Faulu Microfinance Bank recorded a net loss of 496.4 Mn for the full year ended 31 December 2025, a 50.8% improvement on the 1.010 Bn loss posted in 2024, as an aggressive cost reduction programme offset a further contraction in core lending income.
- •The result places Faulu among the three institutions that the Central Bank of Kenya has identified as accounting for nearly 90% of losses across Kenya's 14-bank microfinance subsector, a sector that recorded a combined pre-tax loss of 3.50 Bn in 2024 and has not posted a collective profit since 2015.
- •Total income fell 8.8% to 3.091 Bn, with interest on the loan portfolio dropping 12.9% to 2.197 Bn as advances to customers contracted 6.0% to 10.57 Bn.
- •The revenue decline reflects continued stress in Faulu's core microfinance lending business, where gross non-performing loans stood at 3.114 Bn, implying a gross NPL ratio of approximately 29.5% against a loan book of 10.57 Bn.
The cost side tells the more consequential story. Total expenses fell 14.1% to 3.469 Bn. Staff costs were cut 28.9% to 889.2 Mn, the clearest financial confirmation yet of a multi-year workforce and branch rationalisation that began with outlet closures in 2022 and accelerated after Old Mutual injected 900.0 Mn into the bank in mid-2024 to fund a restructuring and digital pivot. Finance costs collapsed 71.0% to 101.0 Mn after the bank fully repaid 1.533 Bn in external borrowings that featured on the 2024 balance sheet.
The improvement in profitability has not arrested capital erosion. Total shareholders' funds fell 26.4% to 1.361 Bn, weighed down by accumulated retained losses of 4.286 Bn. The core capital to total deposit liabilities ratio of 6.7% sits below the 8.0% statutory minimum, while the total capital to risk-weighted assets ratio of 9.4% breaches the 12.0% floor by 2.6 percentage points. The liquidity ratio of 25.0% remained above the 20.0% statutory minimum.
The capital deficiencies arrive as Faulu attempts a strategic pivot toward digital financial services and MSME lending, a repositioning driven partly by the explosive growth of licensed digital credit providers, whose gross loans surged 91% to 55.20 Bn in 2024 alone, directly competing in Faulu's traditional market segments.
