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4 th AFRACA MFI Forum

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

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4 th AFRACA MFI Forum

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  1. 4th AFRACA MFI Forum RURAL SERVICE DELIVERY MODELS FAULU KENYA CASE

  2. 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 2005

  3. At Faulu Kenya… • We target micro-enterprises only. • 77% of our loans are below US$ 600. • 90% are below US$ 1000. • Focus on running businesses not start-ups. • Lending is to Solidarity Groups of 15-60. • 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 2005

  4. 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 2005

  5. 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 2005

  6. 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 2005

  7. 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 2005

  8. 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 2005

  9. 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 2005

  10. 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 2005

  11. 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 2005

  12. 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 2005

  13. 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 2005

  14. 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 2005

  15. 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 2005

  16.  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 2005

  17. 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 2005

  18. 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 2005

  19. 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 2005

  20. Thank you for Your Time Gerald Macharia, CEO Faulu Kenya - 4th AFRACA MFI Forum - Kampala 2005

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