MICROCAPITAL STORY: Faulu Becomes First Microfinance Institution in Kenya Licensed to Take Deposits

Faulu Kenya Limited has been granted a license to accept deposits, the first microfinance institution (MFI) in Kenya to receive such a permit. Governor of the Central Bank of Kenya (CBK) Njuguna Ndung’u has announced that as many as nine MFIs will receive such licenses by the end of the year.

The new license comes under the Kenyan Microfinance Act that came into effect in May 2008. The Microfinance Act allows the Central Bank to license, regulate and supervise “deposit-taking microfinance businesses” – defined as institutions that provide loans or other facilities to micro or small enterprises and low income households, and that receive money by way of deposits or interest on deposits. Previously, MFIs could issue loans but were not allowed to take money from the public. Faulu was one of ten MFIs to submit a formal application to become a deposit-taking institution. CBK Governor Ndung’u has said that the other applications are in various stages of the approval process, to be completed by year-end. Read more about Kenya’s Microfinance Act in this MicroCapital story.

Faulu Kenya was founded as a pilot micro-enterprise lending program of Food for the Hungry International (FHI), a relief and development organization based in Geneva, Switzerland. The Faulu Loan Scheme began in Nairobi in 1992, and Faulu Kenya became a limited liability company – a 70 percent owned subsidiary of FHI – in 1999. FHI also operates microfinance programs through its affiliates Faulu Uganda Limited and Faulu Tanzania.

Today, Faulu Kenya has 87 branches serving over 220,000 clients with a gross loan portfolio of Ksh 3.4 billion (USD 437 million).* Faulu Chairman Ken Wathome has announced that the new deposit-taking services will allow Faulu to expand.  They hope to reach 1 million customers by 2011, offering both credit and savings products.

The new licenses are part of a push on the part of the Kenyan government and the CBK to expand access to financial services, as well as promote a culture of saving in Kenya. Read about proposed amendments to Kenya’s Banking Act to enhance the regulatory framework for MFIs and mobile banking technology in this MicroCapital story.

By Jaclyn Berfond, Research Assistant

*Note: Faulu Kenya does report to the MIX Market, the microfinance information clearinghouse, however the information was outdated.  More recent financial information was available on Faulu’s website here.

Additional Resources:

Bloomberg: Kenya to License Nine Deposit-Taking Micro Lenders by December by Eric Ombok

Daily Nation: Faulu licensed to take deposits by Mwaniki Wahomep

Kenya Broadcasting Corporation: CBK licences Faulu Kenya to receive deposits

Central Bank of Kenya: Microfinance Act

Faulu Kenya: Homepage

MicroCapital Story: Kenya’s Microfinance Act to Come into Effect

MicroCapital Story: M-Banking 2009 Conference in Nairobi Showcases Promise to Enhance Kenya’s Banking Regulations Towards Microfinance Institutions and Mobile Banking Technology

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