4 th AFRACA MFI Forum RURAL SERVICE DELIVERY MODELS FAULU KENYA CASE

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala A Typical MFI Client  Runs a highly informal business – 1 business license.  Has other income sources.  Hardly keeps records.  Prefers dealing in cash.  Recycles cash frequently.  Business and owner are the “same”.  Operates on very good margins.  Business is highly flexible/dynamic.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala At Faulu Kenya…  We target micro-enterprises only.  77% of our loans are below US$ 600.  90% are below US$  Focus on running businesses not start-ups.  Lending is to Solidarity Groups of  58% of our clients are traders.  21% are farmers.  69% of our clients are rural based.  We work with 26,000 clients in 35 districts.  Also in Uganda and Tanzania.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Client Needs  Easy and fast access to loans.  Variety and choice of loan products.  Competitively priced loan products.  Easy loan transaction process.  Business training and advise.  Constant/frequent access to loans.  Simple loan requirements.  No collateral.  Good comfort level/confidence in institution.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Transaction Needs  Basic –Access to cash upon loan disbursement. –Convenient repayment system.  Added Value –Money transfer. –Purchase of goods. –Payment for services. –Receipt of dues.  Potential –Electronic trading –Commodity exchange

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Our System  We use Microbanker Windows version.  Unique micro finance software package that combines real-time transaction processing, general accounting and information retrieval functions with the low-cost of microcomputer hardware.  The MicroBanker SRTE (Standard Run Time Edition) is sold by FAO/Marketing and Rural Finance Service, a FAO/GTZ initiative.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Utility  Is an integrated package that covers Loans, Savings Accounts, Shares Accounts (for credit unions), Time Deposits, Customer Information and General Ledger in one package.  The FAO Micro Banking system is used in in 20 countries all over the world.  It is predominant in East Asia.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Specialized for MFIs  Includes specialized modules to handle batch processing, collection sheet generation and Management report presentation.  Specially packaged to reduce possibilities of errors and little or no time wastage on post data entry error correction.  Principally designed to handle group lending.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Variety of choice  In Single-Teller mode the system supports 500 or more loan accounts or 1,000 loan accounts with about 100 transactions or less per day.  In Multi-Teller mode the system scales to the choice and ability of each institution. The limit is only the PC processing capacity

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Easy Setup  Companies with less than 100 transactions per day need no Database licensing.  Bigger companies require Licensed SQL Server and additional database licensing from Micro banker.  System files reside on one server where all users will access them.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Security & Audit  Seven (7) levels of security access authority  Auditing Trails for each transaction  Backup Facilities before each End-Of-Day (MB),End-Of-Session GL,End-Of-Month and End-Of-Year  Daily hard copy account listings  Multi-language  Real Time Transaction processing

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Transactions & Access  Transactions volume handling-Scalable  Centralized branch CIF administration  Applications Integration with GL  Flexible interest Schemes  Choice of 360 or 365 days per year as interest divisor.  Access to specific routines controlled by user defined teller authority levels

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Rural Client Focus  Client focused reports and tracking. Clients are able to see weekly reports.  These weekly reports summarize the individual client and the group activities for the week.  The system also prints a “banking slip” that enables clients to fill in sequenced data for processing after weekly repayment.  Client history is traceable right from their time of inception.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Rural Clients  Ability to report weekly and accurately enhances client loyalty.  Generated banking slip ensures accountability as this slip is matched to the actual one from the bank.  Ability to accommodate and report on a large number of products is a big plus.  Reports encourages adaptability of individual members due to group dynamics.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Cost effective  System reduces paper wastage through highly tailored reporting, as reports are generated per group, not per client.  System setup emphasizes consistency,reliability, accuracy and timely reporting.  Centralized data processing helps in controlling quality and costs.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Unique Rural Oriented Products  System is able to handle agricultural credit with a balloon payment structure.  Current products are tied to rural client business cash flows including farming.  Rural clients can also access products of a consumer nature like household appliances.  Unique products include mobile phone loans, water tank loans, farm implement loans and bicycle loans.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Drawbacks  Reports and primary data delivered by courier to the field and back, in all the 35 districts we work in.  Clients use the nearest bank to make repayments, so we have to maintain a large number of collection accounts.  Loan disbursements are by cheque and clients have to find a clearing mechanism if they do not have bank accounts. This costs them more.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Challenges  System is still being developed to handle a centralized database and real time transactions.  Remote based links still to be tested.  Customization flexibility may hamper support.  Reliability of regulatory reporting not yet tested.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Looking Ahead  Testing mobile phone based transactions via GPRS in partnership with Vodafone Foundation.  Wireless capabilities are developing but are yet to take root.  Generic ATM network already developed in Kenya and likely to offer new opportunities.  Fibre optic cable loop under development.  multiple gateway providers and rise of VSAT usage.  MIS systems going towards open source.

Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala Thank you for Your Time