KBA CEO CHAT - SMEs and Regional Trade

CEO | Ibukun Odegbaike, Guaranty Trust Bank, East Africa, Managing Director
MONTH | February 2018
Chat Admin
Good morning everyone! Welcome to this morning's session of My Chat with a Bank Ceo
Chat Admin
The topic this morning is SME and Regional Trade and our host is Ibukun Odegbaike, the Ceo of GT Bank
Chat Admin
We are pleased you could join us and look forward to your participation
Chat Admin
Also pleased to see a couple of early birds! Florence Kamaitha, Simon Lee -thanks for joining us!
Martin Mwanthi
Good morning CEO, looking forward to today's conversation on SMEs and Regional Trade
Chat Admin
Martin Mwanthi, glad you could join in. Look forward to your thoughts on the topic of SMEs and Regional Trade
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We welcome you to post your questions, share insights, update your profile bio and profile picture as we await the official start of the chat at 10am
Chat Admin
Robert, Victor, John and Eric. Karibuni sana!
David Indeje
Good Morning everyone. Happy post Valentines Day too. I look forward to an insightful discourse on SMEs and their growth regionally.
Martin Mwanthi
My first question is, The recent interest rate capping has had a negative effect in the uptake of SME loans, and this is curtailing growth of the SMEs. Is their still hope, bearing in mind many SMEs may lack big collateral to secure loans? what is GT Banks doing to rescue the situation?
Chat Admin
Good morning David, thanks for joining us once more
David Indeje
I have four questions for the day now that we are talking SMEs and regional growth.
David Indeje
Within the countries where GT Bank operates, which country can be used as a model for the SME markets to emulate for best practices?
David Indeje
2. How can Kenyan SMEs address the quality and competitiveness of their products and services, and supply side constraints to benefit from regional trade?
David Indeje
3. The African Union’s Action Plan aims to increase pan-African trade from the current level of around 10 per cent to more than 25 per cent within the next decade. The bottleneck here is lack of harmonised laws and policies to enhance trade. Any possible way out.
David Indeje
4. The opportunity for SMEs is immense however, access to credit, remains a hurdle for them, I know there are many initiatives to address this. How can we continuously empower them to benefit and the trickle effect be felt on the economy?
Chat Admin
Thanks Martin and David. Keep the questions coming so we hit the ground running at 10 everyone
maina NJUGUNA
Good morning.
Chat Admin
Pleased to see Jacinta, Angela Koech, Lincoln, Obare and Maina have joined us. Good morning!
Rayhab Gachango
Good morning guys.
Boniface Karere
Good morning Rayhab
Jacinta Wanjiru
Good morning, looking forward to the chat
Derek Matere
Good mourning, Excited
Derek Matere
Morning*
Jacqie Abuga
Good morning All! Glad to be here this morning
Martin Mwanthi
I personally believe that for our country's economy to grow, SMEs must be empowered, and one such way of empowerment is government legislation that favors ease of doing business. However, some legislation is chocking businesses. CEO, say something about this.
David Indeje
Can the GT Bank MD unravel this mystery. That its products and services for SMEs are those business with an annual turnover up to Ksh. 400 million?
David Indeje
From their website
nuru mugambi
Hi everyone
waithera Muiruri
Good morning good people! looking forward to the chat
nuru mugambi
Hi wiathera
Martin Mwanthi
Hi team, good morning
Villupuram Abiraman
Good morning all
Chat Admin
Good morning Waithera! Glad you could join us.
obare wycliff
hi good morning
Eric Asuma
Good Morning.
Chat Admin
Hello Jacque, Villupuram, Derek, Boniface and Rayhab. Thanks for joining us
Victor Ezaga
Good morning all
Rayhab Gachango
Thank you.
Angela Koech
Good morning
Chat Admin
Good morning Victor. Thank you for joining us
Rayhab Gachango
@David today you have asked all my questions. So I will just wait for you to be answered
Hillary Busisa
Good morning to you all
David Indeje
Ehhh @Rayhab
Eric Asuma
This should be interesting topic as GT operates across the region. At the moment, I think FX volatility represents the biggest challenge for SMEs to participate in the regional/international trade, I would love to hear Ms Odegbaike's opinion on how GT is working to help SMEs go around this risk
Chat Admin
Ladies and gentlemen, please welcome our host for the day, Ibukun Odegbaike, CEO of GT Bank. She will to take us through today's session
Derek Matere
Excellent question @EricAsuma. I currently work in an organization that is focused on nurturign and developing Social Entrepreneurs. I would love to know with the cobination of GTs support for SME how they view the Social Entrepreneur market
David Indeje
@ChatAdmin some emojis in future
Derek Matere
Welcome Ibukun Odegbaike
Ndichu Wilson Mbugua
Good Morning, i'm glad to be here
maina NJUGUNA
Has GT Bank brought together SMEs from the countries they operate in so that they can exchange ideas on how to beat the many non-tariff bottlenecks that plague the intra-Africa trade?
