Old Mutual gets regulatory nod to acquire Faulu Kenya

The Old Mutual Building along Kimathi Street in Nairobi. Photo/Diana Ngila
The Old Mutual Building along Kimathi Street in Nairobi. Photo/Diana Ngila 

Old Mutual has received regulatory approval to acquire a controlling stake in Faulu Kenya in a deal that will see the micro-lender company with set ownership limits.

The London-listed Old Mutual is said to have received the nod of Central Bank of Kenya (CBK) and Financial Services Board (FSB) of South Africa, according to reports in Reuters.

The transaction offers Old Mutual a piece of Kenya’s banking business and deepens its financial supermarket model, which includes trading shares, selling insurance products and offering loans.

“Acquisition of a majority stake in Faulu Kenya has received the final required regulatory approvals,” said Reuters. The sale will allow Faulu Kenya, majority owned by non-governmental organisation Food for the Hungry International (FHI), to diversify its ownership and meet CBK ownership caps.

The shareholder limits bars investors who are not banks, foreign finance companies or the government from owning more than a 25 per cent of local banks. The duo said in July that the deal was to be concluded this month after meeting regulatory approvals.

The deal involved the sale of a controlling stake whose size and worth was not disclosed.

The micro lender is also expected to raise cash from the shares sale that will most likely involve the creation of new stocks rather that the exit of current shareholders to accommodate the new investors.

Faulu became the first microfinance institution (MFI) to get permission from CBK in May 2009 to accept deposits for onward lending instead of relying on donors and commercial institutions to support its loan book.

The micro lender has more than 100 outlets, including 31 bank branches spread across 44 of Kenya’s 47 counties, offering Old Mutual a wider presence to sell insurance products in a process dubbed bancassurance.

For London-listed Old Mutual, which fully owns the Kenyan unit, the Faulu deal is in line with its global operation that has insurance, banking and asset management businesses spread across four continents.

It has also launched a series of overseas takeovers aimed at reducing its dependence on South Africa where it owns the country’s fourth biggest lender, Nedbank.

Old Mutual wants to use Kenya as a launch pad for a larger piece of East Africa and has set aside Sh250 billion for  buying majority stakes in financial services firms in Africa.

In Kenya, it has an insurance arm, asset management division and stock broking division which it acquired with the 2010 buyout of a 70 per cent stake in Reliable Securities.

Integrated financial services models are increasingly taking root in Kenya with commercial banks leading the way in the financial supermarket models.

Equity Bank, NIC Bank, Co-operative Bank and CfC Stanbic are fronting this model, which has come under scrutiny in the US in the wake of the financial crisis.