Stawika Capital’s Quest to Become Kenya’s First Digital Bank

Raphael Kimeu, Founder and CEO of Stawika Capital

Kenya has been at the cusp of rapid growth in the last decade supported by strong government, private sector and foreign investment. Key drivers of this development include the ICT sector expanding from 10 per cent to 22 per cent in the same period; with mobile adoption and internet connectivity at 91 per cent and 84 per cent respectively.

In the midst of this revolution, Raphael Kimeu was working as a credit manager, spanning over 11 years of his illustrious career in the banking sector. Around the same time, Kenya’s banking sector was undergoing a metamorphosis – On 14th September 2016, the interest rate cap law aimed at making credit affordable to the ‘mwananchi’ came into effect. The law put a ceiling on lending rate by banks and other financial institutions to at most 4% above the Central Bank of Kenya (CBK) base rate, known as the Central Bank Rate (CBR) which was as a result of high costs of borrowing which deterred access to credit by a large section of Kenyans. As expected, the demand for credit shot up immediately, before taking a downward trend by February 2017 given the now stringent measures put in place by lenders to manage risk. This saw Kenyans seek alternative avenues of access to credit and this is when Stawika was mooted.

“As a credit manager, you interact with customer data, are part of the credit decisioning process and most of all, As Kenyans we share our frustrations and also seek counsel from our friends. The rumblings and insights from these opened my thought process on how I could alleviate the hurdle that was quick access to credit – especially for businesses; micro and small entrepreneurs who could not access credit from formal banking institutions inspite of the fact that they were running profitable businesses.

The predicament was also not restricted to businesses but spilt over individual borrowers, an emergency to deal here, purchase decisions that arose before pay day or better yet? Running out of cash at the counter and having your goods returned to the shelves. “Imagine if you had quick access to credit on demand and handle your transaction discreetly? “

says the founder and CEO of Stawika Capital during an interview with StartUp Magazine.

“I started to think of how I could give access to emergency credit and timely financial solutions to fund the growth of small businesses” he adds. It is these experiences and the ubiquity of the mobile phone that drove Mr. Kimeu to set up a digital Micro-credit firm Stawika Capital, whose focus is on access to credit especially by Small and Micro

Enterprises, by analyzing data that has not been considered by conventional lenders to expand the financial market.

“Stawika is a Swahili word that means prosper. Our business in the business of ensuring and driving prosperity among Kenyans through the provision of credit, digitally” he says.

A woman selling potatoes

Statistics from the Central Bank of Kenya indicate that there are more than 48 million active mobile money accounts with a transaction value of USD 3.6 billion in 2018 alone. This highlights the impact of mobile money pioneered by M-pesa in driving financial inclusion and the race to turn mobile phones into banks for the financially excluded popularly known as the ‘unbanked’.

The continued growth of mobile money has fueled the adoption of mobile payments across major sectors of the economy such as financial services, retail and wholesale trade. There is no denying that this growth has enabled startups to set up revolutionary business models and disrupt the status quo, avers the CEO.

“M-pesa and Facebook have pioneered massive disruptions in their specific industries, opening up adjunct sectors of the economy to a realm of opportunities.” With hindsight in banking and foresight in the place of technology in the future of banking, Mr. Kimeu started formulating a disruptive business model would not only take advantage of the convergence of these two, but equally boost the utilization of data for financial inclusivity.

“Our business was founded on mobile money, we are now morphing into commoditizing data as a means of guiding financial decisions. When you look at Credit Reference Bureaus, you realise the immense data in their custody which help analyze credit patterns of our customers, their risks and score them accordingly. However, is there more complementary data that can boost what is already existing to bring in more Kenyans to the financial fold? Even then, what more can we do to boost the financial value of those already included but without access to mainstream banking?” This is Stawika’s new frontier.

At the time of set up, other digital lenders had just set up shop in the country. “So, we ran a three-month pilot and the reception was overwhelming, proof that the market was for a purpose-driven digital lender.

The Stawika App is available on Android and iOS platforms and a USSD platform which will include those on feature phones, that continue suffering the misfortune of inaccess. Stawika is equally piloting their SME credit solution, launched in June this year; integrating conventional credit scoring mechanisms and social capital factors such as the value of the business, volume of transactions per day, personal spend and endorsement from existing chammas or informal/formal groups.

“As a requirement for every business, the place of R&D and product development is the most critical one. This comes from the basic knowledge that at any given point; you’re dealing with 3 customer segments – one that knows you exist and is content; another who discovered your products and is on the trial window and the completely clueless one. The second segment elicit excitement at acquisition given that they move in their droves and could give you a false sense of comfort. They also have the potential to undo your business in the shortest time possible, and you must therefore spend a significant amount of time and resources, following their habits, matching trends, listening and engaging with them”

Armed with this knowledge, we carried out a survey on our platform and arrived at the fact that many people borrow to finance a business. There was a sequence of customers who borrow regularly in the morning and repay in the evening or within a certain period or time of the month, which went to show the type of borrowers we were dealing with” says the executive.

But Stawika’s products are not only a darling to entrepreneurs. Many other people borrow to attend to domestic and personal needs; pay school fees, buy household items, offset hospital bills and even other emergencies. This has seen the lender develop a long list of borrowers from a cross section of sectors thanks mainly to the flexible interest rates, simplicity of their products and flexible repayment plan.

“Lending is a mutual relationship and our greatest task is that of engaging our customers, analyzing their behavior to understand and better yet pre-empt their needs. Conducting business in this space needs a human face and this is our key driver” he says.

“Such successes and the impact of our financial intervention fulfils me as the visionary and my team as the radar to this ship. It is also a testament to the future of banking which is the marriage between legacy banks as we know them and the new bank which is technology and digital financial intermediation”

Stawika was voted as the best instant mobi loan platform at the Digital Inclusion Awards in 2018 and is now on a growth pedestal something which Mr. Kimeu attributes to three things summed up in the firm’s core values; Building with Commitment. Service with Resolve and Living for Growth.

As much as the digital space is morphing by the minute, and very competitive, it doesn’t scare him. “We are committed to our customers and clear on our transformation journey into a digital bank. We are about people, and People do not need banks but banking services”

As Stawika aims to demystify lending, moreso data backed financial solutions to Micro-Enterprises in Kenya before expanding to Tanzania, Rwanda and Uganda.

Mr. Kimeu is confident of the export that is Stawika s to other continents in the long term.

Lessons learned

  • If you want to establish a business, start where you are with what you have. You just need the right idea and everything else will fall into place.
  • Find a pain point and offer a viable solution. Investors always look at the value proposition.
  • An idea remains just that without an execution plan. Understand your market as the foremost factor in driving your strategy.
  • Do not limit yourself to a unique idea; you can look at an existing idea and offer improvements to an existing solution.
  • Work with the right people. Business is always about the people you work with and the people you serve. Great Employees and Investors.
  • Mentorship; Nobody was ever said to know too much, you just never learn enough!
  • You Must Think. But don’t just Think, Think BIG!