K-Rep picks turnaround artist in change of guard

Veteran banker Albert Ruturi has replaced long-serving K-Rep Bank managing director Kimanthi Mutua in what analysts see as the micro lenders quest to chart a new course that will help it ride the recovery wave.

The change of guard is being seen as part of a mission by the shareholders to inject fresh ideas and direction in the 26-year-old bank that is facing stiff competition in a market of multiple players.

Mr Ruturi once served as the acting managing director at Barclays Bank and retired in 2001 before he moved to KCB as chief operations officer in 2003.

When he bowed out as chief operations officer at KCB in May 2005, the banking industry waved goodbye to one its most feted and longest serving captains.

But if there was ever a proverbial cat with nine lives in corporate management, Mr Ruturi would be an appropriate case.

He is probably the first banking executive to retire twice in a decade and to make a third comeback to the executive suite of a commercial bank.

It is to Mr Ruturi that K-Rep Bank - considered the pioneer of microfinance revolution in Kenya – has turned to chart a new course after staying in the loss-making territory for nearly four years.

Mr Ruturi took over the leadership mantle at K-Rep last week after Mr Kimanthi, the long serving managing director and founder stepped down. He joined K-Rep last year in the position of chief operations advisor, a vintage point from where he understudied Mr Kimanthi.

Last year, K-Rep recorded a pre-tax loss of Sh289 million compared to a loss of Sh494 million the previous year, signalling that the MFI is yet to emerge from the ravaging effects of the 2008 post poll violence.

In Kenya’s highly competitive micro-lending market, K-Rep has always occupied a far second position compared to Equity Bank – that has become the world’s poster child of the micro-finance model for Africa.

For a second year running, Equity has been named the Micro Finance Bank of the Year in Africa winning the award in a category contested by Africa’s largest MFIs among them Accion of Nigeria, Blue Financial Services of South Africa and UBA Nigeria.

Last year, K-Rep’s total operating income increased from Sh1.6 billion from Sh1.1 billion in 2008 but the growth was not enough to offset its expenses and lift it out of the red.

K-Rep’s loan book shrunk from Sh5.8 billion in 2008 to Sh4.8 billion last year, while customer deposits came down from Sh4.5 billion to Sh4.4 billion within the same period.

In the past six years, Equity has posted double and triple digit annual growth figures to become one of the most profitable banks in Kenya.

With an estimated 4.1 million depositors, Equity posted a five per cent increase in pre-tax profit to Sh5.3 billion in 2009 with the Kenyan unit alone racking in Sh5.6 billion.

It is this kind of divergence in fortunes that has bred impatience among K-Rep’s shareholders culminating to the change of guard at the top.

K-Rep Bank has been trying to turn round its performance after is survived a protracted management tussle over strategy.

At the centre of the tussle was a feeling by some that the bank gradually shed off its micro-lending posture in favour of a more corporate faces a strategy that was vehemently opposed by others to whom micro-finance was key.

More recently as the bank’s fortunes diminished, key shareholders have piled pressure on the management to chart a new course.

The list of top shareholders includes International Finance Corporation, African Development Bank, Dutch Development Bank FMO, UK based bank Triodos, ShoreCap International and Centum Investments.

For shareholders, K-Rep’s inability to replicate the success of Equity Bank – an MFI established in 1984 as building society has been prickly.

Back in 2008 K-Rep hired Gerard Monteiro, a seasoned banker with 33 years of experience and who had spent several years with different MFIs in Africa and the Middle East.

Mr Monteiro came in to replace Ms Carol Musyoka, who had served as the executive director and chief operating officer before leaving in 2008.

Ms Musyoka is now a non-executive director at TransCentury. Before joining K-Rep, Ms Musyoka had previously worked at Barclays and Citibank, and was expected to steer K-Rep on a mainstream banking path.

Mr Monteiro arrived at K-Rep at a time of disappointing financial results and left last year as the profitability woes showed no signs of relenting.

Mr Ruturi joined K-Rep last year in an almost similar script as he had when he entered KCB in 2005.

At Barclays, Mr Ruturi worked with former managing director Gareth George.

When Mr George resigned from Barclays and moved to KCB, it was he who recruited Mr Ruturi to the newly created post of Chief Operating Officer,

Mr Ruturi left KCB at a time when the bank was emerging from years of mismanagement as a government owned bank and partly helped pave the road to its current position as Kenya’s largest and most profitable indigenous bank.

First retirement

His first “retirement” was from Barclays Bank in 2001.

Mr Ruturi was the then acting Managing Director of Barclays, having risen through the ranks to what was at the time Kenya’s largest bank by asset size.

With lending to the poorest in society still fraught with risk and feared by the large commercial banks, MFI’s, seen as the catalysts to financial inclusion in developing economies, have become highly profitable in Kenya.

Analysts however still maintain that new borrowers in new markets will always test the ability of microfinance institutions to control portfolio delinquency.

Small businesses that provide a lifeline to many Kenyans outside the formal employment setup have been the hardest hit, the long term effects of which remains to be felt.

Besides, the knock-on effect on the principal lenders to these small businesses is far reaching, with analysts pointing out that loan books for Micro-Finance Institutions will face severe tests in the coming months as the reality of huge loan defaults and massive write-offs sets in.