In a strategy to woo clients, KCB’s mortgage division S&L will mid this month send 180 members of its SME club to China to study new building techniques. Photo/FILE
Kenyan banks and micro-finance institutions are scrambling to attract small and mid-sized enterprises by tailoring products to meet the needs of this niche.
Barclays Bank last week joined forces with AccessKenya, the Institute of Certified Accountants of Kenya (ICPAK), Phone Express and DHL to launch an SME account — a move that aims to consolidate the bank’s grip on the SME sector.
“This strategic alliance is a clear demonstration of our commitment to take the SME proposition to the next level and to deliver the SME promise,” said Mr Nick Mbuvi, the Commercial Banking Director at Barclays Bank Kenya during the launch.
Such cross-functional products are designed to give a wholesome feel to the banking experience for SME account holders where they are be able to get quality services and goods at one point and at reasonable prices.
Already, several banks and MFI’s including Diamond Trust, Standard Chartered, Barclays, Bank of Africa and Imperial Bank are marketing their SME products aggressively, in what is seen as a lucrative market set to grow with the improving economy.
Some banks, such as CFC-Stanbic, have gone further to start offering Local Purchase Order (LPO) financing products to SMEs, an area that has generally been considered too risky by most banks following its lack of collateral.
Kenya Women Finance Trust (KWFT) is one of the MFI’s that has managed to develop a successful SME product targeting women entrepreneurs across the country.
Major Banks have strengthened their SME clubs that enable their clients network amongst each other and take business trips to foreign countries in an effort to learn new techniques and gain access to new markets.
In a strategy to woe clients, Kenya Commercial Bank’s mortgage division S&L will mid this month send 180 members of its SME club to China to study new building techniques, as it eyes the increasing demand for housing in the region to grow its business.
Some SME’s find these types of products too general and do not capture their area of operations.
“My business is in the medical field, an area in which bank SME clubs don’t focus on completely despite having international exhibitions that expose it,” said Mr Erastus Momanyi, the managing director at Faram East Africa Limited, a firm that distributes medicine, laboratory equipment and reagents and was among the Top 100 SMEs in 2009.
However, the definition of SME varies for different banks and that’s why they end up giving different products for the same market.
Whereas, Barclays Bank looks at an SME as largely driven by turnover with businesses having a Sh30 million turnover or less per year being considered to join their SME Club, banks like Co-operative Bank and KCB may consider less or take a totally different view on who is considered an SME.
“We have propositions for those falling below the set turnover limit but meet other requirements,” said Peter Kariuki, Deputy Director Commercial Banking at Barclays Bank Kenya.
According to a survey by Synovate, conducted among 277 companies and released in September last year, only firms with an annual turnover of between Sh70 million and Sh1 billion fall in the SMEs category.
Employment opportunities
The SME sector, which accounts for over 80 per cent of employment opportunities in the country, is one of the areas expected to record some significant growth this year after going through a rough patch last year due to a severe drought, effects of post election violence, and the global credit crunch.
Most SME’s have a difficulties when it comes to financing due to lack of strong record keeping systems, something that has made it difficult for financial institutions to extend loans to most of them.
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