Faulus refreshing formula of success

“Our success story is making people afford food, clothes, shelter, be healthy and educate themselves.”

Success for many Chief Executive Officers of leading corporate especially banks is measured by the profits posted during the full year results or dividends paid to shareholders right? Not so for John Mwara the CEO of Faulu, which was recently upgraded to a fully fledged commercial bank. “ To me the measure of success is not how much profits am making, but how many lives I have changed therefore I must learn to celebrate a measure of success foreign to other market players,” he declares.

Refreshing, is it not? Not so if you have not followed the history of Faulu then known as Faulu Kenya, a company started in 1991 as a project for Food for the Hungry in Mathare.

Faulu Kenya was motivated by an international NGO Food for the Hungry (FH) which concentrated in giving food to the hungry and intervening in needy cases or calamities by offering out relief food. After realizing it as a permanent need the NGO put together US$ 8,000 decided to lend it through the churches. This worked for a year whereby the needy would be given loans which they would pay back.

Using the world renowned Grameen Model where people come together with a common interest, some were impressed with this provision and consequently formed groups to ensure that everyone paid back.

Twenty years on, ‘your bridge to success’ as their tagline says has changed many people’s lives from vegetables venders to maize roasters who have become big; one even now owns a supermarket.

“Faulu has since grown with a footprint in all Kenyan provinces. We now have a foot print in 92 locations countrywide and our 80 initial clients have reached the 300,000 mark and still counting.”

Listing some of the milestones of Faulu, Mwara remembers how from a food project which became an NGO in 1994 making it able to source for own funds, Faulu has grown to its current stature. At that time DFID and USAID gave out the initial financial support of $1million and a guarantee of Sh120million respectively. The guarantee from USAID, the CEO explains could be used as a guarantee to go to banks and borrow money.

“From an NGO, Faulu Kenya took only five years to break even becoming self sustaining therefore converting to a Limited Company in 1999. We had then grew and reached a portfolio of Sh600million. But since we didn’t have assets funding become a challenge as the international focus shifted from poverty eradication to HIV/AIDS, this made sourcing for money for Micro Finance Institutions (MFIs) difficult,” explains Mwara.

Innovativeness was urgently needed hence Faulu’s move to try raise money from the Capital Markets by convincing people that it was worthwhile to invest in the poor. In 2005 Faulu floated the first bond in Africa by an MFI and surprisingly raised Kshs500million, money that was used to grow the bank. The floating of the bond and its subsequent maturity in April effectively converted Faulu to a public institution.

“We have plans to float a Ksh1billion bond next year since our first had a major impact in our business; we were able to maintain low interest rates, grew our portfolio as we could now absorb big money. We also grew our branch network from 43 to 70 districts. Also we brought in professionals into our workforce making us put in place good governance structures and our financial reporting in order,” he says adding that because of the bond performance Gich Bank gave Faulu Tier II capital through their long-term debt of £6million.

From 2005 to now Faulu has grown by a mind boggling 5,300 per cent and increased its customer base from 18,000 to 350,000. With the passing of the Micro finance Act that the bank helped to formulate Faulu started transformation. “We wanted to be pacesetters and after a rigorous vetting by Central Bank of Kenya we got a license to operate as a deposit taking MFI in May 2009 followed closely with the nod to operate as a fully fledged commercial bank in March this year, the only one that was given a go ahead out of nine applicants.”

Barely half a year since becoming a bank, Faulu now has 26 branches and has established several partnerships setting an example as to how micro finance is run in the country. With Posta as agents Faulu is able to reach 500 locations used on a Point of Sale (POS).

“Noting that our customers have emergencies, right from the beginning we had a product that is completely mobile- based and have so far disbursed 48,000 loans.”

Faulu, Mwara reveals has been researching on a health product and together with Pioneer Insurance have from December last year done pilot tests for a product of Kshs8,000 for four family members with Kshs250,000 unlimited liability for hospital. “We have already done a sample of 3,000 covers and established 200 hospitals countrywide, in the last 8 months the product has proved successful and is ready for roll out soon. Our aim is to bring medical cost much far down; to us it’s a transformational product that will make a difference to Kenyans,” he opines.

Going forward Faulu aims to become a full branchless bank and turn into the agent of choice to bigger financial institutions keen on the low end of the market. Asked about competition in the market, Mwara says, “only t\he most innovative institution will survive the onslaught, but am seeing a financial services sector maturing the way telecoms are doing. The secret is to have a cheap, accessible and easy financial solution,” he offers.