Microfinance in Kenya: KWFT, Faulu, SACCOs and group loans
In Kenya, microcredit is offered by a dozen microfinance banks supervised by the Central Bank of Kenya, by non-deposit-taking institutions, by SACCOs and by public schemes such as the government-backed Hustler Fund.
The legal framework for microfinance in Kenya
The 2006 Microfinance Act lets the CBK license microfinance banks allowed to take deposits. Kenya had thirteen of them in 2024, including Kenya Women Microfinance Bank, Faulu and SMEP, present in most counties.
KWFT and credit for women entrepreneurs
Kenya Women Microfinance Bank, which grew out of the Kenya Women Finance Trust, still specialises in loans to women traders, farmers and artisans. Its group loans rely on mutual guarantees and regular member meetings.
Individual loans and group loans
Kenyan microfinance banks offer group loans without physical collateral and individual loans against household goods, livestock, a logbook or guarantors. The move to an individual loan usually comes after several cycles repaid on time.
Non-bank microfinance institutions
Other non-deposit-taking lenders, set up as associations or companies, also finance small businesses. Their supervision is lighter, except when they lend online and then come under the regime for digital credit providers licensed by the CBK.
SACCOs, the leading rural microcredit network
In areas such as Meru, Nyeri, Kakamega and Kisii, the SACCO is often the nearest financial institution. SACCOs lend to members on the basis of their savings, and those that take deposits are supervised by SASRA.
The Hustler Fund and its group loans
Launched by the government at the end of 2022, the Hustler Fund grants small individual loans by phone and loans to registered groups, with a compulsory savings portion. Limits rise as repayments stay regular.
From microcredit to business credit
Traders at Gikomba, Kibuyu or Kongowea market who outgrow microcredit limits then look for an SME loan. Our guide to the business loan in Kenya sets out the public funds and guarantees available.
Mobile microcredit and M-Pesa scoring
Mobile apps and phone-based bank products assess borrowers using their M-Pesa history, their bill payments and their airtime top-ups. Amounts are small and repayment terms are short, which pushes up the annualised cost of this kind of credit.
Chamas and microfinance working side by side
Many Kenyan borrowers first go through a chama's collective savings before reaching a microfinance bank. Our page on chamas and peer-to-peer loans in Kenya describes this first level of mutual support.
Over-indebtedness among small borrowers
The spread of mobile loans, the Hustler Fund and microfinance banks has left some traders juggling several debts. CRB listings for very small amounts have in fact been eased by the authorities.
Islamic microfinance on the coast and in the North East
In Mombasa, Garissa, Wajir and Mandera, interest-free products based on murabaha are offered by Islamic banks and by some microfinance programmes. They allow observant traders to buy stock at a mark-up agreed in advance with the lender.
How Kenya compares with neighbouring Rwanda
Kenya has an older and more digitised microfinance network than most of its neighbours in East Africa. By contrast, microcredit in Rwanda relies more heavily on the Umurenge SACCOs set up in every administrative sector of the country.
Getting microcredit in Kenya, from group to individual loan
- Find a microfinance bank, SACCO or group operating in your county and check that it is licensed.
- Join or form a group of five to thirty members, according to the institution's rules, and save regularly.
- Attend the training meetings and present your business to the loan officer during an on-site visit.
- Take a modest first loan guaranteed by the group and repay it on the weekly or monthly schedule.
- Gradually raise the amount or switch to an individual loan after several cycles without arrears.
What a Kenyan microloan costs
| Item | Typical level | Explanation |
|---|---|---|
| Interest | Flat or declining monthly rate | Check how it is calculated on the balance |
| Processing fee | Percentage of the loan (indicative) | Deducted on disbursement |
| Compulsory savings | Share of the loan held back | Returned at the end of the cycle |
| Credit insurance | Small premium per cycle | Covers the borrower's death |
| Mobile money charges | M-Pesa fee on repayments | Depends on the amount sent |
Documents for microcredit in Kenya
- National ID card
- KRA PIN for some individual loans
- Business permit issued by the county
- Three to six months of M-Pesa statements
- Group list and meeting minutes for a group loan
- Inventory of assets offered as security
Obstacles and risks of microcredit in Kenya
- Stacking loans from several microfinance banks, apps and the Hustler Fund without working out the total weekly burden.
- Spending a business loan on family needs, which then makes repayment from sales impossible.
- Guaranteeing a group member without knowing their business, then having to repay in their place.
- Paying fees to a fake agent who promises a bigger Hustler Fund loan in exchange for an M-Pesa payment.
- Missing group meetings, which delays disbursements and can lead to exclusion from the programme.
Lenders to contact
- KCB Bank Kenya: Kenyan commercial bank offering unsecured personal loans, home loans and credit accessible through its mobile banking application.
- KCB Bank Kenya: Kenyan commercial bank of the KCB Group offering mobile loans, including the KCB M-Pesa Loan accessible directly from a phone.
Kenyan microfinance: your questions answered
What is the difference between a microfinance bank and a SACCO in Kenya?
A microfinance bank is a company licensed by the CBK and open to any customer. A SACCO is a cooperative that lends only to its members, based on their savings, and comes under SASRA or the Commissioner for Cooperatives.
Is collateral needed for a first microloan in Kenya?
Not necessarily. In group loans, the members' mutual guarantee replaces physical collateral. For an individual loan, the institution may ask for household goods, stock, livestock or a logbook.
Does the Hustler Fund count as microcredit?
Yes, it is a public fund of small loans available by phone, with compulsory savings. Amounts depend on repayment history, and a default can shut off access to limit increases.
How long does a Kenyan microcredit cycle last?
Most cycles run from three to twelve months, with weekly, fortnightly or monthly repayments. Farm loans can be aligned with the harvest, with repayment concentrated after the crop is sold.