Faulu Microfinance Bank plans to lend up to Kshs 3 billion to micro, small and medium enterprises (SMEs) agribusiness, chamas and group customers to help them recover and grow following the Covid-19 economic turmoil.
This includes a Kshs 500 million trade finance facility the lender has rolled out targeting larger SMEs mostly in construction, trade, agribusiness and import business.
The move comes as Faulu scales up financial support to its customers mainly micro-traders and business groups totaling 150,000 Faulu customers countrywide.
Faulu Bank MD and CEO, Apollo Njoroge, says the lender is keen on providing support to SMEs given their unique financial needs as they strive to rebuild their business operations.
“Our goal is to help small businesses who form the bulk of our customer base to recover after having endured a difficult period. SMEs not only need financial support to get back their footing but also financial education and motivation to sustain a growth trajectory,” said Njoroge.
He added that small enterprises are currently grappling with acute liquidity shortage thus hampering their ability to rebuild and scale up their operations as economic activity gradually returns to normal.
Mr. Njoroge further explained that SME recovery is critical to Faulu’s strategy of growing revenue from this particular business segment which accounts for the largest chunk of its loan book and clientele.
“As a Bank, this is an opportunity to provide financial solutions that address specific needs of our customers struggling to rebuild their businesses in a challenging environment.”
The bank recognizes that enterprises especially micro and groups not only need funding but financial literacy to make the right decisions regarding their businesses. With this in mind, Faulu will be organizing workshops for its customers to meet seasoned Entrepreneurs and learn how they can keep their business afloat amidst the myriad of challenges they face from time.
Under trade finance, Faulu is offering a variety of products designed to enable small enterprises take advantage of emerging opportunities in local and international trade and commerce.
Such products include Local Purchase Order (LPO) and Local Service Order (LSO) financing, invoice discounting, supply chain financing, tender/bid bonds, performance bonds, advance payment guarantee, retention bond, payment guarantees and customs bonds.
“Our trade finance solutions are targeting 7,500 clients in the large SME category by providing financial security to help them win contracts and thus expand beyond recovery. For the micro enterprises and business groups that borrow by members guaranteeing each other, we have several flexible loan products,” said Njoroge.
Learning institutions will also benefit with Faulu providing financing to buy more buses so as to comply with social distancing rules. Also, the Bank will also train its SME customers on how to grow their businesses and strengthen financial risk management.
Agriculture is the backborne of the Kenya’s economy. The bank working with strategic partners will offer farmers the much needed support to increase production as the country seeks to achieve food security.
In 2019, Faulu embarked on expanding its branch network in a strategic move to grow its presence across the country and grassroots reach in the counties. The Bank is also enhancing its mobile platform to customers perform financial transactions more efficiently.
With SMEs hit hard by Covid-19 shocks including supply chain disruptions, declining consumer demand and reduced access to credit, small business owners need friendly financing models for sustainable recovery and growth.
The World Trade Organization estimates that SMEs represent over 90 percent of the business population, 60-70 percent of employment and at least 50 percent of GDP in many countries. In Kenya, SMEs contribute 30 percent of jobs and one-third of GDP, underscoring their pivotal role in both formal and informal sectors of the economy.
Faulu Microfinance Bank, a subsidiary of the UAP Old Mutual Group, has a network of over 60 outlets and over 1000 employees. The Bank, established in 1991, offers a variety of financial solutions catering to both Retail and MSME segments.
Old Mutual is an international long-term savings, investments and protection Group founded in South Africa in 1845. The Group provides Life Assurance, Asset Management, Banking and General Insurance in over 40 countries in Europe, the Americas, Africa and Asia. In Kenya, other affiliates within the Old Mutual Group comprises of Old Mutual Holdings which is the holding company of Old Mutual Life Assurance Company, Old Mutual Investment Services (K), Old Mutual Investment Group (K), Old Mutual Securities, Faulu Microfinance Bank and most recently UAP Holdings.