Sept 2015

SEPTEMBER 2015 I KSHS 250 I Ush 7,500 I TSH 5,000 | rWF 1,900

BUSINESS KIT > MARKETING: PRICING CHALLENGES IN GLOBAL MARKETING > LEADERSHIP: LEADERSHIP AND COMMUNICATION POWER > INFORMATION TECHNOLOGY: FUNCTIONAL INTEGRATION OF IT INTO BUSINESS

MANAGEMENT AND OPINION

SWEET BUT BITTER THE PLIGHT OF SMALLHOLDER COFFEE FARMERS IN KENYA

BIASHARA LEO

BL

SEPTEMBER

2015

> YOUNG VOICE: EFFECTIVE MENTORSHIP IN ENTREPRENEURSHIP

BL KILIMO:

> ORGANIC FERTILIZER > FARMING SOLUTIONS

FEATURES:

> THE EAST AFRICA MICROFINANCE SUMMIT AND EXHIBITION > INFORMATION TECHNOLOGY WWW.BIASHARALEO.CO.KE

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Contents

Welcome

MANAGING EDITOR

George Gichuki EDITOR

Amos Wachira STAFF WRITER

Jeniffer Kamau BUSINESS DEV. MANAGER

3 MANAGEMENT AND OPINION 4 20. YOUNG VOICE 6 BUSINESS KIT

WELCOME MORE THAN A THOUSAND WORDS ARTICULATE

CORPORATE NEWS

8

BRITAM USIU-AFRICA CIC INSURANCE SUMAC MICROFINANCE TRANSUNION

22. MARKETING 25. LEADERSHIP 27. INFORMATION TECHNOLOGY

Main Story

30. SWEET BUT BITTER: THE PLIGHT OF KENYA’S SMALLHODER COFFEE FARMERS 34. KENYA COFFEE BRIEF HISTORY 35. CODF 36. M-KAHAWA 38. PLANTWISE APP 39. EMPOWERING FEMALE COFFEE FARMERS 40. CONTRIBUTION OF CO-OPERATIVE SOCIETIES TO THE GROWTH OF COFFEE

STANDING OUT BRITAM NABO CAPITAL

FEATURES

41. THE EAST AFRICA MICROFINANCE SUMMIT AND EXHIBITION 45. INFORMATION TECHNOLOGY - TECHNO BRAIN - CPF LITES

BL KILIMO

52. FARM DRIVE 54. YAD BIO-VITALIZER

18.

56. BIASHARA PICTURE

THE TECHIE JUAKALI.CO.KE

USIU-AFRICA

@biasharaleomag

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SEPTEMBER 2015 BIASHARA LEO

Biashara Leo Magazine

HEKO TEAM KENYA

A

way from the rough and tumble politics of our country, Kenya’s athletes did us proud by emerging top at the World Athletics Championships held in Beijing, China. We clinched seven gold, six silver and three bronze medals, ahead of athletics powerhouses like Jamaica, USA and Ethiopia. The historic performance is the best ever for an African country in the world championships.

It is gratifying to note that all Kenyans – irrespective of their ethnic backgrounds, religions or localities - were united in cheering the top performing team and celebrating its sweet victory. Many of them would wake up in the wee hours of the morning to watch Team Kenya in their television sets. Ultimately, they were not disappointed.

In the midst of these celebrations, there are vital lessons that entrepreneurs can learn from athletes. Their victory never comes on a silver platter. It is hard earned. They train in rough terrains and during harsh weather conditions, denying themselves a lot of pleasure and the good things of life in the process. The training sessions take a lot of time and sacrifice which calls for discipline.

Succeeding in entrepreneurship is equally a tough journey and discipline comes in handy. There is absolutely no room for short cuts for those who want to build solid enterprises which will stand the test of time. Given the ups and downs characterizing this torturous journey, one should be resilient and willing to soldier on, even when the going becomes tough.

Sadly though, many people venture into business hoping to become over night billionaires. Therefore, whenever they experience small setbacks, they throw in the towel. More often than not, during these trying moments, victory is just around the corner for such faint hearted entrepreneurs. Nevertheless, they make the ill advised decision of abandoning their businesses because they do not want to sacrifice more resources, energy and time. Eventually, they become losers because of sheer laziness and lack of vision. That should never be the case if they were to borrow a leaf from our hard fighting athletes. george.gichuki@biasharaleo.co.ke

Jared Odwar MARKETING MANAGER

Emma Nuthu BUSINESS EXECUTIVE

Okumu Sylvester

SUBSCRIPTION / CIRCULATION

Joe Mwangi DISTRIBUTION

NATION MARKETING AND PUBLISHING EDITORIAL CONTRIBUTORS

Ephraim Njega Dr. Kellen Kiambati Peter Muya

DESIGN AND LAYOUT

Felix Rurigi felixrurigi@gmail.com ILLUSTRATIONS

Stanislaus Olonde

PUBLISHED BY: ASANTE MEDIA LTD.

P.O BOX 25239-00100 NAIROBI TEL: 020- 2025755/2508026 Cell: 0733-966 270 Email: info@asantemedia.co.ke Website: www.biasharaleo.co.ke BL is published monthly.

Views expressed in this publication are those of the authors and do not necessarily reflect the position of the publisher. ©2015 Asante Media Ltd. All rights reserved. Material may be reproduced only by prior arrangement and with due acknowledgement to BL Magazine.

SEPTEMBER 2015 BIASHARA LEO

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More Than A Thousand Words

“

Paul Muthaura, acting chief executive officer, Capital Markets Authority: Introduction of an exchange traded funds (ETF) market in Kenya will offer investors an alternative option to invest in a pool of securities or other assets in a formal securities exchange environment. Additionally, ETFs offer a mechanism for reducing exposure to significant price fluctuations that sometimes characterize arbitrary buying and selling of securities.”

“

Hadija Mire, chairman, Uchumi Supermarkerts Limited: The board of Uchumi Supermarkets currently forecasts that earnings for the financial year ending 30th June 2015 will be lower than those of 2014 by at least 25%. The challenges that led to an adverse performance for this period were mainly attributed to a short fall in our working capital.”

“

Peter Mugendi, CEO, Remu Microfinance Bank : Microfinance is a business model designed as one of the interventions to alleviate poverty through expanding financial inclusion. It is, however, not the solution to the poverty problem in the country. It can only work in collaboration with other interventions to achieve its goals.”

“

Joyce Ann Wainaina, CEO, Citibank: Through technology, we have enabled our clients to reach many people in the deepest corners of rural areas. Our global strategy is to help women and to this end, 90 per cent of our financing has gone to them.”

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SEPTEMBER 2015 BIASHARA LEO

Articulate

Efficient biogas for cooking

U

sing locally available resources to produce efficient biogas for cooking is a great idea.

While most people in the rural areas depend mostly on firewood and charcoal for cooking, they also face challenges while obtaining the same. Besides, the impending scarcity of petroleum threatens the world’s fuel supply. In this regard, it is the high time rural households adopted biogas as an alternative source of energy, which is not only cheaper, but also helps in conserving the environment. I look forward to the assembling of the Rehau Homegas plants, as with my four cows, I can generate enough cow dung to guarantee a steady supply of gas.

Lilian Wainoi, farmer

PRIZE LETTER

Equitel sim card Mobile voting platform providing the freedom to choose a great innovation

M

ichael Nduati’s idea of building a mobile voting platform is an outstanding innovation. The M-Kura app, whose purpose is to change the face of elections via the mobile phone, also allows people to vote from anywhere in the world, as long as they are registered and have access to a mobile network. I think the Kenyan government should put appropriate infrastructures in place, and adopt the app for the general elections.

This may help in bringing in convenience and transparency and prevent election malfunctions.

Luke Gatwe, teacher, Kilifi

I

salute Dr. James Mwangi for continuously bringing new innovations that target the mass market. As a customer of Equity Bank, I am able to access my account anytime and anywhere using the Equitel mobile banking platform. Most remarkably, transferring money from one bank account to another within the Equity ecosystem is free of charge. I think other money transfer platforms should follow suit and reduce the cost of sending money.

