Faulu receives Sh1bn for lending to entrepreneurs

Money Markets

Faulu is looking at lending to small businesses in the agriculture, manufacturing, construction, transport and healthcare sectors. 

By JOHN GACHIRI

In Summary

• The Sh1 billion loan is from a new fund by the European Investment Bank.
• This is the second time that Faulu is borrowing from the EIB following a Sh570 million ($5.4 million) loan the micro-lender took in 2011.

Faulu Microfinance Bank has received a Sh1 billion loan from the European Investment Bank (EIB) for onward lending to entrepreneurs.

The new funding by the European Union’s lending arm will enable Faulu issue long-term loans to small businesses, which make up the lion’s share of its customer base.

This is the second time that Faulu is borrowing from the EIB following a Sh570 million ($5.4 million) loan the micro-lender took in 2011.

“As our second facility with the European Investment Bank, this new credit line presents yet another exciting strategic partnership and anchor to help transform our retail micro, small and medium enterprises (MSME),” said Faulu chief executive Charles Njuguna.

The Sh1 billion loan is from a new fund by the EIB.

“The European Investment Bank’s new lending agreement is the first partnership with Faulu Microfinance Bank under a new €50 million (Sh5.86 billion) initiative to support lending by microfinance institutions across East Africa.

“In the last years the EIB has provided €160 million (Sh18.8 billion) for lending by banks and microfinance institutions in Kenya,” said EIB in a statement.

Faulu is looking at lending to small businesses in the agriculture, manufacturing, construction, transport and healthcare sectors.

The new funding will also supplement the Sh4 billion that the bank had earlier set aside for lending to MSMEs.

Faulu got a capital injection of Sh2.8 billion in April last year after Old Mutual bought a 67 per cent stake in the company.

Micro lenders have been raising cash from local and foreign investors that are being attracted by the industry’s double-digit growth.

Sumac DTM raised Sh100 million from Luxemburg-based Regmifa, while Real People raised Sh1.63 billion through a corporate bond that was listed on the Nairobi Securities Exchange.

Grameen loaned Juhudi Kilimo $550,000 (Sh55 million) for onward lending to borrowers in the agricultural sector in January.

The microfinance industry’s total assets stood at Sh317.5 billion as at the end of 2013 from Sh275 billion a year earlier.