Old Mutual has acquired a controlling stake in Faulu Kenya DTM in a transaction that that weds top-dollar financial services with tiny loans and deposits. The financial services company and Deposit Taking Micro-Finance (DTM) made the announcement today, terming it a strategic partnership.
This acquisition gives Old Mutual a strong muscle in the growing micro-finance segment that remains a growth area for banks and insurance companies. The transaction is subject to legal agreements being finalised and relevant regulatory approvals being obtained with a tentative completion date before the end of 2013.
As part of its emerging markets expansion strategy, Old Mutual is seeking to grow its presence in Africa, the company said in a statement. “And the consideration for this transaction will form part of the R5bn (about $500m) previously identified as being available for the African market,” it said.
Mr Ralph Mupita, Chief Executive of Old Mutual Emerging Markets said: “I am delighted that we have agreed this partnership with Faulu. We continue to see further opportunities for the development of our business across East Africa.”
Faulu has grown from humble roots as a loan scheme in 1991 in Mathare, Nairobi, to a leading deposit taking micro-finance company offering financial solutions for Micro Small and Medium Enterprises (MSME’s), consumer credit, agribusiness value chains, micro-insurance and group based (Grameen Model) financing solutions.
Faulu was the first microfinance institution (MFI) to be licensed by the Central Bank of Kenya in May 2009 to mobilise deposits from the public. Since then it has grown to over 100 service outlets, including 31 banking branches in 44 of the 47 counties in Kenya with over 400,000 active customers.
Old Mutual Kenya CEO Tavaziva Madzinga said the strategic alliance fits into Old Mutual’s global ambitious growth plan of becoming a leading financial supermarket. “This deal confirms OM Kenya’s commitment of availing affordable insurance products to millions of Kenyans through strategic partners like Faulu whose fast expanding branch network creates an excellent distribution channel,” he said.
Faulu Managing Director John Mwara said that this concludes a two-year divestiture process that has seen Faulu engage with over 20 potential financial partners, subsequently narrowing down to 6 suitable local and international institutional investors. “The exercise entailed a rigorous vetting process to pick the best suited partner in line with Faulu’s commitment of being a financial bridge to success for Kenyans. This also allows Faulu to comply with regulatory requirements and attain its aggressive growth plans.” said Mr Mwara.
Old Mutual in Kenya, through its Asset Management arm, has close to KShs90 billion of assets under management, while Old Mutual Life Assurance Company remains one of the fastest growing life assurers in Kenya with assets of over KShs 10 billion. Old Mutual Kenya also operates one of the best performing Unit Trust funds in the region with funds under management of over Kshs 10 Billion and also recently acquired Old Mutual Securities, which is a securities trading company licensed by the Capital Markets Authority for the purpose of facilitating trade on the Nairobi Securities Exchange (NSE).