Annacieta Ngugi, student, Kirinyaga University

Empowering Youth with Vijana Business Loans

WIN A FREE ANNUAL SUBSCRIPTION Biashara Leo will award a one year free subscription to the reader whose letter is chosen as the prize letter for a particular edition.

(Existing subscribers will recieve a free annual renewal).

Your view on entrepreneurship and management are of importance to this magazine.

We encourage you to share them with thousands of our readers in Kenya and the entire East Africa.

Please send your views and opinions to: The Editor,Biashara Leo, P.O. Box 25239-00100 Nairobi,Kenya E-Mail:info@asantemedia.co.ke

• Flexible Collateral • Quick Approval • Flexible Repayment Terms Visit your nearest Equity Bank branch for more information

All letters must bear the writer's name and address, although you may request your name to be withheld.Letter's can be edited for clarity.

Tel: +254 763 063 000, 6}

SEPTEMBER 2015 BIASHARA LEO

@KeEquityBank

KeEquityBank

Corporate News

Corporate News

Innovation Boot Camp Equipped Teens with Coding Skills

The launch of USIU- Africa Tech Republic Africa Innovation Bootcamp.

T

he United States International University-Africa recently partnered with Tech Republic to offer upper primary and secondary pupils aged 12 - 19 with a platform through which they can learn and expand their coding prowess.

GOING THROUGH THE RESULTS: Sunil Sanger, CEO, Orion Advisory Services Limited, Gladys Karuri, Britam Group Finance and Strategy Director and Dr. Benson Wairegi, Britam Group Managing Director.

BRITAM’S FIRST HALF YEAR’S RESULTS

B

ritish – American Investment Company (Kenya) Limited (Britam) in the first half of this year’s results posted remarkable revenue growth in its insurance and asset management business. The revenue from the two categories of business grew from Kshs. 6 billion to Kshs. 10.6 billion (equivalent to 77%), in comparison to the same period in 2014.

To start with, the overall premium income posted a sharp rise of 82% - from Kshs. 5.6 billion in 2014 to Kshs. 5.6 billion. The contribution from the regional business on the other hand grew impressively from Kshs.

262.9 million in the same period last year to Kshs. 2.1 billion. Britam has a regional presence in Eastern and Southern Africa.

It operates in Kenya, Uganda, Tanzania, Rwanda, South Sudan, Mozambique and Malawi.

The revenue from Britam Asset Managers increased from Kshs. 413.8 million to Kshs.

439.3 million, while the group’s property investments realized Kshs. 2.6 billion, in comparison to last year’s Kshs. 2.6 billion – a growth of 45%.

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Harsh business environment

So far, the business environment in the country this year has been characterized by setbacks like high interest rates, depreciating currency, insecurity and low earnings from leading corporate organizations.

In the same regard, the Nairobi Securities Exchange, where Britam has significant shares in Equity Bank and Housing Finance has been on a bear run.

The bearish performance negatively impacted on fair value from financial assets, with Britam posting Kshs. 1.044 billion pretax profit in its half year results. “This downturn has also affected other blue chip companies listed in the Nairobi Securities Exchange,” said Dr. Benson Wairegi, the Group Managing Director, while announcing the results.

Consequently, Britam has announced plans to accelerate its property development and investments strategy so as to cushion itself from the vagaries of the equities market.

For instance, it is putting up a thirty one storey iconic building in Nairobi’s Upper Hill, which is set to change the face of the fast

growing financial hub of the capital city. In addition, the group will break ground on a Kshs. 2.3 billion serviced apartment project in Kilimani, during the first quarter of 2016.

It has therefore created a property division, to deliver these ambitious plans.

Giving back to community

Britam is a responsible corporate citizen.

In that regard, it has established a foundation to spearhead its corporate social responsibility (CSR) initiatives. Its main areas of focus are: health, education, sports and the environment. In respect to sports, Britam has entered into a two year deal with Sports Kenya to brand Nyayo Stadium. It is also the official sponsor of Mathare United Football Club which participates in Kenya’s premier league.

During the 2015 Think Business Insurance Awards, Britam was the overall winner in ICT, marketing initiative of the year and customer satisfaction - life. In addition, the company was the first runners up in the life insurer of the year category and the second runners up in the claims settlement – life.

Marking its fiftieth anniversary this year, Britam has the strongest brand equity in Kenya’s insurance industry.

The five-day long innovation camp was held on August 24 through August 28, 2015. No

previous coding experience was necessary for the participants. However, students who had intermediate tech skills were challenged with additional exercises.

Students were charged Kshs. 7,000 as a facilitation fee to cater for daily meals and training materials. USIU-Africa and Tech Republic made efforts to subsidize the participation fee so as to make the camp

Kenya Ladies Union Secretary General wins CIC Kiambu Golf Tournament

K

enya Ladies Golf Union (KLGU) secretary general June Waweru, secured a win in the fourth CIC Insurance Golf series tournament at Kiambu Golf Club.

Handicap four John Ngure emerged as the gross winner by posting 76 gross points as J.K Biriri won the Guest winners prize with 35 points.

accessible to as many students as possible.

“USIU-Africa has been a long-time provider of highly-trained talent to our local and regional computer technology companies.

Providing coding classes to our future “techies” falls right in line with the diverse educational programmes we offer in the computer sciences,” remarked Ms. Jane Muriithi-Thomas, USIU-Africa’s head of marketing and communications, on the institution’s partnership with technology education firm, Tech Republic.

Co-ed tech sessions were offered in web design, app development, computer programming, digital marketing, blogging and social media. The workshop curriculum was designed to be educative and exciting, tied in with hands-on experience that combines a child’s passion for computers with exposure to top instructors.

“Our approach is centred on creativity, collaboration, critical thinking and communication. We are teaching our students to create and grow their own apps and online presence while maintaining a strong academic and practical focus,” said Amanda Gicharu-Kemoli, co-founder of Tech Republic.

“This tournament has given us a good platform to meet and interact with most of you who are our clients and key supporters of our business. At CIC Insurance Group, we are keen to maintain our growth momentum by tapping into the speciality market segments and expanding into other regional markets,” said Mwaura.

June handicap 17, a member of Kiambu and Muthaiga Golf Clubs carded 39 stable ford points to carry the day.

S.N Kiaro was the junior winner with 35 points and the staff prize went to handicap 28 George Ndung’u with 33 points.

Waweru beat B. Wainaina on count back for the win as the handicap eight J.S Gathumbi completed the last podium finish by scoring 38 stable ford points by beating Mwangi on count back.

He added: “We are already expanding into East and Central Africa region with operations currently ongoing in Uganda and South Sudan. We are also in the process of establishing operations in Malawi.”

“I played well, despite the hot environment but I focused on what had brought me here today and that’s how I won, even though I didn’t expect to do so,” said an elated Waweru after receiving her prize from CIC Insurance Asset Management MD Peter Mwaura who presided over the prize-giving ceremony at the same venue.

Mwaura mentioned that the company is keen on bringing services closer the customer. It have recently opened branches in Kitengela and Homabay with Nanyuki, Naivasha, Kitale and Kilifi set to be established soon.

The 2009 Kenya Amateur Play Champion Muthaiga’s Jane Njoroge settled for the runners up position by carding 35 points stable ford behind the winner handicap 23 Patricia Kangongo who posted 37 points.

K. Wangong’u took home the first nine winner’s prize after he played a strong 22 points as S.N Mugwe, David Mathenge, Jackson Ndung’u and S.N Gitau took home the 2nd nine with 20 points.

Mwaura assured the golfers that CIC Insurance will continue sponsoring golf tournaments in Kenya, given the power it holds in bringing people together, and its great potential in becoming a popular sport in the country.

June Waweru thanked CIC for supporting golf in the country saying : “Golf is fun and good for business networking. We enjoyed playing.”

The CIC golf series now heads to Nakuru, Nanyuki and Kitale in the coming months respectively.