maina NJUGUNA
Welcome Madam CEO
Robert Malit
How will GT Bank help SMEs in the region compete against China, India and EU (through the EPA deal) in trade in the region. How much protection do you advocate that SMEs in the region be given against these competitors?
Ezer Kipkurui
Gald to be here for another engaging session
Martin Mwanthi
Welcome Madam CEO. please talk to us.
David Indeje
@RobertMalit good question there. Issues to do with copyright. How to protect our markets but let us not forget our achiles heel. The AGOA
Sammi Nderitu
Good morning. I am glad to be here.
Ezer Kipkurui
#CEOChat Why aren't Banks creating awareness on giving unsecured loans to #SMEs
Julian Kamau
Good Morning, glad to be here!
Ibukun Odegbaike
Good morning to everybody and welcome to the SME Chat on Regional Trade. Im sure it is going to be an exciting chat today. I cant wait to engage you all.
Sammi Nderitu
Ibukun Odegbaike, i worked briefly at Fina Bank before it was bought and renamed.
Purity Kibaara
Good morning, looking foward
Diane Meria
Good morning ...do looking forward to this chat
John Baraka
Morning Madam ,...glad to be here,...looking forward
Sammi Nderitu
Ibukun Odegbaike, your name is hard. Do you have a nick name that is easier to use? Haha!
Paul Odhiambo
Nice to being part of it
Conrad Karume
Good morning Ibukun. Looking forward to learn from the discussion
Ibukun Odegbaike
As we delve into the conversation. Id like to share a brief view on regional trade, particularly here in Kenya. I think there are a lot of opportunities for regional trade between Kenya and the EAC member states and also within the wider international trade arena. Regional trade within EAC has a lot of opportunities. We know of the AGOA treaty between Sub Saharan Countries and the US. Within that treaty there are a lot of products that are sanctioned so the question is how well have we tapped into these opportunities that exist. There is this myth that AGOA is only talking to the apparel sector; but there are many other products that we can benefit from especially from an SME perspective.
Ibukun Odegbaike
I see there are a number of questions that were raised before I joined...Robert I see your question about China.
Lincoln Kamwaro
Good Morning
Ibukun Odegbaike
As we know China has the numbers and this works for them when it comes to international trade. They also are very good with the use of technology. We know of the platform Alibaba and it facilitates a lot of outward trade. Also in China, everybody wants to trade with them and the question is why? The first reason is cost -- people believe that trading with China has a lot of cost savings opportunities. What we see is that quite a number of manufacturing outfits are based in there -- from small to large -- and they have been able to leverage economies of scale ... so you see SMEs pooling resources together to compete internationally...this is something we need to do here in Kenya, SMEs need to pool their resources together. In terms of the volumes we have, Kenya does not have manufactured volumes at the level of China. So we do not have critical volumes coming from SMEs. Whilst one person is manufacturing a certain output that does not meet international demand; we now need to see how to pool output so as to compete with countries like China.
Ibukun Odegbaike
I think also what makes China competitive on cost is that they have an infrastructure that supports trade. Cost of manufacturing is cheaper that doing it there then in our home countries because of this cost benefit. China leverages significant investment in technology and infrastructure to support their local industries. The Government of China also has policies that further support their local companies.
Eric Asuma
Still on FX challenges, do you think crypto currencies will solve the issue of currency volatility across different markets?
Justus Musyoki
Hi, what the chat topic of today?
Ibukun Odegbaike
Maina thank you for your question on Intra Africa Trade. I think there is a lot of trade between Africa and other continents compared to within ourselves; there is a lot that needs to be done to promote intra africa trade. For instance, when you look at the figures from Kenya Bureau of Statistics, we see that Kenya has many international trading partners. In horticulture for example, our largest market is Netherlands and other European countries. How can we promote more appreciation of this lucrative export within Africa? We do have trade with several countries like Uganda, Egypt, DRC, Tanzania but there are 54 countries in Africa so we can do much more.
