KBA CEO CHAT - Start-up Capital Strategies

CEO | Samuel Kimani, Jamii Bora Bank, Managing Director and Chief Executive Officer
MONTH | February 2018
Chat Admin
Good morning everybody, welcome to this morning's my chat with a bank Ceo session
Chat Admin
Today's topic is Start-up Capital Strategies and our host is Mr. Samuel Kimani the CEO OF Jamii Bora Bank
Chat Admin
Today's topic is Start-up Capital Strategies and our host is Mr. Samuel Kimani the CEO OF Jamii Bora Bank
Chat Admin
Your participation by way of posting questions and sharing insights on this topic is most welcome
Chat Admin
Hello Tiberius and Edward, good to have you with us this morning
Tiberius Onsongo
Thanks admin .Am pleased to have a discussion with you all.
Chat Admin
Great! Glad to hear
chrispinus nabule
kindly advise me i am looking capital 3m to start business. whatv are right procedure to follow?
Chat Admin
Hello Chrispinus, glad you could join us
chrispinus nabule
thanks i will join you.
Chat Admin
We welcome you to post your questions ahead of the official start of the chat at 10am when we will welcome our host and officially kick off
nuru mugambi
Looking forward to the discussion today
Chat Admin
Welcome Nuru, glad you could join us
Chat Admin
Welcome Julian, Issa, Victor and Faith. Nice to have you onboard
David Indeje
Does your bank, Jamii Bora understand the MSME opportunity it being part of your growth agenda, this is especially in the wake of the interest rate capping and the new IRFS 9 reporting standard?
Julian Kamau
Glad to be here!
David Indeje
Are you in agreement that there is a need to review the regulations affecting SMEs especially when it comes to taxation, tax exemption, business registration to spur its growth? What can be the role for the financial sector in helping to address the gaps when it comes to policy?
David Indeje
I am curious, what is the current typical MSME loan book in Kenya? What is its estimated growth this year?
Diane Meria
Good morning everyone, I'm sure our discussion will be fruitful.
David Indeje
Are there initiatives that are helping SMEs to effectively collect data and enhance their business so that they are able to access credit?
David Indeje
Good morning everyone.
KEVIN Kimatu
Good morning David!
Rayhab Gachango
Banks have traditionally backed traditional type of businesses. Now that the internet is creating all types of internet based entrepreneurs who may not necessarily have offices and stock in the traditional sense, how are banks evolving in the way they determine credit risks and lending to new types of businesses in the digital economy?
Rayhab Gachango
Good morning guys
KEVIN Kimatu
Morning Rayhab, interesting question :) am tuned in to see Mr. Samuel's take on this.
Ezer Kipkurui
Good Morning
David Indeje
A rejoinder to Rayhab's question, what new technology are Kenyan banks likely to pursue significant channel innovations to reach the SME market
Eric Asuma
Good Morning, Today's topic is one of the most common challenges on how a startup should go about raising capital
maina NJUGUNA
Good morning, good to join this chat today.
maina NJUGUNA
Has Jamii Bora Bank ever funded a start-up?
Chat Admin
Our host for the day is here, allow me to welcome Mr. Samuel Kimani, the Ceo of Jamii Bora Bank
Samuel Kimani
Good morning everyone. Im very excited to be here to participate in this very important chat topic on startups.
David Indeje
Karibu sana Bw. Samuel.
Samuel Kimani
Most Kenyans are self employed and one of the major constraints that they face is how to raise funding for their business. I hope our chat today will be able to help look at the different ways that startups can get that funding for the business.
Samuel Kimani
Asante David.
Sylvester Ojiambo
Karibu Mr. Samuel
Samuel Kimani
Thanks Sylvester.
KEVIN Kimatu
All buckled up Bw. Samuel. Karibu
Florence Kamaitha
Welcome Mr. Kimani. Q: does Jamii Bora have tailored products for SMEs?
Joe Mwenyewe
Welcome Samuel
KEVIN Kimatu
Does Jamii Bora do LPO funding?
Ezer Kipkurui
Karibu Samwel.
Sylvester Ojiambo
Mr. Samuel i tend to believe that nowadays financial services are being highly decentralised, what is jamii bora doing about the same as it is not a popular financial institution to the rural population?
