Faulu shifts focus to small businesses with new lending products

Nairobi, Kenya - Microfinance Bank Faulu is pivoting its lending approach towards traders and small businesses, shifting away from its prior emphasis on retail banking and conventional collateral-backed loans. This strategy alteration, implemented over the past two years, seeks to tackle the hurdles faced by SMEs in securing formal credit. The new lending focus encompasses asset financing, working capital, and trade finance options, tailored for enterprises that lack typical security such as land or vehicles.

Faulu’s Senior Manager of Marketing and Communications, Gloria Kositany, highlighted the challenge of many traders receiving payments through varied channels like paybills, till numbers, and cash, complicating loan applications. To tackle this, the bank rolled out a merchant platform, enabling businesses to integrate their revenue streams and oversee transactions via a centralized portal.

Faulu leverages cash-flow data from this platform to evaluate a business's repayment capability, foregoing reliance on physical assets as collateral.

The institution also extends trade finance to businesses importing goods or purchasing items without sufficient initial capital, securing financing against the acquired goods. Kositany stressed the importance of understanding different business operations for loan structuring around cash flows and repayment cycles, citing schools and property owners as examples. Property owners can utilize rental income for targeted credit top-ups to repair properties.

In addition to lending, Faulu is deepening customer engagement through financial advice, business visits, and consistent communication to promptly identify issues and assist in loan restructuring. The bank has also bolstered its digital systems, equipping frontline staff with a unified view of customers' transaction histories and insurance products for faster service delivery. Faulu operates 24 branches and approximately 150 agents nationwide, holding a 39.7 percent share of Kenya’s microfinance banking sector last year.