Equity Bank says branches are making it easy for SMEs to access products that are right for them
Equity Bank continues to enhance its Small and Medium-sized Enterprises (SME) offering through its supreme banking branches, as the bank embraces new technology and ways of working to meet the retail customer needs.
Thanks to the growing adoption of digital banking which has seen banks shift from brick and mortar expansion (branches), the space at banking halls has enabled SMEs to largely access supreme banking which has been targeting high net worth individuals.
Currently, 96 per cent of transactions at Equity are being done on digital platforms, the Nairobi Securities Exchange (NSE) listed lender has reported.
“This has allowed the bank to transform the branches into advice-giving arms. This branch based venture offers preferential services customized banking solutions with exclusive privileges and unrivalled personal attention,” the bank said in a statement.
Customers have access to relationship managers and a choice to operate their accounts in the local currency or any of the major global currencies including the US dollar, British Pound and Euro.
The clientele also enjoys extended banking hours during weekdays as well as weekends. Equity Supreme branches also serve the Corporate and the high-net-worth individuals.
Equity Group MD & CEO Dr. James Mwangi during the recent release of the 2018 full year financial results said: “When we talk about digitisation, it is well reflected in the channels. We see where the bank’s branches and ATMs are, where the agents are, and the revolutionary mobile apps. We are delivering convenience that has never been offered.”
The Group has received various Development Finance Institutions (DFIs) loans from African Development Bank (AfDB), European Investment Bank (EIB) and International Finance Corporation (IFC) for onward lending to SMEs Flagship departments and branches to support Micro, Small and Medium Enterprises (MSME), SME and corporate sectors at the core of manufacturing and industrialisation.
This is in wake of a credit crunch in the private sector and individuals, occasioned by the capping of interest rates since September 2016.
The law caps interest rates chargeable by commercial banks at four percentage points above the Central Bank of Kenya (CBK) rate, currently at 9.0 per cent.
CBK’s decision making organ― Monetary Policy Committee (MPC) has retained the rates at nine per cent since mid last year, putting the ceiling on interest rates at 13 per cent.
During its recent meeting in march, to review the country’s macroeconomics, the MPC cited the drop in inflation in February, largely due to stable food prices, lower electricity and fuel prices.
Kenya’s inflation fell to 4.1 per cent in February from 4.7 per cent in January.
“Non-food-non-fuel inflation remained below five per cent indicating that there were no demand pressures in the economy,” CBK Governor Patrick Njoroge said.
The High Court has however declared the law that caps bank interest rates as unconstitutional.
In a ruling made in March, by the court declared Section 33B of Banking Amendment Act, 2016 that introduced interest cap in 2016 unconstitutional, a reprieve to banks which have consistently blamed the law for dwindling returns in the sector and negative spiral effect on the economy.
However, the court did not immediately suspend the law but gave a 12-month window period for Parliament to reconsider the provisions.
Banks have preferred investing in government securities since the law came in place as they profile individuals as “high risk borrowers”.
Commercial banks’ credit grew by a paltry 5.9 per cent from Ksh3.34 trillion (USD33.1 billion) as at end of 2017 to KSh3.54 trillion (USD35.1 billion) at the end of 2018, the economic survey 2019 indicates.
According to Kenya National Bureau of Statistics (KNBS) MSMEs both formal and informal contribute over 80 per cent of employment opportunities in the country, yet many enterprises face a significant barrier in accessing credit with a lack of physical collateral.
Recently, IFC, a member of the World Bank Group announced a USD100 million (Ksh10.1 billion) subordinated loan to Equity Bank Kenya to grow its lending operations.
The lender which is on course to expand its presence in the East and Central Africa region says the IFC’s loan facility will increase its capacity base and expand its lending programme to SMEs.
It will also boost its climate finance operations that support renewable energy, green buildings, energy efficiency, and climate smart agricultural projects in Kenya, the management has said.
Equity Bank opened its first exclusive branch in 2013, but has since grown them to 16, stepping up the industry’s race for deep-pocketed clients.
Customers are required to maintain a minimum deposit of Ksh200,000 (USD1,984 ) to qualify for supreme banking.
The high-net-worth segment which caters mainly for SMEs and corporates offers the highest revenue contributions from loans and a perceived differentiation from other banks, according To Mwangi.
“We have digitised the bulk of loan process. Currently, 92 percent of all loan transactions are processed virtually. Branches are left with only eight percent of loans in numbers, but that contributes 77 per cent of the total volume of loans transacted,” the CEO notes.
Government on SMEs
The government is keen to support growth of SMEs, mainly through increased access to credit.
During his ‘State of the Nation’ address on April 4, President Uhuru Kenyatta said his administration recognises the role played by micro, small and medium enterprises in spurring the development of the country.
The sector, employs approximately 14.9 million Kenyans and contributes an estimated 28 per cent of the country’s Gross Domestic Product.
To unlock the latent potential resident in the sector, the government has been working towards addressing the challenges of access to credit, training and skills development.
“We will be launching an SME Credit Guarantee Scheme in few weeks, aimed at deepening their access to credit without being subjected to complex application procedures and collateral requirements,” President Kenyatta said.
These interventions are critical to production of competitive goods and services for the domestic, regional and globally markets.