Oral East Africa>Cash and customers; how Family Bank survived 90’s crisis without raising rates At the hut of the story

Written by Oral East Africa

One thing Family Bank must have learned from banking farmers was the unpredictability of the weather and its seasonality which requires a backup plan in tough times and banking that puts customers first.

Family Bank Founder T.K Muya said in the late 80s the Bank, just like other financial institutions at the time, faced a period of high inflation and interest rates.

While some banks saw that as an opportunity to make a killing by raising interest rates to over 30 percent, Family Bank chose instead to stick with customers and take part of the blow from hard times.

When the crisis persisted, other financial institutions were hit with waves of defaults which Family Bank survived, and has lived to celebrate 40 years.

The Bank Founder T.K Muya said the Bank has gone through very difficult times over the 40 years of growth that threatened the Bank’s survival, and only through underwriting the business with cash and staying true to their customers did they emerge unscathed.

SME support

“We have gone through some very difficult and scary moments. In the 1980s, when we were a building society, interest rates skyrocketed to 30 percent and many building societies and other financial institutions collapsed due to high non-performing loans which were given at that level. At Family Bank, we stuck to an interest of 20 to 25 percent, we never exceeded that,” Mr. TK Muya said.

Even under the current economic strain, Family Bank has bucked industry trends to grow loan books at a time when Banks have stopped lending to customers and raised interest rates.

The Lender’s loan book grew by Kes10 billion to Kes94 billion in a period where industry wide loans to the private sector tumbled to 3.7 percent in July from 13.9 at the end of last year.

Customer support

The lender’s great relationships with customers has also helped to forestall the panic leveraging the years of building trust to lock in deposits.

The Family Bank Founder said the Bank has also endured social media attacks aimed at sparking fear and panic withdrawals, but the Bank has always had ample liquidity to calm and assure customers of the safety of their money.

“We survived the run because we had the necessary liquidity and learned that having ample liquidity is always critical to a bank,” Mr. Muya said.

This legacy is very important in the Kenyan banking sector where customers are very sensitive about the safety of their money following bank collapses in the 90s and 2015s. Banks that demonstrate resilience in tough times are more likely to weather future storms leveraging past experience.

Family Banks has run through forty years of good yields and harsh times and has not only learned how to survive them but extends that grace to its customers, with a focus on long-term relationships.