First Community Bank branches into insurance

By Macharia Kamau

First Community Bank (FCB) is venturing into insurance business through its newly formed insurance arm, FCB Takaful Insurance Agency.

The agency has started to market insurance products it said are designed to meet the needs of customers looking for Shariah compliant insurance solutions.

Nathif Adam, the Bank’s managing director, said the insurance arm will be offering the products in partnership with insurance companies, which will underwrite the activities, in line with the Sharia under the supervision of FCB Sharia board.

Sharia Compliant Insurance, known as Takaful, is a scheme which creates financial protection for participants, who guarantee and assist each other by pooling donations from various participants, from which they create a fund for their collective benefit.

Socially responsible solutions

He added that the bank would introduce more socially responsible financial solutions in future. Among the initial products the agency will market is motor vehicle and home insurance.

Meanwhile, the Bank launched a partnership deal with the Kenya Meat Commission, which will see it tap into the largely unexplored area of financing livestock production.

The two organisations signed a memorandum of understanding aimed at promoting trade activities in the livestock producing areas in the country, which are largely located in the arid and semi arid (ASAL) regions.

The partnership, which includes a joint initiative dubbed ‘Ufugaji ni Biashara’, is expected to give livestock farmers access to financing through guarantee or leverage funding, link players along the livestock value chain, and enhance market linkages.

"Livestock traders face ‘participatory exclusion’ in the banking sector, especially in the arid and semi arid regions. This is mostly due to their nomadic lifestyle, which makes it difficult for them to meet set benchmarks for borrowing from most financial institutions," said FCB’s MD, Nathif Adam.

Adam said he expects the partnership to help pastoralist access financing, and in turn improve their livelihoods. Moreover, the initiative would boost the development and improvement of smallholder livestock producers.

Lenders have long deemed this market segment risky, but Adam said the partnership with KMC would ensure that default rates were low.

Concentrated market

"KMC has provided a concentrated market for livestock producers, as well as a structured repayment regime through assignment of proceeds from livestock sales," he said.

"Through this regime, assessment of repayment capacity is enhanced, and risk exposure controlled through a tri-partite arrangement with the suppliers (pastoralists), KMC and FCB."

The North Eastern region accounts for 70 per cent of the livestock supplied to KMC, making key catchment area for beef products.

KMC’s managing director, Ali Hassan, said ease in access to financing could improve product quality and ensure consistent supply to satisfy market demand, as he signed the MOU on behalf of his organisation.