From only one branch in 1985, Family Bank became a commercial bank in May 2007. It is regulated by the Central Bank of Kenya (CBK) and is also regularly inspected using CAMEL ratings which look at Capital, Assets, Management, Earnings and Liquidity. The bank aims to provide offerings to virtually all customer segments such as retail & consumer banking, SMEs, agribusinesses, corporate banking, trade finance, and insurance.

Modefin is a global fintech solution provider that empowers banks and financial institutions with state-of-the-art digital banking
solutions that help them thrive in the digital age. With technical expertise and domain knowledge in areas such as omnichannel banking and micro-savings and lending, it currently serves more than sixty banks in more than twenty countries worldwide. The partnership between Modefin and Family Bank goes back to 2014. The customer profile was split into upper, middle, and lower-income classes. Financial services were in a state of flux at the time and the banking system was being weaned away from the notion that bank accounts were a privilege of the rich, and an era where ledger fees were charged for routine transactions was still fresh in the memory. Telecom companies had cashed in on the opportunity a few years prior and were offering mobile wallets to the unbanked and underserved, which caused banks to lose out on the high-volume, low-income segment.

Armed with a mandate to design a best-in-class digital lending solution, Modefin had its work cut out. A review of existing customer accounts revealed the need for short term financing. Based on these findings, Modefin set out to design the PesaPap mobile banking solution using its Online Ecosystem Banking Platform (OEBP), incorporating in its core a microloan product that would compete with other mobile-based products.

PesaPap enables Family Bank consumers to access instant loans, as well as banking services such as fund transfer to other accounts and mobile wallets. PesaPap can also be used for bill payments and airtime purchases. Customers of Family Bank can register for and activate the app without the need to visit any physical bank branch or fill out forms. The app is available on the Google Play Store and Apple App Store.

Implementation

The app was built with technology features that always protected the bank’s interests. Credit scores were automatically generated by accessing data in real-time from a licensed Credit Reference Bureau in Kenya and by assessing customer credit data provided by telco operators. The software ensured a cap on the loan amount, meaning a customer could avail of only one loan at a time, funds were disbursed only to the borrower’s mobile number, and EMI payments or loan closure were auto-debited on the pre-agreed date.

As part of the development process, the tech team installed Modefin’s Omnipresence Ecosystem Banking platform and configured it as per client needs. Resources deployed included a head of delivery, project managers, technical managers, a technical lead, and a back-end team of app developers.

Benefits

Feedback on the app was excellent. Customers found the application modern, vibrant, and interactive. Their microloan requirements, such as borrowing in the morning and repaying in the evening, were able to be met.

Rated as Kenya’s premier mobile banking application, PesaPap empowered customers to take full control of their accounts using their mobile phones. Once downloaded and activated, customers could open a PesaPap wallet and carry out online transactions such as funds transfer, bill payment and airtime purchase. Customers could also view account balance, generate a mini statement and access MLoan, the advanced micro-lending feature embedded in the app.

Another unique feature appreciated by users was that PesaPap permitted non-account holders as well to download the app and apply for a microloan for their personal or emergency needs. The app has created a positive impact in the lives of thousands of Kenyans, with loans valued at USD 4 million disbursed every month, with an average ticket size of USD 100.

Other benefits include:

Instant loans with no collateral

Easy accessibility through ATMs and branches

Greatly reduced bad debts for the bank, with NPAs lower than industry standards.

Conclusion

As can be seen through the implementation of Modefin’s solution, Family Bank arrived at a strategy to invest more in technology, aggressively drive efficiencies through IT, and ensure that emerging technology will further deepen financial inclusion for Kenyans.

Key Facts

• Bank: Family Bank
• Headquarters: Nairobi, Kenya
• Supplier: Modefin
• Solution: Modefin OEBP
• Timeline: Go-live in September 2020