Microfinance institution (MFI) Faulu Kenya has unveiled a KES 460 million (USD 7.8 million) expansion plan that would have it become a deposit-taking microfinance bank and grow its customer base to more than one million.
Financing for the plan originates from a EUR 5 million term loan made to Faulu by Deutsche Bank last year. To hedge the foreign currency risk, especially in light of recent political turmoil, Faulu just recently agreed to a takeover of its euro-denominated loan by Kenya’s Standard Chartered Bank in return for an equivalent loan of KES 460 million.
The MFI’s transformation will involve restructuring of its offices to comply with Central Bank of Kenya requirements and will be in line with the country’s Microfinance Act, passed in 2006. The Act includes licensing and governance provisions, outlines the supervisory authority of the Central Bank, and specifies deposit protections. Faulu is also undergoing a rebranding campaign with new colors and a logo.
Faulu Kenya was established by Food for the Hungry, an international non-governmental organization (NGO), in 1991. It has 60 offices throughout Kenya and 90,000 active borrowers. Its book of loans and advances amounts to KES 1.5 billion (USD 25.4 million). As of December 31, 2007, Faulu’s assets totaled USD 38.1 million and its debt-equity ratio was 286.62 percent. Rating agency MicroRate’s December 2006 assessment of the institution gave it a ß+.
By Stephen Son
Additional Resources:
Oanda: FX Converter
Sunday Nation: “Faulu unveils plans for banking”
Business Daily Africa: “StanChart and Faulu reach deal on forex risks”
Microfinance Gateway: Kenya: Microfinance Act, 2006
MIX Market: Profile for Faulu Kenya
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