Ibukun Odegbaike
When you look at the flowers that go to Nigeria, they actually import more from South Africa. So Kenya has an opportunity to market its flowers there.
Teddy Evans
Lack of access to credit is almost universally indicated as a key problem for SME’s in the region yet they contribute largely to our economic progression. What do we need to do to harness credit access without necessarily plunging financial institutions into bad debts?
Ibukun Odegbaike
In terms of what banks are doing to help customers navigate regional trade, I can mention that GTBank has put together a platform called the SME Market Hub and it is an online marketplace where you have buyers and sellers of various products. Like Alibaba and Amazon, it brings the market together as a small village. As SMEs we need to take advantage of technology and platforms such as this to promote our products.
Ibukun Odegbaike
Welcome Eric, you raise a very relevant point on FX volatility and challenges facing SMEs trading across africa.
Mugo Cyrus
With regard to interest capping, it has definitely reduced the interest spread hence reducing the profit margin for the banks. Is your bank looking into alternative investments i.e. derivatives market as a new venture to improve your profits?
Teddy Evans
Stil on the same issue of credit, I really applaud the focus GTBank has given through SME Markethub as above stated but again can the banks for instance set aside a fiinancial rescue package to address SME funding issues?
Ibukun Odegbaike
We do know that we need to have a single currency that enables Africans to trade amongst themselves. Right now we are trading with the US Dollar for intra Africa trade. What we find is that whatever is happening in each individual country in terms of their economic performance will impact on value of the dollar in that particular country. So for example if a country is performing well, their local currency is stronger against the dollar and this is favorable for an importer because they can buy more dollars to trade.
Ibukun Odegbaike
For SMEs they need to avoid the FX risk which means taking positions...if you are an importer who gets products from China, as you source your products, you wouldnt go to a bank and take a loan facility in dollars because tomorrow if there is a weakening in the Kenya shilling, the loan repayment amount would be higher and therefore you would need more shillings to service that US Dollar facility and you may not be able to pass that cost to the consumer of your products and services. So you need to match currency for currency, which means the currency that you earn in is the currency you borrow in. If you sell in Kenya shillings you should borrow in kenya shillings to avoid FX risk.
Ibukun Odegbaike
Ezer thank you for your question, I think many banks offer unsecured loans and they promote these products via various channels. There is always room for improvement.
Ibukun Odegbaike
Teddy I think one thing we need to do is information creation. We need to have databases of the SMEs, their products. A centralized database will help give lenders information on prospective clients. SMEs must also be empowered in terms of capacity building; this is why Kenya Bankers Association will soon be launching the Inuka Enterprise Capacity Building Program which is a free online resources for SMEs. After building capacity, the next is access to capital. If you look at Kenya relative to other countries in Africa, we rank top in terms of access to credit for SMEs, so while we say we are not doing enough, there is something we are doing right. That said, there is still more we can do to address the challenges of the ease of doing business to compliment the progress that has been made in access to finance.
Ibukun Odegbaike
In some markets, banks are directed to set aside a certain amount of their lending in order to finance SMEs and this will help develop the economy. In other markets, the Central Bank has intervention funds, for example in Agriculture, and those funds help bring down the cost of the finance by extending preferential interest rates for banks to onward lend to clients in that sector. And in these markets we have seen that these loans can be given in single digits. Other institutional support include credit guarantee schemes that give banks additional comfort to lend to SMEs. The credit guarantees help offset losses to banks in cases of default and therefore encourages them to lend more to SMEs.
Eric Asuma
One final question, what's your view on Blockchain & crypto currencies in regards to the opportunities represented by these two when it comes to regional cross regional trade
David Indeje
Interesting insights.
maina NJUGUNA
Waiting for the answer on cryptocurrencies...
DOMINIC MAINA
Goodmorning CEO, i like the topic. Like you rightly put, SMEs major challenge is information. Majorly the Kenyans who are in SMEs are young people who have little time to attend seminars and conferences. As an association for bankers how well are you able to reach them on the ground for you to translate the lending into profitable and sustainable ventures? For the young people, does your bank have entrepreneurs incubation
Ibukun Odegbaike
Hi David I see your question about SME definitions...I think the definitions of SMEs are left to each bank to define their own their own criteria...there is a micro and small enterprise authority Act that attempts to define SMEs from a policy perspective but banks are not homogeneous so definitions will depend on an institution's market positioning and market focus, as well as how the institution categorizes turnover, number of employees, assets, and the many other dimensions one would use to define an enterprise and a market segment.
