by Sally Levy - Africa -

MICROCAPITAL.ORG STORY: Faulu Kenya, International Finance Corporation (IFC), and Standard Chartered Bank Form Partnership to Extend Microfinance Operations in Kenya with $5.9m Loan

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Faulu Kenya, the International Finance Corporation (IFC) and the Standard Chartered Bank of Kenya have entered into a partnership to finance Faulu operations in Kenya with a KES 450 million (USD 5.9 million) loan [1, 2, 3, 4]. The IFC, a World Bank member, will provide a partial credit guarantee for 80 percent of the loan from Standard Chartered Bank to Faulu, a local microfinance institution (MFI) [1, 5]. The partnership aims to help Faulu reach more Kenyans by broadening its products and services. The IFC and Standard Chartered Bank will also provide advisory support to Faulu in relation to its recent license to become the first deposit taking MFI in Kenya [1, 5].

Faulu Managing Director, Lydia Koros, said during the signing of the agreement that “our vision is to reach the un-banked population in Kenya who have previously not been served by the existing formal institutions [1]. Our partnership with IFC will enable Faulu to offer a wider range of products and services that better meet the needs of Kenya’s micro and small entrepreneurs” [5].

According to the second national survey on access to finance, FinAccess 2009, by the Financial Sector Deepening Trust (FSDT), only one in five Kenyans has a formal relationship with a financial institution [5]. Furthermore, 32.7% of the population still has no access to financial services [6]. The FSDT is an independent organization that supports the development of inclusive financial markets in Kenya and is supported by partners such as the UK Department for International Development (DFID) and the World Bank [5, 6]. For detailed information on this survey refer to this recent MicroCapital Story [7].

Faulu Kenya was founded in 1992 as a pilot micro-enterprise lending program of Food for the Hungry International (FHI), a relief and development organization based in the USA [2]. In 1999 it became a limited liability company and a 70 percent owned subsidiary of FHI [2]. The latest available information is on the MIX Market, the microfinance information clearinghouse, as at 31 December 2007.  Faulu had a Gross Loan Portfolio of USD 27.4 million and over 90,000 active borrowers [8]. Total Assets were USD 46.9 million with Return on Assets of 2.29 percent and a Return on Equity of 11.49 percent [8].

Created in 1956, the IFC seeks to foster sustainable economic growth by supporting private sector development, mobilizing private capital, and providing advisory and risk mitigation services to businesses and governments [3]. Within its Global Financial Markets sector, the IFC supports microfinance in order to promote successful and sustainable economies in low and middle income countries. The IFC provides direct and indirect investment and advisory services to the microfinance sector. Its focus is on creating and supporting commercially viable MFIs that can attract private capital thereby responding to unmet demand for micro loans. Furthermore it seeks to demonstrate the business case for commercial microfinance and also promote it as an asset class to private institutional investors. Earlier this year MicroCapital reported on the USD 514 million investments made by IFC in the MSME sector [9].

Make your comment at: http://microfinanceassociation.ning.com/forum/topics/deals-in-microfinance-the

By Sally Levy, Research Assistant

Bibliography:

[1] Capital Business “Shot in the arm for Faulu Kenya” by Michael Karanja, 20 May 2009, http://www.capitalfm.co.ke/business/Local/Shot-in-the-arm-for-Faulu-Kenya-2703.html

[2] Faulu Kenya: http://www.faulukenya.com/

[3] International Finance Corporation (IFC): http://www.ifc.org/

[4] Standard Chartered Bank Kenya: http://www.standardchartered.com/ke/en/

[5] International Finance Corporation Press Release “IFC Investment in Faulu Kenya to Bring Financial Services to More Kenyans”, 20 May 2009, http://www.ifc.org/ifcext/media.nsf/content/SelectedPressRelease?OpenDocument&UNID=A394F8479B368856852575F90049BFB6

[6] Financial Sector Deepening Trust: http://www.fsdkenya.org/news/index.html

[7] MicroCapital Story, 26 June 2009, “FinAccess 2009 Survey, Released by Financial Sector Deepening Kenya and Central Bank of Kenya, Shows African MFIs Fill Banking Void as New Laws Provide More Flexibility”, https://www.microcapital.org/microcapital-story-finaccess-2009-survey-released-by-financial-sector-deepening-kenya-and-central-bank-of-kenya-shows-african-mfis-fill-banking-void-as-new-laws-provide-more-flexibility/

[8] Mix Market Faulu Kenya: http://www.mixmarket.org/mfi/faulu-ken/data

[9] MicroCapital Story, 5 June 2009, “International Finance Corporation (IFC) Invests over $514m in Micro Small and Medium Enterprise (MSME) Initiatives During 2008”, https://www.microcapital.org/microcapital-story-international-finance-corporation-ifc-invests-over-514m-in-micro-small-and-medium-enterprise-msme-initiatives-during-2008/

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