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Corporate News

Sumac Microfinance Bank gets Kshs.100 million boost in battle for bigger share of MSME market

The funding will enable Sumac offer loans to MSMEs at competitive interest rates, something it hopes will help position it in the market as a leading micro-lender.

Regmifa was developed and established in 2010 by the German Development Bank in collaboration with several other development finance institutions and donors.

S

umac Microfinance Bank has received a Kshs.100 million cash injection from the Regional MSME Investment Fund for SubSaharan Africa (Regmifa), which will boost its efforts to battle for a bigger share of the micro-credit market.

Sumac Bank Managing Director John Njihia said the funds would be used to shore up the bank’s working capital and for lending to micro, small and medium enterprises (MSMEs).

“We want to aggressively penetrate the market, and the funds from Regmifa will help us lend to more customers,” he said.

He added that the Regmifa board approved the funding after under it carried out due diligence on the bank, which is one of the deposit-taking microfinance (DTM) banks licensed and regulated by the Central Bank of Kenya.

“Regmifa was impressed by our business model and growth strategies that are geared towards financing the growth of

TransUnion launches mobile credit reference service

G

lobal credit reference solution provider, TransUnion, has launched a mobile-based credit reference service that enables Kenyans to conveniently access their credit information. TransUnion Nipashe is an SMS short code platform that provides consumers with accurate, up-todate information about their credit rating.

The mobile credit reference service comes against the backdrop of the rapidly growing micro-lending business, disbursed through mobile phones. M-Shwari, for instance, has extended Kshs. 29 billion in unsecured loans in two years.

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Corporate Event

MSMEs, which are critical in economic growth and job creation,” said Mr Njihia.

2015 THINK BUSINESS INSURANCE AWARDS “INSURING THE MASSES”

The idea to establish the fund was mooted in 2007 at the G8 Summit in Heiligendamm, Germany. Symbiotics SA, an asset management company based in Switzerland, is in charge of the fund’s management. Regmifa aims to foster economic growth, employment creation, income generation and poverty alleviation in sub-Saharan Africa.

It provides financing to partner lending institutions that serve the MSME market, and offers technical assistance to increase their developmental impact.

Through the service, consumers can gain an instant view of their credit standing, and can request a credit report for a more detailed report. Consumers can access the service by sending an SMS with their name to 21272 or 21CRB and register at a cost of Kshs. 50. They can then request their credit status at a charge of Kshs. 19 per SMS, and receive a message back with their credit status listed as “good” or “default”

OVERALL WINNER: The Britam team receiving the Winner’s Award in the Marketing Initiative of the Year category from Doreen Mbaya, Head of Marketing, Standard Group.

Doreen Mbaya, presents the 2nd Runners Up, Marketing Initiative of the Year Award to Connie Kirika, Liberty Life Brand Co-ordinator and Kevin Kiambi, GM Finance and Administration.

TETE-A-TETE: Kenya Orient GM, Operations, Mercy Kiana shares a light moment with Caroline Munene, MD, AAR Insurance.

OVERALL WINNER, Customer Satisfaction Award, Medical: Mercy Ndegwa, Rosemary Maina and Serafina Ndirangu (Madison Insurance staff Members) receiving their award from Walter Omondi, Infotrak Research and Consulting.

The credit report will provide more detail, including the names of all credit institutions and facilities the consumer is active with, how payments are being made, whether any accounts are in arrears, and how long they have been in arrears for.

TransUniion Kenya CEO, Steve Kamau, says defaulting on these loans will adversely affect a customer’s credit score and consequently future loan applications.

“For many consumers, being told they have a negative credit listing is unhelpful as they are unaware of exactly what the issue is.

Armed with their credit report, they can now easily identify areas that may be reducing their credit rating,” says Kamau.

“Nipashe means ‘inform me’ in Kiswahili, and that is exactly what our new product aims to do. Access to credit from formalized financial institutions is a significant challenge for many consumers in Kenya, and lenders will typically refer consumers to the credit bureau if their loan application is declined for any reason,” explains Steve Kamau, CEO TransUnion Kenya.

Credit reference service has gained momentum in the country after the banking regulations were operationalized in 2009, receiving and sharing customers’ financial data with over the 40 banks and other lenders like SACCOs and microfinance institutions.

TransUnion acquired CRB Africa, one of the three bureaus licensed by CBK, in 2012.

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Standing Out “The unveiling of this plan is in line with Britam’s quest for continuous improvement and innovation. There has been increased demand from the market on how retirees can make their pension income work for them after retirement, hence the diversification,” said Dr Wairegi, Britam’s Group Managing Director, during the product’s launch.

He noted that there was growing demand for retirement income alternatives to annuities from high net worth individuals with huge retirement savings and who have a high appetite for investment risk.

Target market

Britam Group Managing Director Dr. Benson I. Wairegi, Agnes Ndirangu, the Technical Manager at Insurance Regulatory Authority and Stephen Wandera, Britam’s Director for Insurance Business during the launch of The Platinum Drawdown Plan, a new product that allows retirees to re-invest their retirement benefits for higher and more secure returns.

BRITAM TAPS INTO RETIREMENT INCOME TO GROW ITS PENSIONS BUSINESS Product targets growing demand for retirement income alternatives from high net worth individuals with huge retirement savings

B

ritam, the market leader in the provision and management of pension funds in Kenya, has launched a product that will allow retirees to re-invest their benefits for higher and more secure returns. It is a first for the Kenyan insurance industry.

The flexible product, known as the Platinum Drawdown Plan, gives retirees a platform to re-invest their benefits and take out a portion of the fund as an income. It targets individuals aged fifty years and above with retirement benefit savings under a registered scheme with the Retirement Benefits Authority (RBA). Under the new plan, the pension benefits will be invested

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with a capital guarantee against investment loss for a minimum period of ten years.

Alternative to annuity

The Platinum Drawdown Plan serves as an alternative to the pension annuity. In that regard, it is registered by RBA, following the amendment of the Retirement Benefits Act in 1997. It is very appropriate for retirees who are keen on further re-investing and growing their benefits and need flexibility in the frequency of receiving the income that is suited to their needs. It is also an option to members of provident funds and retirees who choose not to take part or all their benefits as a lump sum.

The plan also targets retirees who intend to purchase an annuity at a later date, have other sources of income, and do not need guaranteed income from their retirement savings. In addition, it suits those who wish to leave an inheritance to their beneficiaries.

In the unfortunate event of death, the benefit can be passed on to beneficiaries as per the deceased’s wishes as long as the member has not exhausted his or her funds. The beneficiaries also have the option of converting the funds to annuity at a later date when the fund is bigger and hence generating more income.

Moreover, if the deceased was above 65 years, beneficiaries get favourable tax treatment since the benefits are not taxed.

Need to secure your future

Going by a survey which was recently carried out by Alexander Forbes on deposit administration, there is need for players in Kenya’s pension industry to create more awareness on the need to save for retirement. Statistics from the survey reveal that more than 40% of Kenyans will not be able to afford to retire, while a similar percentage will depend on their respective families for financial support in line with the African traditions. Worse still, only 5% of Kenyans are likely to be financially independent while in retirement, and even fewer will lead a comfortable lifestyle.

One of the major challenges the key industry is grappling with is the ability of members to access portions of their benefits as cash on withdrawal from a scheme irrespective of whether they have attained the statutory retirement age.

A QUICK GLANCE ON WHY YOU SHOULD TRANSFER YOUR PENSION FUND TO BRITAM Recognition and Awards

1. COYA (Company of the Year Awards) 2013 > Britam awarded Company of the Year Award 2013 > CEO of the Year Award 2013 - Mr. Benson Wairegi > Leadership and Management Award 2013 > Customer and Market Orientation Award 2013 2. Recognised by Capital Finance International and World Finance as Best Insurance Company in Kenya 2013. > These are internationally renowned publications based in London 3. Think Business Insurance Awards > Fund Manager of the year 2012, 2013 > Unit Trust of the year 2013 4. The first Insurance Company in East Africa to be awarded Super Brands recognition in 2009/2011.

