed investment (Business Plan approved by the board).
ii. Copies of audited financial statements for at least the last three years preceding the
application, including the auditor’s report, if applicable. If the entity has been in
operation for less than three years, submit audited financial statements for the
years since inception.
iii. A due diligence report prepared by an external audit firm on the operational and
financial performance, legal risks detailing a review of the adequacy of the
management information system and internal control systems.
iv. The Applicant, upon receiving the name approval may apply before incorporating
the new company by using the old name in brackets transforming to the new name
 e.g. XYZ Limited may use the name XYZ Limited (in Transformation to XYZ
Microfinance Bank Limited) until it is licensed. No person shall use the approved
name in its operations or engage in microfinance bank business until it receives a
licence from the Central Bank.

e) Foreign Companies
Foreign companies intending to set up a local subsidiary will be required to submit
further information including but not limited to:
i. A copy of the board resolution authorizing the entity to microfinance bank business
in Kenya, and the designated persons who will represent the business in
connection therewith.
ii. Historical background of the foreign entity.
iii. Signed declaration by the board of directors to adhere to the Microfinance Act and
Regulations issued thereunder and other relevant Kenyan laws at all times during
the validity of the licence.
iv. Endorsement letter (or a letter of no objection) from the home supervisory
authority.
Stage 3: Letter of Intent
Upon assessment and fulfillment of all the requirements in stage two, the Central Bank
will issue a Letter of Intent, which is an approval in principle and advises the applicant
on the next steps and requirements to be fulfilled before issuance of a licence and
approval to commence operations, including:
a) payment of licence fees to the Central Bank by bankers cheque or such other mode of
payment that the Central Bank may prescribe (Kshs 150,000 for nationwide
microfinance bank, and Kshs 100,000 for community microfinance bank)
b) preparation of operating premises to meet prescribed standards [see inspection
checklist in Form 4 of the First Schedule to the Microfinance (DTM) Regulations
2008] in readiness for inspection by the Central Bank
c) completion and submission of the “Fit and Proper” Forms for key senior managers
(to be guided by the Central Bank) accompanied by all the supporting
documentation, including but not limited to the following:
i. Curriculum Vitae and any supporting documentation
ii. At least three referees who should have known the proposed senior officer for at
least five years and who should not be related to the officer, giving detailed
contacts including their e-mail addresses and telephone numbers.
iii. Current and any previous employers and occupation(s) of the proposed officers
giving detailed contact addresses including e-mail and telephone numbers.
iv. A recent (issued within the last three months preceding the date of submission)
credit report from a licensed credit reference bureau.
v. Two colour passport-size photographs and copies of identification documents
(ID card and/or Passport) and PIN certificate. These should be certified by a
registered Commissioner of Oaths. For non-Kenyan citizens, documents
 originally issued outside Kenya may be notarized in the jurisdiction in which the
said documents were issued.
vi. A declaration that none of the proposed senior officers holds a similar position
in another Microfinance bank(s) licensed under the Microfinance Act.
d) preparing and putting in place the proposed management information system (MIS)
and other institutional structures required to conduct the microfinance bank
business including but not limited to the following:
i. Governance structures: Board, Senior Management and Committees.
ii. Deposit mobilization strategies/plans and marketing methodologies.
iii. Management Information Systems and infrastructure.
iv. Operations manuals – lending and credit administration; human resource
development; investment policy; liquidity and funds management policies;
accounting procedures; Management Information System; internal audit and
controls; capital, planning and budgeting; Know Your Customer (KYC)
requirements, operations and assets manuals.
v. Risk management policies and internal control systems.
vi. A satisfactory inspection, upon invitation thereto, by the Central Bank, of the
applicant’s proposed operating premises to examine compliance with the
standards and operational readiness of the applicants to commence the business
of the microfinance bank .
vii. In this stage, the Central Bank shall undertake a due diligence evaluation on the
proposed management, an assessment on the adequacy of the MIS, internal
controls and procedures.
Stage 4: Issuance of Licence
The Central Bank, if satisfied that the applicant has met all the requirements of the
above three stages, may then issue a licence; the Central Bank will duly specify the
institution by placing a notice in the Kenya Gazette, thereby legally authorizing the
applicants to commence microfinance bank business.