Samuel Kimani
Rayhab you raise a very relevant question...and just near our Jamii Bora offices is iHub and what is interesting there is that startups go to hire offices from iHub for a day or a month...and what we are finding is that new entrepreneurs dont have offices and dont need to -- they work either from home or from locations where they hire for the day. So how are banks evolving around that? Banks have had to change their requirements. Previously you had to have a physical address and that was an important KYC / know your customer requirement. Today, most banks no longer require that. Even requirements such as utility bills are no longer a needed for opening an account. In fact a mobile phone number is more important today. So banks have definitely evolved to react to the digital economy.
chrispinus nabule
hi iam looking 3m capital .what are right way?
Rayhab Gachango
Thanks. Are banks funding digital businesses though?
Ezer Kipkurui
Start-ups often know that they need financing; they are just unsure how to secure it, how can their security be guaranteed?
Samuel Kimani
Yes David, if you look at the innovations that have come through involving channels to serve customers, they are mostly around the individuals and not businesses...If you look at MPesa its mostly person to person transactions. But the businesses are not being catered for, especially when you consider the limits. KBA has done quite a bit; we now have the PesaLink platform that supports the SMEs to move larger volumes. We need to do more to support SMEs. We are seeing that is definitely going to come with Safaricom and also the banking sector. So yes, there needs to be changes and more innovation. There is also a push to deposit taking ATMs which are good for SMEs. In fact today some banks are driving cash deposits to their ATMs. Also bank agents are increasing in number. This helps decongest our banking halls while supporting the client with easier access.
Eric Asuma
It is very difficult for a new business to get a loan from a commercial bank for business startup. Banks will often say simply, "We don't give loans to startups." I believe this is because of the risky nature of the businesses. Why don't banks set aside a certain amount of cash in every financial year specifically for such startups?
Isa Abdulaziz
Thank you Mr Samuel Kimani. What is the right way to choose Start-up Capital .
David Indeje
Thank you Sam, you just startled my mind, when you mentioned Pesalink, seems the buzz has been waning. Time to leverage on it more for the SME I guess
Diane Meria
What makes Jamii bora more competitive in start up capital financing as opposed to other banks?
Nicodemus Barasa
Hallo everyone; I trust you're well. I am looking for seed funding for my startups. How best can I pitch my ideas to potential investors without going through "innovation hubs" who are prone to stealing peoples ideas? I have developed several platforms that have ready markets, cumulatively they have a potential of generating revenues of over $1,000,000,000 in their first 3 months. I am an Electrical Engineer/Programmer/Web Developer based in Nairobi.
Samuel Kimani
Yes Eric...capital is one of the greatest challenges for startups. I think most startups go it the wrong way...they think that to start a business they need a bank loan or a lot of money. But if you look at the more successful startups, they were started in garages with very little initial capital. You only need money to register and start selling to friends, relatives, your community. And then you build a track record. Your friends and relatives are your 'social' capital because they want to see you succeed. After you have your business running, the next source of funding would come from the next level which includes 'angel' investors...within a locality, there are successful business people who are willing to invest in a good idea. So entrepreneurs should seek out these 'angel' investors who may be willing to take a stake in your business.
David Indeje
It is true, the biggest challenge with SMEs is lack/ inadequate information – that and better risk models would do most to help us increase SME lending but Banks must think beyond standard risk models do we have some in place?
Eric Wainaina
Hi Samuel, Thank you for engaging with us. What do you see as the future of raising startup capital? Do you think the crowd funding model used by startups is sustainable? For the longest time we have had harambees to raise school fees, pay medical bills. How can we extend the same in raising startup capital for businesses and how can banking institutions get involved in such spaces?
Samuel Kimani
So really banks are the third level of funding for startups. Because banks typically would come in when a business has cash flow. Banks are probably the most risk averse of sources of capital. I have seen some people using their personal accounts to borrow to start a business. But this can be a risky venture if you are not able to service the loan. If the business doesn't work you may find yourself in problems.
Samuel Kimani
Maina, we as Jamii Bora do fund startups and we pride ourselves for doing that. Our history started as a microfinance where we were working with people of modest means and many of them started their businesses with funding from us. There is a lady entrepreneur who we funded from Mathare and today she has a big trucking business and we are proud of such stories.
Joe Mwenyewe
Talking of Angel investing, do we have established angel investors whom you can direct start ups to? I have seen a vibrant model in Israel.
