Barbara Asumadu Presents Musoni Microfinance: The Leading Credit Only Microfinance Institution in Kenya

Interview with Barbara Asumadu, CEO at Musoni Microfinance Ltd

Give us a historical background of Musoni Microfinance Limited.

Microfinance in Kenya took off sometime in the late ‘90s, and it has evolved quite a bit since then. It is a wide stretch of different types of microfinance institutions or institutions lending to the bottom of the pyramid. There are regulated microfinance banks, savings, and cooperative organizations (SACCOs), and credit only institutions. The microfinance banks have deposit mobilizing aspects of the business, while the SACCOs do savings and some lending. Musoni is a credit-only microfinance institution. Regulated microfinance banks are about 14 to 15 in total, and the deposit taking SACCOs are about 175. There are several credit-only institutions, and some of them do not feature under the umbrella body AMFI (Association for Microfinance Institutions – Kenya). The SACCOs have their own umbrella organizations, while the microfinance banks, the credit-only institutions, money lenders, etc., all come under the AMFI, which is a huge sector association in Kenya.

The digital-only providers are also coming up strongly. They are working with algorithms, purely internet-based, and have very little or no physical touch with the clientele. Clients are free to access credits from their mobile phones at the comfort of their homes. Musoni fits under the credit-only institutions, we are not authorized to collect deposits, we are purely the lending side to many at the bottom of the pyramid. Our competitive advantage is that we employ a very strong, high touch and high-tech business model, where we have a field team that meets and has meaningful relationships with our customers, but also leverages technology to reach more people and far off areas of the country. That is our strongest advantage. Musoni Kenya was the first financial institution to start leveraging technology for disbursing loans and also collecting repayments. Our operations are completely cashless, and all of our loan products are disbursed via digital channels and repaid via similar channels.

What makes Musoni so competitive?

It is the strong technology in the microfinance space, which is connected quite strongly to the Kenyan technological landscape and growth, the advent of M-PESA, and all the opportunities that this platform opened up has made our solutions a success. People find our solution so attractive and as an operator in the sector we want to continue our impact by building up on that using strong tech.

Do you see any upcoming innovations in the microfinance sector?

COVID has taught us that we need to look at and reconsider the typical traditional approach to microfinance that a lot of institutions have had to up to this point. This has created a pressured environment and built up competition in the sector, the sector feels the heat on interest rates, operational costs, the credit risk issues, and competition, posed by the government and clients. These pressures make microfinance institutions want to reconsider how it operates. The lessons we have learnt from the crisis which includes; how to effectively and feasibly conduct the business that we do – sometimes even remotely, the readiness to switch to certain distance service channels, how to get your clients adapting along with you technologically, etc. It is all about the efficiency of what you do at the moment. Therefore, when your margins are squeezed because cost of funding is higher, your income line is challenging, because of difficulties in the market, so you have got to look for ways to do your business better and more efficiently. This conclusively highlights the role of technology in easing the pressures of the microfinance industry. Technology will play a much bigger role in assisting MFIs in coming out of the pandemic and into the future.

Have the services and clientele changed?

Musoni and our new shareholders are and continue to be committed to the ideology of working with the clientele at the bottom of the pyramid. We have recapitalized the institution to make it stronger than it was before. We have on-boarded new shareholders with a common goal of getting Musoni back on track. The shareholders at the moment are ID Inspiring Development GmbH, a Frankfurt-based managing consulting company, that works in emerging and developing markets all over the world. Regional MSME Investment Fund for Sub-Saharan Africa S.A. (“REGMIFA”) is another shareholder, then we have Alterfin C.V. (“Alterfin”), a Belgian social investor that raises capital to invest it in developing countries via microfinance institutions and organizations active in agriculture. Our fourth shareholder is SIMA Off-Grid Solar and Financial Access Senior Debt Fund 1, B.V. (“SIMA”), who remain committed to Musoni’s vision of transforming and improving financial access to the low income Kenyans.

