- Faulu is changing how it assesses SME borrowers who lack traditional security for loans.
- A new merchant platform will help businesses consolidate their income records for credit assessment.
- The lender is introducing flexible repayment arrangements to match different business revenue cycles.
Small and medium sized enterprises (SMEs) that own no land or vehicles to pledge now have a route to formal credit at Faulu Microfinance Bank. The lender is judging them on the money moving through their businesses, not on the assets they hold.
Collateral has been the main barrier for many of these firms. Faulu says it has spent two years reworking its lending to address that gap, shifting away from retail customers and loans secured mainly by payslips. SMEs can now apply for asset financing, working capital and trade finance.
Trade finance is aimed at owners who want to import or buy stock but cannot find the money up front. In those cases, the goods being purchased can serve as the security.
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Income records are the next hurdle. Gloria Kositany, Faulu’s Senior Manager of Marketing and Communications, says traders receive payments through paybills, till numbers and cash. Their earnings end up scattered, which makes it hard to show a lender a full picture. To fix this, the bank has introduced a merchant platform where a business can gather its revenue streams and manage transactions from one portal. Faulu then uses that cash flow data to assess whether the owner can repay.
Loan structures are also being matched to how each business earns. Kositany says schools, which collect fees mainly during term, can struggle with fixed monthly instalments. Property owners, on the other hand, can get targeted top ups paid through their rental income to fund repairs.
Faulu is also checking in more often once a loan is running. It is offering financial advice, visiting businesses and keeping regular contact, so that problems surface early and loans can be restructured where necessary.
By Benedict Aoya
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