Subsequently awarded the same recognition together with other insurance companies in 2012/2014

Actual Performance

1. Association of Kenya Insurers’ ( AKI) Agent of the Year Award - 2007 - 2013 won seven years in a row 2. Very competitive pensions returns among insurance companies in 2006, 2010, 2012, 2013 and 2014.

3. Among the highest insurance companies in the 7-10 year average pensions returns.

Firsts in the Industry

1. First Insurance company with two qualified actuaries and a fully fledged actuarial department. Very instrumental in asset liability matching, investment strategy and fund valuations.

2. Innovative: First to develop the following: > Umbrella Retirement Fund – registered in 2006 and currently with over 150 participating employers. > Pension backed mortgage product

Financial strength

1. Financially stable company – Asset base of Kshs. 73billion as at 31st December 2014.

2. Among the most profitable Insurance Companies – Kshs. 3.7billion for year 2014 3. Solvency – Kshs. 3.5billion against a regulatory requirement of 1.2billion 4. Listed in the Nairobi Securities Exchange ( NSE) 5. Most capitalized Insurance Company in the NSE

Pensions Business

1. Return for 2012, 2013 and 2014 – 16% - the highest among insurance companies.

2. Britam has been in Pensions business since 1995 3. Pension Fund size – 10.7billion and annual contributions of 2.65billion as at 31st December 2014 4. Minimum guarantee 5% on Pension funds 5. Widest range of retirement benefits products: a. Occupational Schemes b. Umbrella Retirement Fund c. Individual Retirement Funds d. Annuities e. Income drawdown

Investment

Investment

Nabo Capital has differentiated its products by offering access to investment opportunities across SubSaharan Africa managing traditional asset classes as well as real estate and private instruments. It is a leading investment solutions provider for institutions and individuals with an Africawide focus.

Alternative investments

The rapid growth and increasing recognition of alternative investments continues to be a vital aspect, not only in Kenya, but the world at large. In this regard, Nabo Capital has marshaled its instruments to meet the strong demand from its clients as it continues to push for alternative investment options.

John Gichanga, Head of Business Development, Nabo Capital.

CREATING TANGIBLE WEALTH THROUGH INVESTMENT Nabo Capital is committed to revamp investments within the continent by pushing for alternative asset classes.

By Jeniffer Kamau

F

inancial investment may seem a familiar part of the economic cycle, but they are rarely embraced by everyone exactly. While one may chose to embrace investment as a way of generating wealth, choosing the right investment vehicle has however proved essential. It is now obvious that alternative

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investments are the current fundamental option in wealth generation.

According to John Gichanga, the head of business development of a leading investment firm, Nabo Capital, Kenyans mostly invest in money markets and equities. “However, high demand for these

traditional investments has brought down returns,” says Gichanga, adding that the investment firm is innovating alternative investments to bring more options to its clients.

The company provides dollar-denominated and high-yielding investment vehicles to its clients to help them diversify their portfolio.

The name Nabo has been borrowed from the Maasai language. It means “one” thus translating into “First Capital”.

This is in line with its commitment to become the gateway to Africa while simultaneously revamping investments within the continent by pushing for alternative asset classes.

Nabo Capital, a wholly-owned subsidiary of Centum Investment Company Limited, seeks to utilize its rich expertise to create tangible wealth for its customers by

Increased demand for traditional investments has brought down expected returns. “As a result, more investors are turning to alternatives as they are seeking strategies that can provide both alpha and a return stream diversification within their core portfolio allocation,” says Gichanga.

Besides, many are confronting the reality that bonds and stocks will not generate enough returns to help them achieve their desired investment objectives.

As part of the changing mindset, Nabo Capital has adopted a diverse set of alternative investments including real estate, offshore, securitizations and private instruments. These provide diversification and offer investors a longer return stream.

The Two Rivers project located on a 100 acres within the highly sought after diplomatic blue zone along Limuru road in Nairobi is a good example of real estate development.

The realization of the project has created a solution for Nairobi’s growing population by providing a master planned environment

of commercial, office, residential and retail space. “The development has adhered to the international standards and for that reason has received good reception both from local and international companies.”

low level of awareness. To address the issue, Nabo Capital has embarked on educating clients on the benefits of investing in alternative assets by holding workshops and through breakfast meetings.

Competitive edge

So far, the company has managed to build its name and the fact that it is a subsidiary of Centum Investment has contributed greatly to its success.

Gichanga says that Nabo Capital is probably the only company with an Africa-wide focus and offers tailored fund management services that appeal to sophisticated investors. As dictated by its mission, the company focuses on growing its clients’ wealth by investing in lucrative opportunities across Sub Saharan Africa, except South Africa.

Moreover, the company is committed to a culture of trust, reliability and honesty.

“We do what is right and not just what is allowed.”

As a fully fledged institution, Nabo has opened doors to third party funds, who can now exploit the expertise attained in the African markets over the years. “We are solution providers to fund managers and other pools of Funds,” observes Gichanga.

Nabo is unique and different. It targets clients, both local and international, with innovative product offering. “Innovation is our DNA and we always strive to address glaring gaps within the market,” quips Gichanga.

Thus far, Nabo is rapidly gaining reputation as a conduit for accessing lucrative alternative asset solutions, indicating the degree of recognition within the region. It has also engaged several organizations within East Africa through real estate projects.

Industry trends

“For a long time, investment has been done in Kenya in a traditional way,” affirms Gichanga. Nevertheless, the asset management industry stands on the edge of a number of fundamental shifts that will shape its future. This is evidenced by the rise of alternatives that provides investors with additional avenues of making money within Africa.

In spite of the availability of a range of investments products, some potential investors still shun investments due to the high risk involved. This is partially caused by

Product diversification

Nabo Capital has differentiated its products by offering access to investment opportunities across Sub-Saharan Africa.

One such avenue is the Nabo Unit Trust Fund, an investment vehicle that allows clients to pool funds with other investors sharing the same investment objectives.

The fund offers diversity in that investors can choose among various options depending on their risk return preferences and investment horizon. These include Nabo Africa Money Market Fund, Nabo Africa Fixed Income Fund, Nabo Africa Equity Fund and Nabo Africa Balanced Fund.

These products are generally targeted at high net worth clients with short-term and medium-to-long term investments needs.

“The minimum investment for the unit trusts is $50,000.” Gichanga points out that this makes economic sense both for the investor and the fund manager. He also advises individuals to invest in the long-term products as the rewards are really good.

Most remarkably, investors have the freedom to switch between the funds as their investment objectives change.

Besides, investing in unit trusts enables them to access a range of opportunities and they can sell their units at the prevailing price when need arises.

Other than the unit trusts, the company also manages private wealth through Nabo Private Wealth Management. Resources are committed to achieve the goals of high net worth individuals and those of their family.

Gichanga observes that Nabo Capital provides advisors who work closely with the investors to understand their needs.

This results in the formulation of a bespoke investment strategy, which is implemented by the company’s professionals who have extensive experience in the field.

SEPTEMBER 2015 BIASHARA LEO

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Strategically positioned

To deepen the penetration of retirement savings in Kenya, Britam has focused on reaching the small and medium enterprises (SMEs) market segment. Consequently, it has strategically positioned itself to serve this lucrative market by establishing a wide branch network and satellite offices across the country. This is backed up by a large distribution force of over two thousand financial advisers.

BRITAM: PROVIDING LEADERSHIP IN THE PROVISION OF PENSION FUNDS

Renowned for its innovation, Britam pioneered the establishment of the first umbrella retirement fund in the industry in 2006. The decision to launch the product was informed by the need to tap into the SMEs market by providing them with a simple and cost effective solution that allows them to focus on their core business, while Britam manages their retirement funds. “We currently have over three hundred and fifty SMEs under this fund,a hundred of which came on board in 2014,” says Wakiria. The Individual Retirement Fund (IPP) also targets this market segment.

