Family Bank changes lives in Kenya via Microfinance
For Family Bank in Kenya, banking is more than money – it is a calling and a matter of improving lives. Since 1984 Family Bank has been enabling people to create and sustain wealth by providing access to flexible, affordable financial services. Thanks to a key partnership with the EIB more resources have been made available for Family Bank. In an interview with the EIB Family Bank’s Managing Director and CEO, Peter Munyiri, talks about these success stories.
How does Family Bank lead positive change in people’s lives?
The contribution Family Bank makes is truly by bringing improvements to society at large. Currently we have 1.47m clients, mainly rural dwellers or are living in urban slums, all with low income levels. Their primary concern is how to put basic provisions on the table for their families. Although they are struggling, somehow they find the underlying strength wanting to move upwards in life. Through financial support they have the possibility to change their social status, build decent lives and provide their children with basic medical care, food, clothes and education.
What products does Family Bank offer to their clients?
We customise our product offering. We sit with our clients and get to know them to be able to create loan facilities on the basis of their needs. In some cases a client starts with a small loan facility and progressively they move to other, larger, longer-term facilities. On other occasions, we see the opportunity for collaboration and we bring two entrepreneurs together to help them build their businesses and they act as co-guarantors for each other.
How do you ensure that clients repay their micro-loans?
Our risk-assessment is really driven through the branches and the relationship officers. Our structure only accepts repayment via bank accounts and not via repossession. If a client buys a cow, the branch managers do not sell the cow to recover losses. We have to be comfortable with the potential loss from the first micro-loan. Slowly the loan size builds up, as does the relationship. Our average loan size is around EUR 400 and by the time a customer is ready to borrow a higher amount, such as EUR 1000, they will have such a good track record with us that we can be sure that the risk is low.
Impact funding and corporate social responsibility are very important to Family Bank. Can you tell more what that means for Family Bank?
Our impact is very significant, especially when you consider certain key target groups. Take women’s groups for example. We have lent to over 1000 women’s groups and many of our individual customers are also women. Youth is another impact area. These are people with ideas, who want to expand their horizons and who are at the heart of their community. The impact of lending to women and the youth translates into employment, which in turn creates financial freedom and empowerment. It is this chain of empowerment that is most significant in terms of our impact.
The relationship with your clients clearly means a lot to Family Bank. Has the relationship with the EIB helped to reinforce this?
Our relationship with the EIB is very valuable to Family Bank. Firstly, the long term funding by the EIB creates turnaround and ensures sustainability. Secondly, the partnership with the EIB has brought important advantages to Family Bank. It has strengthened our bank profile, our balance sheet is more matched, and for the customer there are more funds available to roll over and continue our financing programmes with loans that have repayment terms of 5, 6 and even 10 years.
Finally, what does the future hold for Family Bank?
We have a great growth plan. By the end of 2015 we will have broken through the threshold of over 100 branches. Already in 2014 we will close the year with around 85 branches. In addition, our loans to companies increase every year, in 2013 we lent KES 27.9bn [EUR 250m]. And for this year from December 2013 to August 2014 our net loans have grown over KES 6.7bn [EUR 60m]; an incredible achievement that will spread across our network of branches. In terms of employment we have gone from 700 to 1567 Family Bank employees in the last three years. We try to employ graduates to create opportunities for them to build careers and implement their knowledge. In turn this means we can expand the business lives of SMEs and microenterprises. And all of this makes us feel happier.
Family Bank Kenya: Testimonials
Daniel Kasimu improves the quality of his products thanks to Family Bank loans
32 year old Daniel Kasimu has been operating his maize milling firm for the past six years together with his wife who assists him in the daily activities of the business. A client at Family Bank for five years now, he has been able to boost his business through various loans going from KES 100 000 [EUR 890] to KES 650 000 [EUR 5 800].
Daniel’s business targets individuals in Machakos, a city located 63 kilometres southeast of Nairobi, especially low income earners from the Kariobangi slum. Occasionally he also receives orders from local schools and government Institutions. His business employs five workers on a permanent basis and has a monthly turnover of KES 600 000 [EUR 5 300].
“My main challenge is to meet the cost of electricity and source affordable raw materials. Thanks to the financing from Family Bank, I manage to buy in bulk to reduce the cost of production” Daniel said. Currently, Family Bank is financing his fifth KES 650 000 [EUR 5 800] loan which enabled him to purchase a destoner machine. And Daniel does not intend to rest on his laurels: “I followed a number of courses in food production and business management in order to strengthen my business further. I am also looking forward to receiving a KES 1m [EUR 89 000] funding to brand my products and purchase more milling machines.”