Our services, despite acquiring new shareholders, remain the same, we continue lending to people in a sustainable business activity, working capital or asset loans for businesses, but we also provide education and agricultural loans as well, because we are committed to those sectors and the difference it makes for SDGs and the economy at large. Our core target group will remain the lower income population in Kenya, located in rural, peri-urban areas of Kenya, which is where our business is predominantly conducted.

Are there projects on which you are currently working?

This year, 2023, we are taking strategic steps and engaging on some significant projects that will impact our clients and contribute towards the development of their business and the Kenyan economy.

One of these key projects would be bolstering a bit of agricultural portfolio by repackaging the agricultural loan that we have, to be able to reach more and extend our coverage to reach stakeholders in different value chains, concentrating on the key sectors of food production and trying to stretch our efforts into the entire value chain. We are also going to look into energy efficiency for agriculture, the market potential exists. We want to come up with the right products that meet the most specific needs of such clients. We are cognizant that this requires a lot of partnerships. This is also an area we are looking into, we are going to revive some good partnerships which align to specific sectors of our target clienteles, from agriculture, entrepreneurship, green energy and education.

We are also moving more towards individualized based lending. This is important to us since it will help us build an individualized relationship with our clients. Also, we want to monitor growth and the impact our solutions are having on our clients, mostly women and the youth, in whom we have specific interest.

On the business side, we are looking at more digitized products, digitizing some of our products, as well as our processes and procedures in the interest of gaining efficiency. Efficient delivery of our services is important for us in 2023. The automation will also look at divergent aspects of our processes that are still manual and digitize them in a bid to improve service delivery.

Could you tell us one of your success stories?

Musoni was the first financial institution in Kenya to employ mobile technology in lending. It started in 2010, and within a space of five years we have dispensed around 128,000+ loans and priding of 50,000+ active clients. Musoni is a member of Smart Campaign, having received SMART Certification in 2019. The company subscribes to the standards and guidelines for responsible microfinance practices by providing fair, transparent and sustainable microfinance services as advocated by Smart Campaign. We have been the recipient of several awards in the 13 years of our operation; we have been recognized for Social Impact and CSR awards, Best Company in Poverty Reduction Initiatives in 2021, and the best MFI in the use of technology solutions that was awarded during The 5th Digital Technology and Excellence Awards. Musoni is also focused on women financing. We are staying focused on what we are committed to, which is; women, agriculture and the low income sector here in Kenya. That has been our focus for the last 13 years, and that will continue to remain our focus going forward. Just doing it smarter, efficiently and impacting as best as we can.

We also have a significant loan book of agricultural clients as well, about 30% of our loan book at the end of 2022 was in agriculture.

What is your vision for Musoni in the next three to five years?

Our medium-term vision is to consolidate Musoni in the market. Musoni is a well-known brand with a lot of affection within the Kenyan market, and consolidating that by gaining even more market share would be crucial in the medium term. Secondly, we want to imprint ourselves as the go-to lending institution for great financing in business and microfinance, and that will involve expanding to more than the 25 locations that we are currently operating in, in Kenya. Our offering can go even further than where we are operating now.

Are you ‘sustainable businesses’ policy driven?

It is a cause that our shareholders are strongly committed to. In the end, to a micro borrower, a loan is still a debt, so you have to do it responsibly, and it has to be with someone or a business that is sustainable. A loan should not sink a microfinance client or micro or small enterprise business. A loan should go to develop the business. That is what we mean by sustainability, a loan that keeps a business, growing it and impacting it as well. Therefore, when we give a small microfinance loan to a business that has just one employee this year, we work with them, we grow them, within two or three years they have opened a second outlet, and they have a second or third employee. That kind of development of the businesses is important to us, and we have to be able to do that sustainably.

What drives you to do what you do, and what is your philosophy in life?

I got into this sector by pure chance, but since those first years, that passion has been built for the target group; micro, small and medium enterprises. I started off my career many years ago by granting a small loan to a market woman in Accra, Ghana. Going back a year later, she had managed to grow her business and educate her child. That was definitely a feel good moment for me starting over my career and that consolidated my passion for work. Making a difference in people’s lives, no matter how small, is more rewarding to me than anything else, and that is what drives me.

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