Gospel music artiste Jemima Thiongo entertains guests during the launch of Faulu Kenya as a deposit-taking institution earlier this year. Photo/CHRIS OJOW
Faulu Advisory Services, a fully owned subsidiary of micro-finance group Faulu Kenya, has acquired an insurance brokerage company as it seeks to diversify its offerings by getting a piece of the untapped business.
The micro finance firm has now taken full control of Trustmark Insurance Brokers at an undisclosed price, and a notice published in the latest Kenya Gazette indicates that Finance Minister Uhuru Kenyatta gave the deal the nod on November 11.
“In exercise of the powers conferred by Section 31 of the Restrictive Trade Practices, Monopolies and Price Control Act, the Deputy Prime Minister and Minister for Finance hereby authorizes the proposed acquisition of Trustmark Insurance Brokers by Faulu Advisory Services Limited Magazines,” says Mr Kenyatta.
The move underlines the growing trend in the local financial services of having integrated financial service models — which spans from trading shares, selling insurance products to offering loans — which has come under scrutiny in the US in the wake of the financial crisis.
George Maina, the CEO of Faulu Advisory Services said the deal was in line with firm’s strategy to enter into new lines of business in a bid to grow its earnings and diversify the range of financial services it offers.
“It’s a strategic move on our side to venture into insurance brokerage. For now, we shall continue offering services that the brokerage used to have,” said Mr Maina.
Currently, the firm offers savings and loans at the low end of the market, and is keen to develop insurance products that will target the same niche, which has been neglected by most Kenya’s insurance firms.
It is likely that the entry of the Faulu Kenya group into insurance business will help improve research that could lead to development of micro insurance products in Kenya.
Development of low-price insurance products could be the key to increase the availability of these crucial financial service, whose penetration rate has remained at a mere 2.5 per cent for nearly a decade.
Less than a million Kenyans for instance have life insurance cover, despite its savings and risk cushion potential.
Sector players blame a low savings culture and lack of awareness on the importance of insurance for the slowdown.
A study conducted earlier by the Association of Kenya Insurers found that Kenyans are willing to pay for insurance, but at monthly premiums that majority can afford, averaging Sh500.
This is the market that Faulu is eyeing and is betting that its knowledge will make its easier for it to serve the profitable segment.
This buyout comes as integrated financial services models are increasingly taking route in Kenya with commercial banks leading the way in financial supermarket models.
Equity Bank, NIC Bank, Co-operative Bank and CFC Stanbic are fronting this model and their cocktail of businesses includes insurance, stockbrokerage, commercial and investment banking.
This has mostly happened through acquisitions since its provides an easy solution compared to starting operations from scratch.
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