Nairobi Star (Nairobi)
Lola Okulo
24 December 2011
DEPOSIT taking Micro Finance Institutions will soon be able to join banks in rolling out agency services after the Central Bank of Kenya yesterday issued a set of guidelines for operations of agents under these institutions.
The new guidelines come into force starting January 2. “The purpose of the guideline is to prescribe the manner in which third parties may be contracted by an institution to provide deposit taking micro finance business on behalf of the institution,” said the bank.
Apart from seeking to regulate the agency model among MFIs, CBK said the guidelines would help these institutions roll out the agency model in a cost effective manner. Some of the activities that the MFI agents will undertake as per the CBK rules include, cash payment of retirement and social benefits, cash deposit and withdrawal, cash disbursement and repayment of loans, payment of bills, payment of salaries, transfer of funds and agent mobile phone deposit taking micro finance services.
The agent will however be prohibited from charging any fees directly to the customers, open accounts, grant loans or undertake cheque deposit or cashing of cheques. The guidelines give the board of directors of a deposit taking MFI the mandate to formulate a policy and procedure of identifying and selecting an agent, to identify risks associated with agents and document them and to monitor agency activities.
Also the institutions will be required to make a background check on the moral and professional standing of the Chief Executive Officer of an agency firm or the sole proprietor of the business seeking to be its agent. The MFIs will also need to detail how an agency model would fit into its business strategy and a business case for for the future operations and development of agents.
Though agents will have a transaction limit to ensure that they do not conduct very large volumes of business, the CBK has left it to the institutions themselves to put a cap per agent according to business locality and volume ability of the agent. Agents will also be allowed by the law to offer their services to multiple deposit taking MFIs as long as such an agent holds separate contracts for each partnership and has the capacity to do so.
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