The fourth edition of the Banker Africa- East African Banking Awards 2018 were hosted on the 10 May 2018 in Nairobi to recognise outstanding performance and excellence in the financial services industry. Co-operative Bank was a big winner, scooping key awards notably The Best Retail Bank in Kenya and Best SME Bank in Kenya.
Commenting on the awards, the Group Managing Director and CEO Co-operative Bank Dr. Gideon Muriuki said,
“We have over the years worked hard to build a model that enables us to stay close to the customer, listen to their needs and glean insights on their long-term goals that we can confidently say we are offering the most competitive value proposition that SMEs and Retail clients can expect to ever get in this market.”
Co-op Bank already enjoys significant presence in the SME and Retail banking space. It is the recognition of the unique funding needs of SMEs that the bank negotiated and secured long-term funding from international development finance institutions essentially to fund SMEs.
Most lately, the bank recently secured a substantial US$150 Million (approx. Ksh 15.2 Billion) line of credit from the International Finance Corporation (IFC) for on-lending mostly to SMEs and favourable terms.
The lines of credit offer great support to SMEs in the following ways;
- Flexible, long-term loan tenure, as the loans are offered to the bank with a long repayment period, the bank is able to extend the same benefit of long-term repayment period to SME customers.
- Currency choice of loan facility, which allows SMEs to borrow in the currency of their choice, including US Dollars especially for SMEs engaged in international trade.
- Competitive pricing, as the bank is able to extend the benefit of affordable pricing of the credit lines to customers, as opposed to higher pricing of locally-sourced funding.
Our practice in the SME space has served both the customers and the bank well, to wide acclaim both in Kenya and across the world.
Q 1. SME financing
Is funding and support of small and medium-sized enterprises in the form of either bank loans, overdrafts, leasing and hire-purchase arrangements, asset-based finance, invoice discounting. The SMEs will basically have two needs namely:-
- Working capital – The day to day expenses like stocking, salaries & wages, rent and others.
- Investment capital– asset purchase like machinery, motor vehicles, business premises purchase
Q 2. What interests Co-op Bank about SME financing?
- MSME is a key growth area and the backbone of the Kenyan economy with over 30% GDP contribution and 87% jobs creation in the country.
- The strong projected growth in the Kenyan economy would drive growth in the MSME banking market, across all sectors
- Kenya’s status as a regional hub for technological innovation, especially in the mobile money realm, offers opportunities to leverage technology to improve efficiency, increase product offerings and reach the unbanked MSME customers
- The Kenyan government’s ambitious plans in the big four agenda and vision 2030 to improve infrastructure, especially in roads, railways, ports and power generation would generate MSME growth opportunities
- Cooperative Bank being in the fore-front of the major players in this category are keen on increasing our share by delivering unprecedented services and products to SMEs and position ourselves as the go to bank
- The existence of the opportunities in the value chains within MSME is enormous and if tapped efficiently provides a platform for growth in this key segment thus supporting the government agenda in growing this sector for economic expansion.
Q 3. Can you mention some of the financing solutions you target with this group?
- Working capital- Short term loans and overdrafts
- Investment capital– Mortgage financing, asset Financing/hire purchase
- Supply Chain Financing – Potential to better leverage value chains of corporate customers through supply chain financing—more effective customer acquisition, better risk management
- Mobile loans through developing more sophisticated credit scoring models that utilize diverse information sources to better access and manage risk associated with MSME customers
- Trade Finance Solution- Tenders & performance bonds, Letters of credit & Guarantees, import guarantees
- Insurance premium financing
Q 4. What do you think are the impacts of your financial solutions to SMEs?
- Cash flow injections boost –to cushion against any working capital dents
- Buying products or supplies at a one off price – enjoying available discounts(economies of scale)
- Funding expansion plans – finance for new products, services, extending your offices
- Delivering diversification – entering a new market so need finance for new equipment or machinery, staff, hardware and marketing
- Relocation – to fund new premises, IT, fitting out costs
- For property professionals, buying new property to grow a portfolio to increase yields or to convert property or change its use
- Purchasing land for future development – to build premises or a property scheme
- Tapping of the available business opportunities in the market
- Trade facilitation-ensuring smooth flow of goods either locally ,bilateral or international
Q 5. What do you think are the roles played by SMEs in social and economic prosperity of this nation?
- SMEs have ability to fuel economic growth by expanding the tax base
- They are the primary vehicles by which new entrepreneurs provide the economy with a continuous supply of ideas, skills, and innovations+
- Growth avenue for Food security and health
- potential avenues for job creation, especially among the youthful & women population
- help the country address the imbalance between imports and exports through exportation and importation of products
- SMEs contribute to economic development by virtue of their sheer numbers and increasing share in employment and Gross Domestic Product
- SMES empowers and ensures the spread of financial literacy that helps to spur growth within the economy
Q 6. Are there current trends you see in this space? If so how have they impacted on your operations?
- Technology- Embracing use of Technology has led to reduction of cost especially operational costs
- Social media advertising-awareness and accessibility of information leading to more innovations and improved customer experience
- Fintechs and aggregators-Need for more collaboration and open intergrations to facilitate business transactions
Q 7. What future prospects can we look forward to in your relationships with SMEs?
- Artificial intelligence- data will be very key in devising new ways of serving these clientele
- Financial literacy and relationship management deepening
- Provision of linkages and networking opportunities
- Digital apps, e commerce, accounting application and ERPs intergrations