Faulu Bank to close six branches in cost-cutting drive
DIVESTMENT: Old Mutual’s subsidiary Faulu Microfinance Bank will shut down six branches across the country from next year to cut operation costs amid decline in the number of customers visiting its physical branches.
The move, which has since been approved by the Central Bank of Kenya, will see Faulu Bank close its Gikomba, Limuru, Nanyuki, Kiserian, Homa Bay, and Bondo branches by April 2023.
“Operations in the affected branches shall cease with effect from close of business 14th April 2023. We encourage our customers to visit us at any of our other banking outlets or transact using our alternative channels,” Faulu Bank said in a consolidation notice.
The lender said some of its physical offices, which are facing reduced business activities, are costing the lender money as more customers shift to digital platforms. The affected branches will consequently be consolidated with nearby branches.
Kenyan banks have been scaling up investment in innovative technology to improve efficiency and customer satisfaction amid surging competition from digital financial institutions. “The decision is based on customer usage and we are seeing that decline in the branches. It is costing us money but customers are not using those channels [branches],” Old Mutual CEO Arthur Oginga told Business Hub. Old mutual offices will also act as agency offices for Faulu’s customers.
Operating expenses
Old Mutual’s operating expenses were up by 30 per cent across the six months to June 2022 when it posted Sh375 million loss before tax.
This was driven by increase in software expenses, taxes, and market expenses following the group’s rebrand to Old Mutual in Kenya and Uganda that swallowed loss-making insurer UAP Holding.
Old mutual is expected to complete the rebranding drive in the South Sudan and Tanzania subsidiaries in the course of 2023.
Faulu’s parent company, Old Mutual Holding, has been closing operations of some of its business units and inked consolidations to ease financial strains.
Last May, the financial services group announced it was stopping the stock brokerage business in Kenya to concentrate on its asset and wealth management units. The wealth management services were extended to include even individuals to boost its customer base and capital.
