KBA CEO CHAT - SME Credit Needs & Opportunities

CEO | Paul Njaga, Chase Bank Kenya, Chief Executive Officer
MONTH | June 2015
Chat Admin
Good morning everyone. Welcome to this morning’s "My Chat with a Bank CEO" session
nuru mugambi
Good morning all...looking forward to an engaging session on SMEs
Chat Admin
Our topic this morning is SME Credit Needs & Opportunities and our host is Mr. Paul Njaga the CEO of Chase Bank Kenya.
Chat Admin
Good morning Nuru
Chat Admin
Glad you could you could all join in
Chat Admin
As we await the official start of the session, please update your profiles and add in a picture of yourself
Ezekiel Wafula
Thanks
Agrey leloo
Good morning everyone...my first time am joining the chat from Tanzania
Chat Admin
Good morning Agrey..glad you could join us
Chat Admin
You're welcome Ezekiel.
Chat Admin
Welcome to the chat Eddie and Kenneth
Eddie Ndichu
thanks, is there an app for this? oh and the newspaper ad worked great in getting me here
Chat Admin
That's wonderful Eddie, glad to hear that. The chat platform is well themed to work on mobile devices as well.
Andrew Kyuvi
Patiently waiting for this great session to kick off
Chat Admin
Welcome to the chat Andrew. We look forward to engaging on the topic of SME Needs & Opportunities
Chat Admin
Please feel free to post your comments and questions on the topic of SME Needs & Opportunities ahead of the official start
Agrey leloo
As there are corporate banks,investment banks, rural development banks and others established to serve a main purpose like corporates institutions, why shouldn't there be an SME bank to purposely serve small medium enterprises so as to make an ease access to small entrepreneurs to get cheap loans and prosper rather than them engaging to Sacco's and others which also borrow from these banks hence introducing multiple interest rates.?
Kawiria Rincuni
This should be interesting, such a great intiative to have a platfrom that connects us to the key decision makers in the corporation world.
Ezekiel Wafula
SME,s are hailed as a solution to unemployment my focus being on the youth are we in agreement that the numerous enterprise funds set by the government sufficient or we need the private sector to contribute and if so how can this be made possible?
Chat Admin
Thanks for your comments guys. In afew minutes we'll welcome the CEO to share his insights on SME needs and opportunities.
Conrad Karume
Good morning everyone
Paul Njaga
Good morning to all those who have logged in...especially Agrey from Tanzania -- karibu ndugu -- and will be participating in today's chat...also I would like to thank KBA for hosting this forum and I look forward to the discussions we are going to have this morning.
Paul Njaga
I see we already have recieved some comments...so let me respond to Agrey about his question on the SME bank....
Paul Njaga
We recognise that SMEs are business owners / entrepreneurs and also entities therefore they have both personal banking needs and then they have needs that are specific to their businesses
Agrey leloo
Thank you Sir..
Paul Njaga
...therefore it makes sense to have banks that are able to address both personal and business needs -- as opposed to just SME focused banking.
Paul Njaga
I also think that SMEs aspire to evolve into large corporations and therefore the current model makes sense.
Paul Njaga
Welcome Ezekiel...it is a very good point you raise...
Eddie Ndichu
would an individuals personal credit score support their business credit score especially for sole businesses. focus here being the youth given that they would struggle to differentiate themselves with their businesses at the beginning
Paul Njaga
...The challenge of unemployment and SMEs contribution to addressing this problem should be faced by both private sector and Government in a complementary way.
Naomi Thoiya
Why has there been an increased focus by banks in extending credit to SME's?
Paul Njaga
... the commendable effort by Government through initiatives like Uwezo fund and unemployment-focused policies is making it easier for private sector to contribute towards creating employment opportunities in a more effective way.
Paul Njaga
Karibu Agrey
Cosmas Butunyi
Good morning sir. Following up on Eddie's question above, does an entrepreneur's personal credit history taken into consideration for new businesses?
Paul Njaga
Eddie you are raising a very good point and it is true that one's personal credit history contributes to how banks assess the risk profile of businesses run by the same individuals.