Diversified financial services group stands out in a competitive industry by developing unique products and offering exemplary service

T

he need for individuals to plan, sacrifice , save and invest for a comfortable retirement where they can pursue new found interests without passing the burden to their relatives or well wishers should not be over emphasized.

Since the establishment of the Retirement Benefits Authority (RBA) to regulate and supervise the establishment and management of retirement benefits schemes in the country, tremendous growth has been registered in the key industry. As the regulator strives to achieve its mandate, increasing the retirement benefits coverage among the working population in the formal and informal sectors still remains a major challenge.

To overcome this hurdle, RBA together with other players in the industry has been rolling out awareness campaigns on the need to save for retirement, besides developing products targeting the mass market. Indeed, studies carried out by the organization have established that the life expectancy of those who retire with benefits tends to be higher than that of their peers who do so with none. That is mainly because with a secured future, one can easily open a new and enjoyable chapter in life, full of promises and hope, as opposed to getting disillusioned.

Highest returns in the pensions industry

Among the players who have distinguished themselves in the provision and management of pension funds in the country is Britam. The diversified financial services group is a market leader in this competitive industry. It has been providing retirement benefits solutions with products tailored to meet the ever changing needs of customers since 1995.

Product offering

Rose Wakiria, Britam Country Sales Manager, Group Life and Pension.

With a retirement fund of over Kshs.

12billion, the company is a market leader in the provision and management of pension funds for individuals, private companies, parastatals, small and medium enterprises (SMEs), schools, universities, hospitals and churches among other institutions.

“Strong performance and innovative products have positioned Britam to be a market leader in the provision of pension in the country,” says Mr Ambrose Dabani, Britam’s General Manager, Life and Pensions.

“We continually take advantage of our active portfolio management capabilities to seek opportunities that enable us achieve above average returns,” he adds.

Moreover according to him, for the last three years, Britam has recorded the highest returns on pension guaranteed funds among insurance companies in the country.

Britam has five pension products spanning from retirement planning and income.

The first one is the occupational schemes.

These are group schemes offered to medium sized and large organizations in terms of staff complement. They are run by a board of trustees or a corporate trustee who appoint crucial service providers such as fund managers, administrators and

auditors to ensure they are efficient. Britam offers investment (fund management) as well as administration services in respect to this product.

The umbrella retirement fund on the other hand is a scheme that allows multiple employers to participate while Britam provides a complete package of trusteeship, fund management and scheme administration. It targets the SMEs with a minimum of two employees.

Britam also offers the individual retirement plan(IPP) targeting those who wish to save for their retirement in a tax efficient, cost efficient and flexible way. “This innovative product allows individuals to make contributions when they are in a position to do so, which can be varied from month to month,” according to Wakiria. “The minimum contribution is Kshs.500, but if need be, lump sums can be injected,” she adds.

The fourth one is the pension annuity which is a retirement income product available to individuals aged fifty years and above, especially the ones retiring from a pension scheme. This product is purchased using retirement savings. Its objective is to provide an income for life to the retiring person.

The final product in this line of business is the income drawdown. It is a retirement income product which serves as an alternative to the pension annuity that enables the retiree to reinvest his or her

It posted a return of 16% on guaranteed pension funds in 2014. This is the third time in a row that the company has posted the highest returns in the industry.

Ms Rose Wakiria, Britam Country Sales Manager, Group Life and Pension says that retirement planning is long term in nature and investment returns are crucial in growing the retirement fund to ensure a comfortable future.

In addition, Britam provides guarantee on savings against investment losses, while at the same time offering a minimum rate of return of 5% per annum. This ensures that the funds grow year on year. “Through prudent investing, the actual rate of return has been significantly higher than the guaranteed one which is 5%, with rates being as high as 16% in 2012, 2013 and 2014,” Wakiria observes. The ten and five year average return for the group on the other hand has been 12.23% and 13.8% respectively.

Jude Anyiko, acting CEO Britam Asset Managers, Dr. Edward Odundo, CEO, RBA, Gladys Karuri, Britam Group Finance and Strategy Director and Muthoga Ngera, Britam’s Director of Marketing and Corporate Affairs during the launch of the Umbrella Pension Scheme.

retirement savings , while drawing an income from the fund, subject to statutory requirements.

In a market segment characterized by cut throat competition, Britam has over the years clinched the leadership position because of developing innovative products that resonate with the clients’ needs ( especially the umbrella retirement fund which is the fastest growing in the product mix) , leveraging on a wide distribution network which comprises insurance brokers and agencies as well as a big number of financial advisers who are trained, equipped and supported to market pension products to their prospective clients. “We also have a strong brand and we provide value to our customers by offering them cost effective products with superior returns in the market,” affirms Wakiria.

Market trends

Besides providing for the old and their dependents, pension funds are also effective tools of mobilizing long term savings which are in turn used to grow the gross domestic product ( GDP). Nevertheless, only the big corporate organizations have pension facilities for their employees. In addition, the government only provides pension to its permanent employees. In that regard , it has made it mandatory for employers in formal organizations to contribute towards their non-pensionable employees’ retirement benefits through the National Social Security Fund ( NSSF).

A number of changes are expected in the pension industry once the NSSF Act 2013 is implemented. For instance, all employers with a minimum of one employee will be required to enrol their employees into NSSF with an option of putting part of the savings in private pension schemes (Tier 2 contributions). This will result in the growth of the number of individuals saving for their retirement, besides boosting the volume of savings being made to these plans as the Act increases the contributions from Kshs.400 per person per month, to a maximum of 12% of his or her salary.

“Going by this development, the role of pension funds as institutional investors in the economy will be enhanced,” says Wakiria. In the same vein, more players are expected to join the industry. This will heighten competition leading to innovations in respect to supportive products and systems as well as lower prices for the services rendered. Ultimately, the customers will benefit through improved quality of service offering.

The Techie

The Techie

Clara Mutongi, project manager, Juakali.co.ke.

Juakali founder Judith Owigar shares the stage with US President Barack obama during the Global Enterpreneurship Summit.

ONLINE TOOL THAT LINKS SKILLED JUAKALI WORKERS WITH EMPLOYERS

Juakali.co.ke is a platform where artisans, masons, plumbers, chefs, painters, electricians among others meet their clients

By Amos Wachira

W

orking as a research assistant in 2012, Judith Owigar noticed there was no link between Jua Kali workers (painters, plumbers, and electricians among others) and people who need their services. She realized that a large percentage of this informal workforce plies their trade by the roadside, sometimes with or without any shelter. This startled Owigar, who hatched the idea of starting a website which could be the link between employers and the Jua Kali workers. Using the online tool, Owigar reasoned, the workers could increase their earnings and the client (home owners, small and medium enterprises) could get reliable workers. This gave rise to the launch in 2012 of Juakali.co.ke, a website that Owigar created from scratch.

For many people, getting a reliable and trusted Jua Kali worker is a daunting task.

It involves making numerous calls to many workers and sometimes, getting none, even after the said workers promise to show up.

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The Juakali platform is in the process of making this experience better for both the clients and the Juakali workers.

JuaKali creates livelihood opportunities by linking skilled workers from the informal sector with on demand clients. This service allows workers to show their expertise on an online platform. The service can be accessed both on web and mobile platforms.

The Juakali platform had a noble idea from the start: To provide easy access to reliable skilled manual workers while creating a reference based listing of skilled manual workers.

How was the service received in the market?

“At first there was very low uptake since I approached it from the Techie mindset: ‘built it and they will come’. That is so wrong.

I later realized I needed to understand the Juakali (informal sector) industry and build on the existing relationships. We went to market again in 2015 with a stripped down

version of the initial product. This time the uptake has been better and the number of users and customers are growing.”

Owigar says that she and her team is constantly learning how the industry works and making changes to the model to take advantage of the insights.

The experienced innovator says that she wants the online tool to become the go to reference point for all the informal workers in Africa. Her dream is not farfetched. So far, her start up has changed lives in a good way. Here is how.

