Microfinance development in Kenya : transforming K-Rep"s microenterprise credit program into a commercial bank

The creation of K-Rep Bank raises two key strategic issues: (1) How might K-Rep Bank"s need to be commercially viable and institutionally self-sustaining affect its current microbanking mission and market niche? (2) What are the potential complementarities and contradictions in the missions of K-Rep Bank and K-Rep Holdings Ltd.? The creation of K-Rep Bank also raises four critical operational issues: (1) How will K-Rep Bank mobilize voluntary savings, and what will be the relationship between voluntary and mandatory savings? (2) How can K-Rep Bank improve efficiency while maintaining the quality of its lending operations? (3) How can K-Rep Bank ensure sustainability? (4) What will be the relationship between K-Rep Bank operations and the microbanking operations of K-Rep Holdings Ltd.? Finally, issuance of K-Rep"s banking license raises regulation and supervision issues regarding the Central Bank of Kenya"s (CBK) regulation and supervision of Kenya"s microfinance sector: (1) Are the CBK"s commercial banking statutory requirements and prudential norms and regulations appropriate for microfinance banks? (2) Can the CBK monitor and enforce these provisions in a cost-effective manner for microfinance banks? The report analyzes these issues in light of the experience of microfinance institutions in other countries and K-Rep"s research and strategic planning efforts to date and provides specific recommendations. Includes references. (Author abstract, modified)