James Ndwiga
Hello, My Name is James Ndwiga, SME has seen an increase of start -ups in Kenya and most employed staff are opting to take Unsecured Lending and start their fortunes, How are the Banks placed to help this start up grow and mentor them through incubation other than financial support and inclusion
Ezekiel Wafula
To further elaborate on my comments we appreciate for SME's to grow they need among other qualities networkings do we have programmes by the Banks that provides a platform for SMEs that are innovative,have enterprenual skills and are able to manage their businesses well?
Paul Njaga
To expound further, the progress made by the banking industry to rely more on credit reports (history) is going a long way in addressing the collateral problem facing borrowers like micro and small business owners as well as the youth.
Imali Ngusale
@NjagaP @chasebankkenya Surely do all Kenyan SMEs have a turnover of Kshs.5 million per year #CreditChat
Eddie Ndichu
thats very true @Mr.Njaga, i recently tried the *433# service by metropol. works great!!
Ezekiel Wafula
@JamesNdigwa to add to your question do Banks Influence the growth of SME's do we have any Bank partnering with the government or most banks line up to be used to administer such funds?
NICHOLAS OMBIJA
Good morning everyone.sorry for being late but locked .....looking forward to fruitfull discusion
Paul Njaga
Hi Naomi...welcome to the Chat...we are seeing an increased focus by banks in the SME space because banks have recognised the important role SMEs play in the economy and the opportunities to bank these enterprises. So extending credit and other financial solutions to SMEs will enable SMEs to grow, create employment, create wealth and by so doing contribute to national development.
Imali Ngusale
Goodmorning Paul NyagaHow has @chasebankkenya braced itself for #Agenda2063, will the bank diversify regionally to capitalize on #freetrade
Paul Njaga
Good morning Cosmas...
Naomi Thoiya
Thank you sir.
Eddie Ndichu
Thank you Mr.Njaga.
Ronald Cheru
good morning mr paul
Paul Njaga
....to answer Cosmas, Yes. The customer's credit history and the nature and viability of his/her new business are critical in credit evaluation decisions.
Paul Njaga
Good morning Imali...
Imali Ngusale
Good morning Paul
James Ndwiga
@Ezekiel True, Most Banks are used as administrators of government funds that making it difficult to creat clear policies and strategies to develop and grow the government disbursements. A good example is Uwezo fund the government uses table banking Idea which is already passed by time. What is the banks involvement in the fiscal policies development of the country and the government funded credit financing?
Paul Njaga
....Imali there is a large spectrum of SMEs and 5mn turnover is just one of the classifications that the industry uses, but that does not exclude other businesses. We recognise that smaller and micro businesses do exist and with time grow into SMEs and corporates in the future.
Paul Njaga
Good morning Ronald and welcome.
Imali Ngusale
Thanks. I was referring to WorldBanks definition of SMEs. But I am more concerned about the upcoming Trpate African Union. How will @Chasebankkenya evaluate the customers history records when we go
Imali Ngusale
regional?
Jennifer Kinuthia
Good morning. To be able to adequately meet the needs in the market and stir up economic growth, what is your institution doing to be able to meet young people with brilliant ideas and business opportunities but do not have the credit history as outlined above.
Paul Njaga
I see James has raised quite a number of important points...I will attempt to unpack them as they come
Ezekiel Wafula
Paul see @Ndigwa above how can the Bank especially chase Bank bring the government uptodate on modern ways of growing of SME's who told the government that for growth of SME's is provide cash and ask people to apply?
NICHOLAS OMBIJA
Morning Mr Njaga....with the report of the world Bank that high cost of credit is slowing growth of SME's in Kenya,what are your take on this and what re some of the policies or strategies that can be put in place to face such for the positive impact on the SME's in kenya or even est african countries.
Paul Njaga
James you are right that budding entrepreneurs are starting their businesses through unsecured lending and I think banks are doing a good job in providing the necessary funding and also creating opportunities for capacity building, mentoring and networking.
Renaldo D'Souza
Good Morning Mr.Njaga. The 2015/2016 budget was read yesterday. How well is the bank placed to support local SMEs particularly manufacturers to ensure that they are able to take advantage 40% of all Government contracts?
Paul Njaga
Ezekiel, as noted in my response to James, yes, banks are creating various platforms like business clubs, and in Chase banks case we have innovated the business "hub" concept where we are providing SMEs with the critical support that they need to support their businesses.
Imali Ngusale
@Renaldo D'Souza good question. We seem to be having more foreigners capitalizing on government contracts
Paul Njaga
Thats good Eddie...digital is the way to go!