A year ago, Dominic Hamisi used to spend most of his time idling or chatting away with friends. He could not find jobs, despite being an experienced plumber with shinning credentials. His predicament was easy to decode. Few people could trust strangers from the roadside with some of these jobs, which were mostly inside their premises.

This means that Hamisi’s chances of getting a job, any job, were shrinking by the day.

But in came Juakali.co.ke and Hamisi’s life got a relief. He could simply log into the system, get a job online, and actually get paid for his services. Today, he smiles ear to ear whenever he hears anyone mention Juakali.co.ke. He can now afford to live a decent life and support his family, as he enjoys doing what he likes best, hassle free.

He represents a growing number of artisans who have embraced the new innovation.

Dorothy Kiminya is a client of Juakali.co.ke.

She used to struggle to get the right artisans to fix her premises, but all this used to end in disappointment. Independent Juakali workers have a penchant for not showing up, even when they had been given a down payment via mobile money platforms.

“Today, all I need is to call the dedicated Juakali telephone numbers and I am promptly linked with an artisan who is near my location.”

According to Clara Mutongi, project manager of Juakali.co.ke, hundreds of other clients make enquiries via the website, something that shows that the industry is still untapped.

Mutongi handles both clients and workers and ensures that all are satisfied. To make this a reality, she vets all Juakali workers before matching them with clients. Mutongi also oversees the work being done by Juakali workers to make sure that only high quality services are given.

This has borne fruits. The project manager says that more clients are appreciating the services of the online platform.

“My defining moment was when I received a call from one of our clients who had struggled to get a reliable worker, saying that the worker we sent over to her did an exceptional job,” recalls Mutongi.

Her biggest challenge yet is ensuring that the client does not call the worker directly.

“We have embarked on building healthy

relationships between Juakali, the client and the worker.”

It is easy to see why the platform is making shockwaves in the industry. In the recently concluded Global Entrepreneurship Summit, Juakali.co.ke founder Judith Owigah was one of the 30 semifinalists from around the world in the Spark the Fire competition where she pitched her start up.

The computer science graduate of the University of Nairobi also got the chance of a lifetime to pitch Akirachix, a startup that is she co founded in 2010, to US president Barack Obama and his Kenyan counterpart, Uhuru Kenyatta.

Her venture, Juakali.co.ke won her the ICT Authority Tandaa Award in 2012, when her venture was just an idea. Her journey as an innovator has been interesting so far. Growing up, the young innovator knew from an early stage that she wanted to be successful. “When I was a computer science student I wanted to be an IT manager in a big company,” she recalls.

But after founding her first startup and realizing that she was in a position that could impact lives, she decided to be a tech entrepreneur, a decision she describes as “challenging and more fulfilling.” This is best exemplified by the success she is gaining in the technology world. Currently, Juakali.co.ke is finalizing the process of getting the first corporate partner who will be training the workers on the system.

Owigar’s star has continued to shine in a male dominated industry. She is an East

Hamisi, a Juakali worker.

African Acumen Fellow (2015) and an international Focus fellow (2014). In 2012 and 2009 she was named as one of the Top 40 under 40 women by the Business Daily newspaper. In 2012 she was also named as one of the 10 African voices to follow on twitter by CNN. To cap it all, Owigar was recognized with the Anita Borg Change Agent Award (2011) by the Anita Borg Institute for Women and Technology.

She has also been honored by the US Embassy in Kenya with the Unsung Heroes Award. This was in recognition of the work that Akirachix has done to promote women and give them a voice using science and technology. In 2007 she was named the Best Female Engineer at the Institute of Electrical and Electronic Engineers students’ exhibition.

Having experienced the struggles of the Kenyan innovator, Owigar knows the challenges that characterize local startup industry. These include lack of a mentorship programme that can help budding innovators realise their dreams, as well as lack of capital to turn ideas into start up’s that can create jobs for thousands and turn around the economy.

She advises the youth who would like to delve into the uncharted waters of entrepreneurship to possess visions that are bigger than themselves so as to have something that they constantly strive for.”

The goal of entrepreneurship should be to design the life you want. It should fulfill your own personal need for a better life or a better tomorrow or something very personal to the entrepreneur.”

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Young Voice

Young Voice

Let us not hesitate to render advice to those who seek it from us. We owe it to others to be there for them when they need us. As it were: “To him that much has been given, much will be required.”

Being a relationship, it cannot possibly be commercialised. Furthermore, the mentorship relationship is a very personal thing. Making it a business would mean canvassing for clients, which would not make any sense.

Mentorship is not dictatorship

EFFECTIVE MENTORSHIP IN ENTREPRENEURSHIP

M

Understanding mentorship

By Ephraim Njega

entorship is a relationship in which a more successful person holds the hand and guides another one who is aiming for the same level of success. Mentorship is important in entrepreneurship because the idea that another person has done it is enough motivation to start something. While entrepreneurs are often self-driven, motivation from within is not always enough.

While the concept of mentorship and role model are somehow related, there is a difference in that role modelling may not involve any relationship. A role model can inspire you but you might never even have the opportunity to interact with him.

In addition, mentorship is not apprenticeship, which involves learning a craft from those more experienced in it. In

20} SEPTEMBER 2015 BIASHARA LEO

entrepreneurship, every journey is unique and it is not like a craft with well laid down processes and systems.

Mentorship relationship is crucial in entrepreneurship. The good thing about mentorship is that you do not need to have really made it to become a mentor. All you need is to guide others who are in the stages to success you have already passed.

Mentorship should be Voluntary

Sometime ago, there was a programme in which a local university was trying to professionalise mentorship by training mentors. While such an initiative is noble in terms of raising the standards of mentors by making them understand their roles well, one of the ideas that was being explored is whether mentees can pay for mentorship.

I believe mentorship should be voluntary.

You cannot turn it into a business or profession. Mentorship is not consultancy.

The mentorship relationship is unique because it is about encouraging others rather than patronising and dictating.

Mentorship is not about cloning yourself or photocopying your success. You shouldn’t elevate yourself into a mould upon which others should drop and be cast into instant success. That is not mentorship; it is playing God. Mentorship is not about drilling down your ideas about success on others. The path one follows to success is not one that can be replicated. One can share his experiences but should understand the circumstances others are going through are not identical to his. Thus, this sharing of ideas only has an encouragement value but zero duplication capacity.

The mentor also has no business making decisions for the mentee. The responsibility for one’s success can never be outsourced or delegated. Thus, the mentor should avoid babysitting and spoon-feeding the mentee.

It is up to the mentor to avoid a situation in which the mentee becomes dependent on them for key decisions. This should never happen.

Mentees should choose mentors

I believe it is the responsibility of those who need mentorship to look for mentors. At the end of the day, the mentor is busy with his business and even if he wants to mentor

others, it should be based on respect.

Respect cannot be commanded, it can only be earned.

Mentorship is also anchored on admiration.

You cannot possibly campaign for people to admire you and your achievements.

Sometimes I see some successful business people creating Facebook pages and promoting them and wonder if success has become a commodity.

Procuring mentees is like building a monument for yourself. It is an absurdity.

No matter how much you feel you have contributed to society and that it owes you a debt of gratitude , it would be insane to do the debt collection. This reminds me of the Kenyan politician and businessman who went to court to demand for state honours. Thankfully, the court declined him his strange wishes.

It is important for mentees to choose their mentors wisely. Not all mentorship relationships will be productive. Indeed, in some cases, it can be destructive, as I will demonstrate shortly.

Current circumstances should not discourage one from mentoring others

Sometimes, when young people or start up entrepreneurs ask me to go and advice or mentor them, I wonder how I can mentor people yet I also have my own business challenges to deal with. Yet I have realised that even the Kirubis of this world with their billions and years of experience still have things that keep them awake at night.

In any case it is better to talk to people when you are making it and not when you have made it. After you have made it, your words will sound hollow, pretentious, exaggerated and utopian. Otherwise, how will they believe that you once starved to be where you are when you have come riding in a beast and wearing Kshs. 500,000 brioni suits?

