1a). Why is banking in poor different from normal banking?

In a bad situation, the bank officer looks for the customer, while in a regular situation, the customer comes into the bank for financial services.

In poor banking, money come from local and foreign donors, while in regular banking, funds come from deposits.

Microfinance handles a small number of loans in poor banking, while in regular banking, microfinance manages a big number of loans.

Microfinance provides additional services in poor banking, such as teaching individuals; these services are not provided in regular banking since everyone is expected to know what occurs in the bank.

Microfinance area rates in poor banking are extremely low as compared to microfinance in regular banking.

b). Why is the rate different from normal Bank

Due to high processing expenses, the quantity of loans draws high interest rates.

Micro financing has a significant administrative cost connected with it, which draws high rates of interest while officers are on the road.

Microfinance institutions are linked with significant risks, therefore they set their interest rates extremely high.

Small businesses have a relatively low marginal rate of return when compared to big businesses.

c). What did you learn from the Article about the microfinance?

The aim of microfinance is to help customers increase their economic activity and income.

Microfinance is modest in size as a result of many group lending schemes that require a minimum deposit in order for their members to qualify for loans.

Microfinance companies spend a lot of money on educating their customers and also pay for all of the trainings.

The primary goal of microfinance is to alleviate poverty.

2 (a) What are the key issues common in literature reviewed?

In the field of microfinance, there is a lot of emphasis on financial inclusion. Financial inclusion is defined as businesses and families having access to fairly priced and suitable formal financial services that suit their requirements. Geographic (i.e., proximity to a financial service provider) and socioeconomic access to financial services are two ways to describe access to financial services (that is, absence of prohibitive fees and documentation requirements).

The article focuses on the obstacles to financial inclusion, such as high prices and risk, which are at the heart of the low-end market's restricted supply of financial services. There are also the dangers of reaching out to the market's bottom end, which is excessively expensive. A hurdle has also been highlighted as a lack of financial knowledge. Microcredit methods have a number of challenges, including problems reaching low-income households and businesses, questions over whether shared responsibility is necessarily preferable, and restricted enforceability of credit claims due to the lack of collateral and expensive legal expenses compared to the loan amount. Barriers to microinsurance and saving products have also been highlighted. Geographical, transaction costs, paperwork requirements, behavioral limitations, and a lack of financial knowledge have all been identified as obstacles to saving.

The literature study also considers how financial inclusion affects society in different ways. Access to savings via commitment has boosted investment in crop farming as a result of increased consumption, which is one of the effects of financial inclusion. Digital access has aided the integration of more low-income people and micro entrepreneurs into the larger market economy, which may have a significant effect on outcome factors. The problem of inclusions vs stability was examined, since fast microfinance growth in recent years has resulted in repeated borrowing and unsustainable indebtedness among low-income customers in many instances. This is due to insufficient legal and institutional frameworks (such as the absence of a credit registry and consumer protection), but it was worsened by political interference.

The above body indicates that the literature evaluation focused on financial inclusion obstacles, outreach initiatives, and financial inclusion effects.

b). Suggest how microfinance in Kenya can be improved as from the literature reviewed by the World Bank

Kenyan microfinance can be improved by ensuring that the poor have easy access to microfinance services at a lower cost. According to the World Bank, the rate of interest charged to customers should be kept low in order to attract more people, including the poor, to participate in microfinance activities. Microfinance services will be enhanced as a result of this.

According to the World Bank, microfinance services in Kenya may be enhanced by increasing technology in the microfinance services, such that one may obtain a loan using his mobile phone, allowing a large number of individuals to utilize microfinance services rather than bank loans.

3. a) How are microfinance institution guided by the Act

The CBK gives basic instructions and recommendations to institutions on how to carry out their duties.

Respect for: the criteria to which they adhere in the performance of their duties in Kenya;

A license granted is good until December 31st of each year unless it is prompted, and it is issued in May. When the license expires, it must be renewed.

Every institution must be managed by a board of directors with a minimum of five members.

All institutions must submit their balance sheet and a copy of the editors report to the central bank within three months of the end of each financial year.

b) How are customers and microfinance protected by this law

The DPFB will notify clients of the amount of balance that must be kept as a protected deposit. The DPFB will be deemed to have been received after the protected deposit has been paid.

The DPFB requires the claimant to provide any documented evidence that is necessary to demonstrate that the customer is entitled to the funds of any protected deposit.

c) What are offences in this Law and what is their punishment

Anyone who violates a license requirement is guilty of an offense and faces a fine of up to $100,000 or a sentence of up to three years in jail, or both.

Any client who violates the governance rules commits an offense and faces a fine of up to $100,000 or a sentence of up to three years in jail, or both.

Any person who violates the loan giving conditions or credit facility is subject to a fine of not more than $50,000 or a sentence of not more than two years in jail, or both.