David Irungu, MD, REMU Microfinance Bank.

REMU’s unique model of financial inclusion, reaches theunbanked

By Caroline Mwendwa

While most microfinance institutions begun by only offering credit, REMU made the first steps into the industry by taking deposits. As a regulated microfinance bank, REMU has grown from a network of two to four branches. It has a customer base of 10,000 savers and 2, 500 borrowers. With its net cast both in the urban and rural areas, REMU’s customers are mainly in agribusiness, as well as small and medium enterprises (SMEs). “Our focus is on the dairy, poultry and cereal farmers. This puts into consideration the diversity of farming practices in Kenya,” says David Irungu, REMU’s CEO.
The microfinance bank applies the value chain approach to achieve its goal of inclusion. “Using those already linked to us, we are able to reach the unbanked population by netting their employees, and the suppliers of their goods,” explains Irungu. This means that not only do the SMEs provide a large customer base for REMU, but also act as an intermediary between the microfinance bank and the targeted unbanked population. “This is what makes our model of operation unique from others, and shows how innovative we have been in pursuing our goal of being a highly inclusive microfinance bank,” he says.
REMU has tapped into partnerships to keep its customers moving forward, even during tough times. “We partner with distributors of necessities like cereals and animal feeds to make sure that our customers obtain these products to grow their businesses. We pay these organizations and once the farmer has had good yields, we are able to get the money back, and the farmer makes a profit from the yields as well, this approach has positively impacted the farmers’ ability to move forward,” he says.
With customers borrowing as low as Kshs 10,000 to an average of Kshs 150,000, the microfinance bank is open to people from all walks of life. While most banks will shun startups, REMU embraces them with the desire to see them grow immensely, and develop partnerships that last. “We offer credit to startups, besides advising them on how to run their business,” he says.
Another way in which REMU implements its goal to be an inclusive institution is by accepting a hybrid of securities. “We accept household goods as collateral, and this enables more people to access our products, regardless of their financial status,” adds Irungu.
On technology, REMU, has extensively leveraged on the available resources to make banking easy and convenient for its customers. Through the M-Pesa platforms for example, REMU customers can experience a very versatile way of depositing, withdrawing and transferring money. By partnering with other players such as Safaricom, REMU customers, enjoy the privilege of a convergent financial system.
The various options at the disposal of REMU customers, is a proof of its advancement and milestones achieved overtime. “We have automated our operations, and our customers can access ATM services from any branch,” he assures.
The fees charged for these services are also highly affordable to accommodate the customers. Transfer of funds is for instance free of charge as well as the mobile banking application. “Our customers do not have to pay for mobile banking services,” he asserts.
Mr Irungu however explains that even though technology is an important factor in the growth of the financial sector, it all depends on how well one is able to leverage on it, and benefit efficiently.
The impact the microfinance bank has on its customers can be evaluated by checking the change in quantity of goods a customer was dealing in, prior to the commencement of the partnership. Also the records reveal the number of transactions over a period of time as well as the range of money in terms of the amount handled by a customer. “These are the indicators of a customer’s growth,” he points out.
“We have worked with a customer who first supplied goods worth Kshs 50, 000, but currently, he is supplying goods worth Kshs 3-4 million,” explains the Mr Irungu. This clearly demonstrates the ability of REMU to transform its customers lives.

On the trends, Mr Irungu acknowledges that commercial banks have now realized that microfinance banks (MFBs) are not competitors but complementary institutions. “It is now clear that there is room for conducive collaborations since the market is converging,” he adds.
He also observes that with the new regulations, MFBs will become key players for instance in offering mortgage solutions.Other services that are now being offered by microfinance banks, that were a preserve of commercial banks, are current accounts, forex exchange, among others.
A significant trend in the industry, he says, is that even the international investors have started investing in MFBs. A case in point is the partnership REMU holds with Fusion Capital, an equity firm which holds a 25% stake at REMU. “The potential the MFBs hold is apparent, partly because, owing to the regulation, they have now started to adopt a professional approach in their management. Some are even employing a professional team of advisers,” he says.
REMU for example is governed by a highly experienced board of directors and its business is therefore above board.

Mr Irungu explains that microfinance banks are still grappling with the public’s perception that they are only lenders. Another challenge experienced by the microfinance banks is being over shadowed by commercial banks. “For example when reports are compiled, both commercial banks and microfinance banks are put together, which makes it hard to recognize the place of the latter. He suggests that such reports should be different, for clarity and so that microfinance banks are not swallowed in the process.
It also a challenge to solicit collateral from customers despite the fact that they grow very fast. Once a customer has attained a level that he or she can afford collateral, it becomes difficult to secure it,” he laments.
“Often, microfinance banks are considered as risk lenders, hence raising the cost of availing these facilities. “Regulators should draw lines on what types of groups should be financed by the microfinance banks, and which ones should go to commercial banks,” he says. This way, the ground will be levelled and the costs will go down.

Future plans
REMU is still on an expansion path, aspiring to open at least thirty outlets in the near future. It is also part of their goal to ride on innovative technology in the coming years. “Partnerships also enhance growth and that is why we hope to create more of them with key players in order to enhance financial inclusion,” he concludes.