Mentorship is not about bragging

There are mentors who spend so much time with mentees bragging about their achievements. This may end up discouraging mentees and ruining their spirits. A bragging mentor will make success look easy and make the mentee feel as if their struggle is out of incurable deficiencies.

On the other hand, another way of bragging is making success look so far out of reach

that making an attempt at it is foolhardy.

Exaggerating your struggle and inflating your success may make the mentee give up. Making it look as if succeeding is blasting through hell, with fire everywhere and demons in hot pursuit is unnecessary and irresponsible.

The mentor should be honest about success. Those who have been in business know that the little progress we have made has not been about strictly sticking to textbook guidelines. It has not been about being military like in planning and clinical in execution. There are times when we were just lucky. Yet there also times when we manoeuvred craftily to succeed.

Mentorship is also beneficial to the mentor

When people succeed in life, there is always the desire to want to give back as a way of appreciation. Mentorship is a powerful opportunity to reciprocate for the success we have achieved in life through the grace of God and the generosity of men.

Being asked to mentor someone also provides one with encouragement. You feel that there are people who appreciate the journey you have travelled; people who see in you what they would like to see in themselves. It is a rare vote of confidence in a world that suffers a heavy deficit of gratitude.

Despite such benefits, the mentor should also engage in mentorship wisely. You can’t say yes to every mentorship request as time may not be sufficient and in any case, the mentor also has to be comfortable with the mentee.

Conclusion

Indeed, many of us in business have gone through a lot to be where we are today. We have benefited from mentors and those in business we hold in high regard. When it is our turn to also mentor others, we should do it wholeheartedly and not for any gain.

The very satisfaction that you are helping others is sufficient reward.

Let us not hesitate to render advice to those who seek it from us. We owe it to others to be there for them when they need us. As it were: “To him that much has been given, much will be required.”

The writer is an entrepreneurship, management and marketing consultant Email: emunje@yahoo.com or www. facebook.com/njega

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Marketing

Business Kit If some of the issues make it unprofitable to operate in a country, it may be wise to suspend expansion until such a time when market conditions are favourable

PRICING CHALLENGES IN GLOBAL MARKETING

charges and mark-ups, tariffs, and other expenses. This is the reason why you can go to another country and find that the price of a certain product is costing a lot compared to the home country.

By Ephraim Njega

The challenge with this is that it makes the products costly and difficult to compete with the local ones. Some measures that can be adopted include reducing the number of middlemen, shifting production to a foreign country and negotiating with middlemen to reduce their margins.

I

Going global and its challenges

n a previous column, I discussed about entering international markets and the challenges and opportunities it presents. One of the challenges that require more attention is in the area of pricing. While pricing challenges are there even when selling domestically, the following challenges make it hard to price goods and services in international markets.

Currency fluctuations

Currently, most world currencies are depreciating against the strengthening US dollar. For instance, the Kenya shilling has depreciated by 13 percent this year, the Uganda shilling by 22.4 percent and the Tanzania shilling by 18.6 percent. When the Kenya shilling depreciates, our exports become cheaper to foreign consumers but it becomes more expensive to import goods for local consumption.

Forex losses present challenges since such they have to be passed on to consumers.

This can make the goods uncompetitive.

When the currency fluctuates in a volatile manner, setting prices also becomes a challenge. This means using the price as tool to meet sales target is no longer effective.

Some of the measures that can be adopted include quoting prices in a more stable currency and tinkering with other aspects of the marketing mix to make up for the pricing

22} SEPTEMBER 2015 BIASHARA LEO

challenges. As a rule of thumb, a seller should negotiate to bill in a strong currency, and a buyer should try to gain acceptance in a weak currency. In the current case for instance, if you are exporting, you should insist on receiving payment in dollars while if importing, insist on making payment in Kenya shillings.

Inflation

Inflation refers to the general rise in prices of goods and services.

In international markets, some countries have hyperinflation situations in which prices are so much out of control that the concept of inflation loses meaning. For instance,Ukraine’s inflation rate eased to 55.3 percent in July from 57.5 percent in June and a 2015-high of 60.9 percent in April. In Venezuela, a Forbes columnist has calculated an implied inflation rate of 808% as government stopped releasing inflation statistics due to its volatility. In Southern Sudan, cost of food increased 60.6 percent in July 2015.

These kind of figures may mean little when you read them, but when you are selling

goods to such countries, it presents many challenges. It makes it hard to project sales figures and harder to set and adjust prices.

Such challenges if not tackled well can lead to losses.

Some of the measures that can be adopted include shortening credit cycles, pursuing quick inventory turnover, sourcing materials from low cost countries and modifying products. Other measures include putting price escalation clauses in contracts. For instance, some landlords nowadays put annual rent escalation clauses in contracts as a way of managing inflation.

When conducting business in the country, it is critical to work with managers experienced in such operating environment.

For instance, countries in Latin America are used to high inflation and they have learnt good lessons on how to deal with it.

Price escalation

Price escalation is rise in price as a product moves from one country to another due to the costs of transportation, middlemen

Another option of dealing with price escalation is stripping the products of some features to make it affordable to foreign consumers. You may have seen some books here in Kenya which are authorised for sale in some Asian countries only. Such books are usually printed in black and white and in low quality paper.

One can also position the product as a premium brand to justify the high price. This is why you may find that when new products are imported from other countries, the price is initially high and only declines with time.

As time progresses, the premium brand strategy may not withstand the competition and prices will come down. Nevertheless, the marketer will have dealt with some of the initial price escalation challenges.

Price controls or administered prices

This happens when governments set prices of certain commodities. In some cases, the set prices can be so low that the company can no longer operate profitably.

The marketers also can’t use price as a strategic tool as they are no longer able to adjust prices beyond the set ceiling or even floor.

Some measures that can be used include dropping products which are price controlled, moving into products categories that are not price controlled e.g. from human food to animal feeds. One can also modify a product to remove it from the price control regime for instance. In addition, if price control only affects products of a certain weight, one can reduce or raise the weight to be well just over the price control target.

The other measure would be to negotiate an exemption from the government but this is hard for a foreign company due its limited lobbying powers.

Anti-dumping regulations

Dumping occurs when the foreign company prices are so low that they threaten the local industries. Currently, this is a hot topic in global marketing. For instance, the current sugar debate in Kenya regarding its importation from Uganda has a lot of dumping undertones. There are those who believe that Ugandan sugar will be so cheap that the Kenyan one will be in no position to compete. It is feared that this may cause loss of livelihood along the sugar value chain.

Dumping can be legal or illegal depending on the regulatory environment. There are three types of dumping. To start with, sporadic dumping occurs when a manufacturer with unsold inventories wants to get rid of distressed and excess merchandise. Secondly, predatory dumping involves selling at a loss to gain access to a market and perhaps to drive out competition. Persistent dumping on the other hand involves consistently selling at lower prices in one market than in others.

One measure that can be used to escape dumping allegations may include enhancing service in one market so that the exported product is differentiated from the one in the home country. Assembling in foreign country on the other hand can lower costs hence justifying the low price.

In addition, one can make a non-price competitive arrangement with distributors by for instance extending credit to them.

Transfer pricing

Transfer pricing refer to the price a company charges its affiliates and associates such as subsidiaries for goods sold to them. This is another hot topic in international markets due to the attention it elicits among tax

authorities. Transfer pricing can be used by multinationals for tax evasion. Many companies have been charged and fined heavily by the taxman on this basis.

One of the approaches to deal with this is to charge the subsidiary the same price it would be charged if it bought the products elsewhere i.e. in the open market. This makes it easier to justify the price charged when the taxman comes calling. This is the arm’s length strategy and it is the safest way of managing the issue. The subsidiary can also be charged the cost of the product plus a margin but this is hard to justify to tax authorities.

Price coordination challenges and grey markets Price coordination refers to how the company manages price adjustments across various countries in which it operates. If it is not done properly, the goods will be cheap in one country and expensive in another without objective justification.

