How to Start a Microfinance or Table Banking Business in Kenya

Microfinance and table banking have become vital pillars of financial inclusion in Kenya, providing credit, savings, and financial services to millions of Kenyans who are underserved by commercial banks. With over 70 percent of Kenya's workforce in the informal sector, the demand for accessible, flexible financial services remains enormous. Whether you want to establish a formal microfinance bank (MFB) licensed by the Central Bank of Kenya (CBK), a non-deposit taking credit provider, or a community-based table banking group, this guide covers the regulatory framework, licensing requirements, capital needs, operational models, and strategies for success.

Understanding the Microfinance Landscape

Kenya's microfinance sector operates at multiple levels. Deposit-Taking Microfinance Banks (MFBs) are licensed by the CBK under the Microfinance Act, 2006, and can accept deposits from the public — examples include Kenya Women Microfinance Bank, Faulu MFB, and SMEP MFB. Non-Deposit Taking Credit Providers (NDTCPs) provide loans but cannot accept public deposits — they are now regulated under the CBK (Non-Deposit Taking Credit Providers) Regulations, 2025. Credit-only microfinance institutions provide small loans funded by donor grants, investor capital, or borrowed funds. Table banking groups (also known as chamas or merry-go-rounds) are informal community savings groups where members pool contributions and rotate loans among themselves.

Option 1: Starting a Deposit-Taking Microfinance Bank

A deposit-taking MFB is the most regulated and capital-intensive option, but it offers the greatest range of services and revenue potential.

Capital Requirements: The CBK requires a minimum core capital of KES 60 million for MFBs with nationwide operations, or KES 20 million for community-level MFBs operating within a single county or region. This capital must be fully paid up before the licence is issued.

Licensing Process: Submit an application to the CBK with a comprehensive business plan covering the proposed business model, target market, product range, governance structure, risk management framework, and five-year financial projections. Required documents include certificates of incorporation, details of all shareholders and directors, proof of source of capital, fit and proper declarations for directors and key managers, draft policies for credit, risk, compliance, and anti-money laundering, and evidence of adequate premises, IT systems, and operational capacity.

The CBK conducts thorough due diligence on all shareholders and directors, evaluates the business plan, and may conduct on-site inspections. The licensing process typically takes 6 to 18 months. Upon approval, the MFB must comply with ongoing prudential requirements including capital adequacy ratios, liquidity ratios, and regular reporting to the CBK.

Option 2: Non-Deposit Taking Credit Provider (NDTCP)

Following recent regulatory changes under the Business Laws (Amendment) Act, 2024, non-deposit taking microfinance businesses must be either licensed or registered with the CBK. This includes digital lenders and traditional credit-only microfinance institutions.

Licensing Thresholds: Any NDTCP whose capital, borrowings, or loan book exceeds KES 20 million must obtain a licence from the CBK. Smaller operators below this threshold must register with the CBK. Application fees are KES 100,000 for both licensing and registration. Annual fees are KES 500,000 for licensed entities and KES 250,000 for registered entities.

This option is more accessible than a full MFB licence — you cannot accept deposits, but you can provide loans funded by equity, borrowed funds, or investor capital. The regulatory burden is lighter, making it suitable for entrepreneurs entering the microfinance space with moderate capital.

Option 3: Table Banking and Chama Groups

Table banking is a community-based financial model where a group of people — typically 10 to 50 members — meet regularly (weekly or monthly) to contribute a fixed amount to a common pool, from which members can borrow at agreed interest rates. This model has transformed financial access for women's groups, youth groups, and rural communities across Kenya.

Registration: Table banking groups can register as self-help groups with the Department of Social Development at the county level, which costs approximately KES 1,000 to KES 5,000. For greater legal recognition and access to bank accounts, the group can register as a community-based organisation (CBO) or a cooperative society with the Ministry of Co-operatives.

How Table Banking Works: Members contribute a fixed amount at each meeting — typically KES 200 to KES 5,000 per sitting. The pooled funds are placed "on the table" and immediately loaned to members who need credit. Borrowers repay with interest — commonly 5 to 10 percent per month — and the interest earnings are shared among all members as dividends at the end of the cycle (usually 12 months). Some groups also maintain a welfare fund for emergencies and a savings fund for long-term goals.

The table banking model requires minimal startup capital, no formal licensing, and can be launched with as few as 10 committed members. Successful table banking groups often grow into registered SACCOs or credit cooperatives as their financial base expands.

Startup Costs by Model

For a deposit-taking MFB, the minimum investment is the core capital of KES 20 to 60 million, plus premises setup (KES 2 to 10 million), core banking software (KES 1 to 5 million), and initial operating expenses. Total: KES 30 million to KES 100 million.

For a non-deposit taking credit provider, budget for registration/licensing fees (KES 100,000), initial loan capital (KES 1 to 20 million), office setup (KES 200,000 to KES 1 million), loan management software (KES 100,000 to KES 500,000), and working capital. Total: KES 2 million to KES 25 million.

For a table banking group, startup costs are minimal — primarily group registration (KES 1,000 to KES 5,000), a record-keeping book or simple software, a lockable cash box, and members' initial contributions. Total: KES 10,000 to KES 50,000.

Revenue Model and Pricing

Microfinance businesses generate revenue primarily through interest on loans. MFBs and NDTCPs typically charge interest rates of 1.5 to 3 percent per month (18 to 36 percent per annum) on microloans, reflecting the higher cost of serving small borrowers. Additional revenue streams include loan processing fees (typically 2 to 5 percent of the loan amount), insurance commissions on credit life policies, transaction fees, and for MFBs, interest on deposits and payment services revenue through agency banking and mobile money integration.

Profitability depends on maintaining a high-quality loan portfolio — the portfolio at risk (PAR) ratio should be kept below 5 percent. This requires robust credit assessment processes, active loan monitoring, and effective collections procedures.

Compliance and Regulatory Obligations

Licensed MFBs must comply with CBK prudential guidelines including minimum capital adequacy of 12 percent, liquidity ratios, single borrower limits, and regular submission of financial returns. All microfinance entities must comply with the Proceeds of Crime and Anti-Money Laundering Act, implement Know Your Customer (KYC) procedures, and report suspicious transactions to the Financial Reporting Centre. Credit information must be shared with Credit Reference Bureaus as required by law.

Interest rates must comply with the CBK interest rate guidelines and consumer protection regulations. All fees and charges must be transparently disclosed to borrowers in compliance with the Total Cost of Credit disclosure requirements. Tax obligations include corporate tax at 30 percent on net profits, PAYE for employees, and VAT on applicable services through the Kenya Revenue Authority.