Impact of CBK Prudential Guidelines on MFI Operations in Kenya
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Microfinance institutions in Kenya are currently registered under eight different Acts of Parliament; The Non Governmental Organizations (NGO) Co-ordination Act, the Building Societies Act, the Trustee Act, the Societies Act, the Co-operative Societies Act, The Companies Act , the Banking Act and the Kenya Post Office Savings Bank (KPOSB) Act. Some of these forms or registrations do not address issues regarding ownership, governance, and accountability. They have also contributed to a large extent to the poor performance and eventual demise of many MFIs because of a lack of appropriate regulatory oversight. This paper aims to identify whether the absence of a regulatory framework has had any effect on the outreach and sustainability of microfinance in Kenya. This paper concludes that that the major challenge hindering outreach and sustainability of micro finance institutions in Kenya is lack of specific legislation and set of regulation to guide the operation of microfinance subsector. Also, the paper creates a platform where further insight can be provided through empirical research.