James Ndwiga
I agree paul, However, if you look at the rapid growth of the Unsecured book write off, It is a clear indication that Bank Acquirers have failed to educate this customers on the need to invest wisely and know their break even period before quitting their employment. Should i say we have failed to give financial literacy to customers and thus acquired the write offs? should Banks introduce financial literacy training to its customers to avoid such?
Imali Ngusale
Sorry @Paul Njaga I can't seem to view @EddieNdichu "digital comment"
Alex Mugo
Morning Mr. Paul. I think we have a big problem as SMEs reason being most of banks dont give us opportunities because the want to deal with big companies and they end getting old services in the same old way, what need to be done to give the upcoming companies with news ideas equal opportunities?
Paul Njaga
Jennifer good morning, the industry recognises the need to support youth entrepreneurial initiatives...at Chase bank we have a youth banking department that is specifically focused on enabling such entrepreneurs to crystallise their bankable business ideas.
Agrey leloo
Mr CEO....why banks act so friendly when administering loans and credits to companies and other customers, but withdraw the friendliness when particular businesses face it rough due to economic conditions and market competitions, instead they should partner with the particular entity,advice and guide it through the hardship rather they rush selling the collateral s ?
Paul Njaga
Nicholas thank you for your point about the World Bank Report and cost of credit and SMEs. Cost of credit is no doubt an issue; but it indeed has been coming down...In 2012 it was close to 20 pct and now its around 15 pct on average.
Robert Mutua
Morning Mr.PAul,i just to keep it simple and to the point,Chase bank offers asset financing which is a good deal,well then why do they leave the young or rather the youth out of it and opt to finance only well established companies or individuals?
Paul Njaga
...Nicholas it is important to note that whilst the cost of credit is an important variable, it is not the only one that influences the growth of the SME sector. For example, limited access to market, poor infrastructure, inadequate knowledge and skills, general government policies, and much more, all have an impact on the growth of the sector.
Ezekiel Wafula
Paul I commend Chase Bank for this but can we go down to education what has KBA done to constantly check education curriculum?as low as highs school am sure the demand and supply concepts tought in schools should be reviewed and branding,marketing skills,strategy should be toughtin schools and not at Masters Level can this policies reviewed and suppose the Govement gives Kshs 6B to develop and implement this would it be in your opinion making it easy for SMEs to sustain themselves?
John Komu
Good Morning Bwana CEO, thank you for hosting today's chat. My question is, can the Banks be a facilitator to an SME's growth in other ways other than the traditional credit facilities? For example creation of business clubs where the Banks introduce CustomerA to CustomerB who may benefit form CustomerA's products?
James Ndwiga
@Ezekiel Good Thought, I love your point.
Paul Njaga
That being said, in sub Saharan Africa, Kenya is still the leading country as far as credit extension to SMEs by banks is concerned. Also, the cost of credit for SMEs in Kenya -- relative to other comparable markets in Africa -- is still lower.
NICHOLAS OMBIJA
Thank you Mr Njaga,with all that whats the future of aspring entreprenuers in kenya
Paul Njaga
Renaldo, welcome, the budget proposal for the manufacturing industry is a positive development and banks will play their rightful role in supporting their SME clients to take advantage of the opportunities that will emerge. Banks are raising funding from a variety of ways; they are enhancing their internal capacities; and also expanding their product range and delivery channels. All these will facilitate SME manufacturers.
Ezekiel Wafula
@James thanks Bro just that I think Intellectual Capital is natured at a very last stages whereas successful business men impact this to their children at a very tender age of this happens a lot of Money spend by Companies and specifically Banks to train their employees will be used in giving credit your comments Sir Paul.
James Ndwiga
The New Directive by the CS finance of raising the working capital of Banks from 1 Billion to 5 Billion, will microfance banks have to merge or be acquired by other Banks to fulfill the requirement? #Speculation
Wangui Muturi
Good Morning Mr.Njaga; I read on the Chase Bank website that Chase Banks aims to help people achieve what matters most to them. The biggest need to SMEs is access to financing and education on financial management. Most bank shy away from using non-conventional methods of evaluating the financial positions of the SMEs. Most SMEs are banked by MPESA yet most banks fail to consider the MPESA statements as a legitimate. Most banks shy away from using household chattels as a way of evaluating an SME. I think banks have forgotten the 'small' in the SME and focused on the medium.