Eric Asuma
Hi Mr Sam, in your own How do you value a start up that has got no revenue and certainly no profit? I believe wrong valuations can have significant consequences for both startup investors and entrepreneurs.
Geoffrey Okumu
What traction or other requirements would a startup need to be considered by VCs and banks for funding. Say a web based enterprise software solution.
Ezer Kipkurui
Should the act of securing financing for your business be ongoing? From the time you start looking for financing to help get your company off the ground
Hezekia Mbati
With 100,000 which is the best startup to venture in , I had an option of going for supplies to institutions is it a wise idea
Samuel Kimani
Welcome Chrispinus...congratulations for thinking about starting a business! Im not sure what your business is but I can guide you in general... I think the first question I would ask is what is your stake or 'skin in the game'?...have you started the business or are you thinking about it? You would have needed to start the business before you get the 3 million. That capital you need should be to enhance the business or take it to another level...it should not be your seed capital. About 80% of startups fail in the first five years and this is expected because most entrepreneurs have tried their hand in many businesses before they succeed. But that doesnt mean we should stop trying...Richard Branson has started 300 businesses in over 40 years...thats like 10 businesses per year; so if you fail try another idea and there are lessons you pick along the way. So Im sure you have a great idea...pursue it, grow before you seek the 3 million.
maina NJUGUNA
Thank you Samuel.
Samuel Kimani
Hello Florence, yes Jamii Bora has tailored products for SMEs...actually we call ourselves an enterprise bank because we serve entrepreneurs and enterprises and their employees. We have tailor-made trade products that include bid bonds; performance guarantees; LPOs financing; and invoice discounting, among others. Visit our nearest branch or jamiiborabank.co.ke.
Samuel Kimani
Yes Kevin we do offer LPO financing.
Samuel Kimani
Rayhab thanks for your followup question...my view is that digital is a channel and an important tool for any business today so yes we do fund digital businesses.
KEVIN Kimatu
Thank you Samuel.Allow me to probe further, to what extent to you finance the LPO's? do you do 100% financing?
Gerald Ochieng
Do you finance new businesses? What do i have to do for qualification?
Samuel Kimani
Ezer...I would say that the most important thing that banks look for in business finance is cash flow and not security. So there are many banks that will give an SME a loan based on cash flow and not a security like property. There are also many other types of security that a bank can accept like business insurance -- you can secure your SME loan with credit insurance. There are agencies like the African Guarantee Fund that will come in to provide security to SMEs so that they can access bank loans. Traditionally banks needed title deeds to lend to businesses but this is changing.
Samuel Kimani
Eric your idea of a fund for startups is actually there but offered by the Government. Banks are required by our regulator not to speculate on depositors money so we need to ensure that the money we collect from depositors is secure and invested well.
Samuel Kimani
Isa thanks...I had shared earlier that you can start with your savings...then go to your 'social' network of friends and family, and then look for successful business people or angel investors to invest in you...and then the next level is Chamas, Saccos and banks...and eventually list on the Stock Exchange. I think sometimes we want to own 100 percent of the businesses we start, but what we need to consider is that by opening up the ownership, you can raise capital...you'd rather own 50 percent of a successful business than 100 percent of an idea. So have a slice of a big business instead of a whole queen cake!
Florence Kamaitha
Great insights. Did not know about Africa Guarantee Fund. will look them up. Thanks
Samuel Kimani
Greetings Joe, we need to start getting angel investors together in Kenya. In places like the US there are Angel Networks and associations that list the registered investors. It would be nice to start something like that here. In Kenya there are Venture Capital networks but these are different from Angel Investors who are individuals who often are high net-worth and have extra capital to invest in startups or small businesses that want to scale up. Venture Capitalists typically fund much bigger businesses -- some VC firms look for USD 5 million upwards -- which is quite high.
Samuel Kimani
Geoffrey, Venture Capital would look at the viability of the business and the scale...to my point earlier, VCs look for multimillion Shilling investments. Banks on the other hand will look at any business size, but focus on your cashflows.
David Indeje
Bw. Samuel, by you stating we need to angel investors to come together, what are the steps to achieving this?
Samuel Kimani
Welcome Kevin Kimatu, normally a bank will not finance 100 percent on LPO...at Jamii we finance 70%. Every financier wants to see your 'skin in the game' which is why you typically wont get 100%...we say that the entrepreneur must carry the 'residual risk' which ensures that they work to make their business successful.
