Faulu banks on Sh900m to boost digital business

Faulu Bank has received a Sh900 million capital injection from its parent firm Old Mutual to advance its digital service offerings as local lenders scramble for the mobile loans segment.

The microfinance bank on Thursday said the new financing will help it refocus its business as it seeks to boost its digital lending and support for small businesses as part of its strategy to return to profit.

This comes amid an increasing race by lenders in the country to boost their digital service offerings as the surge in digital lenders eats into the market that was previously controlled almost entirely by the banks.

“We are eager to become a leader in the digital finance space. Many of the services that the bank offers are now available online, and our intention is to make our services more accessible for our customers,” said Julius Ouma, bank’s chief executive yesterday.

With about Sh21 billion in user deposits and over 350,000 accounts, Faulu is one of Kenya’s largest microfinance lenders but has struggled to make a profit for the last few years.

According to its available latest financial results, it made a loss of Sh13 million in the financial year ended December 2022, an improvement from the Sh205 million loss it made in 2021.

Generally, all microfinance banks in the country have lately been struggling to make a profit, with their joint loss in the year ended December 2022 increasing by 78 percent to hit Sh1.3 billion, according to the latest report by the Central Bank of Kenya.

To return to profitability, small-scale lenders have lately prioritised digitisation and mobile lending to boost efficiency and compete in a growing field of digital lenders.

The latest survey report by the Central Bank of Kenya published last month reveals that 74 percent of commercial and microfinance banks now prioritise digital lending, up from only 44 percent in 2022.