Paul Njaga
Good morning Alex...whilst I sympathise with your sentiments, I believe the landscape has changed considerably in recent past. Between 2013 and 2014, banks disbursed Ksh 190 billion to SMEs in Kenya and the proportion of lending to SMEs continue to increase with time. What is needed is a closer engagement between SMEs and their respective bankers to address specific challenges.
Paul Njaga
I also think the fact that banks are focusing more on SMEs reflects a balanced approach to lending to both SMEs and big corporates.
Paul Njaga
Wangui welcome to the Chat...I would say that the industry is making huge steps in addressing the issue of collateral requirements in lending. For example, with the development of the credit reference bureaus banks are placing more emphasis on credit reports and scores in determining the character of the borrower. With time, other non banking players such as telcos, and utilities will also contribute their data to the credit information sharing framework and this will derisk/promote further unsecured lending, particularly to the small micro businesses you refer to.
kithuka bernard
Good morning. my first time to join looking forward for great engagement.
Paul Njaga
Thank you John...I notice we are running out of time but let me quickly say yes...and it is happening...
NICHOLAS OMBIJA
My suggestion this platform needs more time....looking forward to joing dream Bank and fast class bank .ChaSE bank - CEO Paul Njaga THANKS for hosting this discusion
Paul Njaga
Robert thanks for your point...I think we touched on how banks, like Chase, are creating youth focused products.
David Kanyora
Great discussions indeed. Thank you Paul Njaga for the insights
Paul Njaga
James I see your point about financial literacy training...yes, it is a necessity and one that is ongoing through the capacity building initiatives that many banks are now offering.
Paul Njaga
Ezekiel as KBA we are engaged with the sector regulators on developing a national financial literacy strategy and school based curriculum. For more information about KBA initiatives you can visit the KBA web site.
Robert Mutua
Mr.Paul,thanks May be i should try.
Imali Ngusale
Time flies when learning is fun. We should be having such platforms so as to gain more banking literacy
James Ndwiga
I think 2 hours will be more appropriate
Chat Admin
We are about to wrap up the session. Thank you all so much for your participation that has made the session vibrant
Alex Mugo
Thank Mr. Njaga for your time and insight.
Paul Njaga
Yes thank you all, my time is up but allow me to sum up.
CHRIS KIMATHI
Great insights shared indeed. Thank you Mr Njaga
Alex Mugo
Chat Admin: As mentioned by one of the user, it will be great if one can join and participate to this chat from a mobile device, think about this and in case you need the experts(developers), we are here!
James Ndwiga
.Thanks
Ezekiel Wafula
I totally agree though it's a very good forum I have learned new things today thanks Paul and Admin
Kawiria Rincuni
Quite an insightful session. Thank you Mr. Paul Njaga.
Jennifer Kinuthia
Thanks Paul and all. This has been very informative.
Ezekiel Wafula
@Alex am using a mobile devise
Alex Mugo
@Ezekiel i meant a mobile app. Thanks
Ezekiel Wafula
Yes I was looking for it before I went to the website @Alex develop one please
Paul Njaga
I think to pick up on Nicholas' point about the future for entrepreneurs...I would say the opportunities for SMEs are infinite as the country continues to develop. The banking industry will continue to play its rightful role of supporting entrepreneurs to realise their potential and those of their business ventures. For those entrepreneurs out there, shoot for the stars.
Paul Njaga
Thank you very much. Have a great weekend.
Chat Admin
Ladies and gentlemen, allow me to take this opportunity to thank Mr. Paul Njaga for being with us today and for his insights.
Chat Admin
We would also like to thank you all so much for your questions and comments that have made this session interactive and a success.
Chat Admin
You can get copies of the transcript, podcasts and other information relating to this and all past chats in the archive page of the chat.kba.co.ke website.
Chat Admin
We look forward to meeting here again next Friday same time. The topic will be Retail/Household Access to Credit. We look forward to your participation. Many thanks and have a good day.
Wangui Muturi
Hi Admin, Is it possible, in future to have this chat window bigger; such that it can be blown full screen?
Chat Admin
Thanks Wangui. We'll definitely look into that.
Alex Mugo
May you all have a good day and a great weekend.
Wangui Muturi
Thank you
Chat Admin
You're welcome. Have a lovelyweekend