NAIROBI, Kenya, Oct 30 – Faulu Microfinance Bank is shifting its lending strategy towards traders and small businesses, moving away from its traditional focus on retail banking and loans backed mainly by payslips.

The bank said the change, which has been underway over the past two years, is aimed at addressing challenges faced by small and medium-sized enterprises (SMEs) in accessing formal credit.

Its new lending focus includes asset financing, working capital and trade finance facilities designed to support businesses that may not have conventional collateral such as land or vehicles.

Faulu Senior Manager of Marketing and Communications Gloria Kositany said many traders receive payments through different channels, including paybills, till numbers and cash, making it difficult to consolidate their income when applying for loans.

To address this, the bank has introduced a merchant platform that allows businesses to bring their revenue streams together and manage their transactions through a central portal.

Faulu uses the cash-flow information collected through the platform to assess businesses’ ability to repay loans, rather than relying mainly on physical assets as security.

The bank is also offering trade finance to businesses seeking to import or purchase goods but lacking the upfront capital. In such cases, financing can be secured against the goods being acquired.

Kositany said lenders needed to understand how different businesses operate and structure loans around their cash flows and repayment cycles.

She cited schools, which collect fees mainly during school terms, as an example of businesses that may struggle with loans requiring monthly repayments. Property owners, meanwhile, can access targeted credit top-ups through rental income channels to finance repairs.

Beyond lending, Faulu says it is increasing engagement with customers through financial advice, business visits and regular communication to identify challenges early and help restructure loans where necessary.

The bank has also upgraded its internal digital systems to give frontline staff a consolidated view of customers’ transaction histories and insurance products, with the aim of speeding up service delivery.

Faulu operates 24 branches and about 150 agents across the country. The bank reported a 39.7 percent share of Kenya’s microfinance banking market last year.