David Indeje
Thanks for the clarification IO.
Ibukun Odegbaike
David I think Kenya is leading in sub Saharan Africa in terms of SME development so I would say that we are a good example.
Ibukun Odegbaike
Dominic welcome...I think that institutions are creating online platforms so as to educate as many SMEs as possible on how to grow their businesses. GTBank has the online SME MarketHub Merchant Academy which facilitates capacity building for example. There are many other such platforms and other institutions offer SME clinics. At the industry association level a lot is being done by KBA like the Inuka Program which is starting soon.
Ibukun Odegbaike
Eric you rightly point out that blockchain can help unlock regional trade by accelerating the rate of contracting through shared services. Cryptocurrencies is still debatable.
Chat Admin
We are almost wrapping up today's session
Ibukun Odegbaike
Martin I see your question about collateral and regional trade...I think there is development for example the moveable assets registry that Kenya is working on will help expand the types of collateral an SME can use.
Ibukun Odegbaike
Many of the moveable assets that facilitate regional trade include assets such as machines and vehicles so the Moveable Assets Registry is a good development for our market.
Martin Mwanthi
Thanks Madam CEO for the insights. I have been enlightened.
Ibukun Odegbaike
Youre welcome martin
Ibukun Odegbaike
Regarding the interest rates cap that indeed has affected how banks are lending to SME sector.
maina NJUGUNA
I think the moveable assets registry is already in existence thanks to the Industry docket under CS Adan Mohamed.
Ibukun Odegbaike
As banks, we look to match risk and return; and lending is risk based. We saw a flight to government securities once the interest rate cap came in...and this meant less lending to SMEs and the reason is that with the capping law banks do not have the ability to freely price risk, and therefore the option is to lend to risk free or low risk clients.
Ibukun Odegbaike
As we wrap up, David I see your insight on the African Union Action Plan.
Rayhab Gachango
I am asking a follow up question. You talked about registering SMEs on a database. How will this work when most SMEs are not even registered businesses they are briefcase businesses?
Ibukun Odegbaike
There are a number of policies that are coming up that are helping address bottlenecks and harmonise policies across our region. For example the EAC Certification which enables single certification of an SME that enables that SME to trade across the EAC without having to be certified in each country. But as David points out, there is still more that can be done to bring down the non tariff barriers across EAC.
Ibukun Odegbaike
Hi Rayhab that is the issue...SMEs must formalise.
Ibukun Odegbaike
Its been an engaging session...thanks everybody for participating...I hope we have learnt a thing or two from the chat. This conversation shouldn't end here, we should continue to take the conversation to other platforms so we can all further build capacity and create more awareness about what SMEs can do to facilitate trade within Kenya, the EAC and the larger world.
Rayhab Gachango
The problem is so far many SMEs do not see the benefits of formalizing especially when they are a tiny business. There is a mindset that if they formalize the government will know everything about their business and they will not get any benefits. Maybe a topic for another day
Ibukun Odegbaike
So thank you all so much for your participation and I wish you a good weekend... GTBank is here to serve you and bring convenience to your doorstep...reach out to us and we will be glad to listen :)
Chat Admin
Ladies and gentlemen, we have come to the end of today's session. We thank our host Ibukun Odegbaike, GT Bank for her insights in the topic of SMEs and Regional Trade. We also thank you for your questions and brilliant contributions to the discussion.
Ndichu Wilson Mbugua
Insightful ...
Chat Admin
Indeed. Good job everyone. Thank you for participating by way of posting your questions and observations on the SMEs and Regional Trade
David Indeje
Thank you
Martin Mwanthi
Thank you. looking forward to the next conversation. Great weekend all.
obare wycliff
this has been a great session with lots of insight thank you very much madam Ibukun Odegbaike
BEN SHICHENGA
Thank you Madam Ibukun and all participants. Very insightful.
Chat Admin
Thanks Everyone. We are glad you found the session insightful
Carstens Wanjala
My first time in the chat and am so happy with what is happening here. Such a wonderful,educative and insightful platform.
Chat Admin
Thanks Carsten.
Chat Admin
We are soon closing the chatroom. Thanks once more and have a good weekend
DOMINIC MAINA
A great engagement