Samuel Kimani
Hello Gerald, yes we do finance new businesses at Jamii ... please visit jamiiborabank.co.ke for more information.
Geoffrey Okumu
Thanks Samuel
Samuel Kimani
Diane, what Jamii Bora does is that we look at the business and look at its specific financial needs...we are small enough to be able to be competitive in the area of knowing our customers and working with them...we are a very friendly bank. You should come try us out!
Samuel Kimani
David I agree...we need to sell PesaLink more...
WANGARI GATHU
Hi Sam, how you can help those new to business understand the tender process? Most people are knocked out at the initial stage as they either have incomplete documents or did not fill in correctly...
Samuel Kimani
Sylvester...agency banking is what everybody is doing...so banking mashinani is critical...we have 120 bank agents across the country and our target is to have 1,000 bank agents by the end of this year.
Isa Abdulaziz
Thank you Mr Samuel Kimani.
chrispinus nabule
thanks so much MR. Samuel.
Samuel Kimani
Wangari, to your point about tenders...I think before you tender you need to seek advise either from somebody who has tendered in that area, or you can come to us at Jamii Bora and we can help you...Jamii Bora is planning to install a tender center at our offices at Argwings Kodhek and we will help entrepreneurs with their tender applications and we will advise them on the trade cycle.
Tiberius Onsongo
until we are laid off or fired is when we start realizing that we`ve got ideas,a terrible investment or best? limited upside or limited upward? Alibaba is the worlds valuable retailer who started business with no inventory.Is this the way for start-ups should go without much looking to LACK OF FINANCES?
Samuel Kimani
Ezer, yes securing finance for your business is an ongoing process... your business plan should envisage your financing needs at various stages of the growth of your business.
Samuel Kimani
Tiberius, the point you raise that not all of us can start businesses and that you should start a business because you've lost employment. To be a successful businessperson, it should be in an area that you are passionate about and that you enjoy doing...entrepreneurship is not something you do when employment has failed.
Samuel Kimani
Tiberius, I see your other point about Alibaba, I think the no inventory model works if it is part of the strategic business approach...it may not be ideal for all business models. You always look at an efficient business model.
Samuel Kimani
Eric Wainaina, crowdfunding is something we have been doing here in Kenya for decades...its our chama or investment group approach...so really the next step for our chama model is to put it online and open the fundraising to the general public...we in Kenya are way ahead of other countries in crowdfunding because of our chama culture. There are so many successful businesses in Kenya today that started via chama or investment groups.
Samuel Kimani
David I think formalisation is an important area...one of the things that Banks are doing more is training MSMEs on accounting, writing business plans, and advise on finance and legal and other regulatory requirements. And this makes the MSMEs attractive to banks and other investors.
Chat Admin
Ladies and gentlemen, we are about to conclude today's chat. Our host Mr. Kimani will give his final remarks shortly and wrap up the session
Eric Asuma
Thank Mr Sam, the session was engaging
WANGARI GATHU
Thank you
Samuel Kimani
Id like to wrap up by saying that Kenyans have an impressive entrepreneurial spirit ...You see it everywhere you go and most of our people are self employed or employed by entrepreneurs. The informal sector contributes the most to our economy. The next stage is to formalize these businesses so they can contribute more to the growth of our country and ultimately address unemployment.
Samuel Kimani
Karibu sana Isa
Samuel Kimani
Thank you all, it was nice chatting with you. Have a great weekend!
Chat Admin
Ladies and gentlemen, thank you very much for your participation and for the engaging session. Your questions and insights have made today's session a success
David Indeje
So short, Thank you Bw. Samuel for the insights. All the best in the bank's initiatives.
Diane Meria
Thank you so much for your insight Mr. Kimani
Chat Admin
We welcome you to join us again next week for the next chat session. The topic will be on SMEs and Regional Trade. We look forward to yet another engaging session with you
Chat Admin
Please look out for the live recording on @ktnkenya Facebook page where Mr. Samuel Kimani will be answering more questions. This will be available over the weekend. Be sure to look out for it.
Chat Admin
Have a good day and weekend ahead and let's meet again next Friday from 9am
Chat Admin
We shall now close the chat room. Good day