Top commercial banks are turning to business clubs to boost their lending to small and medium-sized enterprises (SMEs) through customised loan products, training and flexible banking hours.
Many top lenders are now splurging millions of shillings on SMEs to offer financial and non-financial benefits such as priority banking, higher debit card withdrawals, extended banking hours and business advisory services.
Lenders say the move is aimed at addressing the unique needs of small businesses to ensure they are accessing financial information and credit that is aligned with their needs.
Banks that started business clubs several years back are expanding the suite of benefits to almost mirror what has for the longest time been a preserve for large corporates and wealthy individuals.
Absa Kenya head of SME banking Erastus Muthura said that the lender, for example, is using the business clubs to train SMEs on opportunities within and outside the country, link them with business partners and provide customised credit products for their growth.
“Through our engagement with different SMEs, we were seeing pockets of similar needs and we saw business clubs as a place for solving those common problems such as organisational structure, succession planning, taxation, retaining and attracting talent and managing expansion,” Mr Muthura said in an interview.
“So, business clubs allow us to put together business people who have common interests and then we engage them on the things they are struggling with. For Absa, one of our focuses is access to training and mentorship where we help them create the capacity to scale up. And as this happens, the loan book grows.”
Other Tier 1 lenders, including KCB Group, Equity and the Co-operative Bank of Kenya, have also gone big on the business clubs strategy, emboldened by the reducing default rates among many SMEs compared with corporate clients.
KCB, for example, runs the Biashara Club through which MSMEs are granted business solutions and advisory services. Equity Bank runs a programme known as Equity SME Club, which focuses on supporting small businesses through various financial products and services, mentorship and access to resources for business growth and development.
Co-operative Bank, for its part, runs a programme known as Co-op Captain’s Club with a focus on SME empowerment.
SMEs in business clubs also enjoy discounted interest rates on loans, free foreign currency accounts, discounted insurance, and higher business overdrafts and unsecured loans. Non-financial benefits include quarterly networking events and business trips.
Mr Muthura said that the business clubs also offer a chance for banks to train them on compliance with taxation laws and regulations such as employee safety, insurance, and certification, which have seen a number of SMEs suffer penalties and business disruption.
The clubs have also become an avenue for lenders to connect SMEs with businesses looking for new suppliers or distributors of goods and services within the country and beyond.
“The idea of business clubs means that as banks, we don’t push products to them. We bring them closer, listen to them, and implement their recommendations. We are seeing more commitment in loan repayment out of the relationship that develops out of the club,” said Mr Muthura.