This will lead to grey markets in which nonauthorised distributors engage in parallel importation. These grey market players will buy the products from the cheap country and sell it in the expensive country. Price coordination challenges can be addressed by setting prices from the headquarters and allowing local managers little or no leeway in varying them. One can also impose quotas for instance ensuring few goods are shipped to the country with low price to curb re-exports.

Conclusion

The above challenges bring serious complexities when selling goods across borders. Anyone thinking about expanding abroad should carefully consider each issue and see how it affects their business.

If some of the issues make it unprofitable to operate in a country, it may be wise to suspend expansion until such a time when market conditions are favourable.

Remember that once you have entered a foreign market exiting may be a costly and messy affair.

The writer is an entrepreneurship, management and marketing consultant Email: emunje@yahoo.com or www. facebook.com/njega

SEPTEMBER 2015 BIASHARA LEO

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Leadership

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LEADERSHIP AND COMMUNICATION POWER

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any of the defining characteristics needed for effective leadership -- like having a vision, integrity, commitment and resilience – are innate. Happily, another quality, which is as essential for success as the others, can be learned. It is the ability to mobilize a fire-in-the-belly effort among employees to help the leader realize ambitious goals.

This quality can be acquired by observing the behaviour of leaders who deploy these skills by being coached or incrementally with “stretch” efforts by the leader to generate the much needed employee commitment.

The power of the leader’s position alone cannot command enthusiasm and dedication from today’s workforce.

Instead, employees must be convinced that the leader’s objectives are achievable, understand that meeting the goals will provide a personal payoff and be inspired

to make their own full force contribution. To generate the support needed from everyone in the organization, the leader has to put his leadership on parade. Accordingly, he must be visible, crystal clear about his message and take every opportunity to demonstrate, live and in person, his passion for his goals.

Unless he shows how deeply he cares, few others will care and his plan may be seen as another flavour of the month.

Internal media

Some leaders believe it is sufficient to communicate their goals to the workforce through the organization’s internal media: employee publications, intranet and videoconferencing among others. The more sophisticated the technology, the better. Many have become enamored with blogging because it makes possible instant communication with large numbers of employees, assuming they make the effort

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SEPTEMBER 2015 BIASHARA LEO

{25

Information Technology

Leadership

to log on. All this is useful because it allows the repetition of the leader’s message, which is essential for making an impact.

But using media is not a substitute for interacting with employees face to face.

Media cannot convey the intensity of the feeling the leader has for his plan, nearly as well as human contact does. The very fact that the leader is there, that he has left the comfort of the office to communicate with employees, gives the message importance.

The leader must make his case loudly, clearly and consistently. He should seize every opportunity to speak from the heart in personal engagements with the employees.

Doing this lets the leader express his message with absolute clarity and address any concerns the employees may have about it. There is an additional payoff: The workforce’s views about other company issues will come through unfiltered.

Reporting of bad news at these meetings should be encouraged because it can be dealt with on the spot and not spiral out of control. Personal interactions with the workforce can take many different forms.

The leader can make presentations before large groups in auditoriums. There can be smaller, more informal departmental or function-focused meetings, where participants will feel freer to ask questions or present problems. When the leader appears at these meetings without the usual retinue of direct reports, it signals that he is approachable and welcomes interaction.

Skip-level meetings

The leader can also meet with a crosssection of employees in skip-level meetings, conduct spontaneous walkabouts to fill in the time between planned events, have lunch in the organization’s cafeteria, and drop in on the back office, the factory floor or a remote office where employees may never have seen him. They will therefore be particularly impressed. When a leader presents awards to employees at ceremonies, they become particularly special. Praise from an employee’s direct supervisor is a strong motivator. It is even stronger if it comes from the organization’s leader. Effective leaders are generous with their praise whenever it is deserved.

Establishing trust

Putting leadership on parade does not come naturally to some leaders, particularly those who have led primarily by issuing directives.

But presenting with power is a skill easily learned. Once learned, it becomes a

26} SEPTEMBER 2015 BIASHARA LEO

habit and each presentation becomes increasingly effective. In any meeting, large or small, the effective leader captures the listeners’ attention immediately, holds it for the duration of the presentation, and creates the kind of energy that generates action.The leader should organize the message so that it is clear and compelling.

He appeals to both the heart and head. He tells stories that involve the audience --and reveal his humanity, which is essential for establishing trust. The stories paint word pictures, with characters, settings and action. The leader makes deliberate use of wording, voice, posture, movement and timing. And his most powerful communication tools are his eyes.

Steady, warm eye contact conveys credibility.

Failure to make eye contact can signal unease, defensiveness or perhaps lack of candour. When talking with one person, the leader looks at the other’s eyes, then moves away to avoid causing discomfort.

With a large group, he makes everyone feel included by making eye contact with one person in the audience for as long as it takes to express a thought, and then moves his eyes to someone else in a different part of the room.When a leader is able to zero in with eye contact toward one audience member, surrounding audience members benefit too. Studies have shown that all the audience members in the area around the person being addressed feel they’re being spoken to directly. Using the eyes this way also alleviates whatever anxiety the presenter may be feeling because speaking one-on-one to an individual comes naturally.

In contrast, nervous speakers scan the audience, never finding one focal point, which increases their anxiety because the brain has too much information to process.

Using the eyes appropriately is the single most important factor for communicating effectively.

Avoiding jargons

Leaders who are effective presenters do not use a lectern, a barrier that separates the leader from the audience. They have no need for lecterns because they do not read from a written text. They understand that presentations that are read are considered old news and, as such, detract from the spontaneity that creates energy in the audience. Doing without visuals can be particularly effective when the presentation is intended to inspire the audience rather than convey information.Effective leaders showcase their passion by putting their whole body into the presentation. They

support every statement with an appropriate gesture and make large body movements to underscore important points. They further accentuate these points with dramatic pauses or by raising or lowering their voice.

Their choice of language demonstrates they are real because they avoid euphemisms, jargon and office-speak.

Leadership on parade

Though the presentation may appear spontaneous, it has been carefully rehearsed. Extraneous content has been put aside. Questions that may be asked have been identified and succinct, persuasive answers have been prepared. As noted earlier, though an initial presentation like this may require serious rehearsing, the process becomes easier as the leader seeks out opportunities to continue presenting. A seasoned speaker who gets a deep sense of pleasure from presenting can become encouraged to present his views about significant issues on the national stage. This further helps cement leadership positioning.The “leadership on parade” process must begin with honest assessments by the leader of how the workforce perceives him and how he in turn views the employees. Mistaken impressions can hinder communication and, with that, the leader’s effectiveness.A leader may misunderstand the workforce’s values, particularly if he is new. He may have come from a company whose employees value making lots of money but his new culture emphasizes a concept like “do no evil.”

Judgments from trusted direct reports will be needed because even a small change that runs counter to the culture can have large repercussions.The workforce may not have a good understanding of the leader either. The leader may have served for many years but has not been very visible.

Unknowingly, the leader may be sending out contrary signals. Is the leader shirt-sleeved or double-breasted? Occupying a walnutpaneled corner office or at the centre of the floor? Each is making a values’ statement.

With these and other choices, leaders must project their true selves.

Dr. Kellen Kiambati holds a PhD in business administration with a focus on strategic management from JKUAT and an MBA from KEMU. She is a certified business associate (CBPA) and a member of the Institute of Human Resource Management of Kenya. She is also the author of Business Research Methods and can be reached on kellenkiambati@gmail.com.

FUNCTIONAL INTEGRATION OF IT INTO BUSINESS

I

By Peter Muya

n the last couple of years, there has been clamour for IT to be more responsive to business. To illustrate that is an analogy of a horse rider. It depicts, IT as the hind legs of the horse, the torso and the front legs as the rest of business and the rider as its owners. In a three dimensional view, view 1 illustrates a mismatch between a focused business and a sluggish IT that cannot enable the business jump over the hurdles as the horse navigates towards the finish line. In view 2, the picture is of a sluggish operation with an agile IT which causes chaos in the kind of direction to follow. Finally in view 3, both IT and business are aligned with the vision and moving in tandem to execute.

The very organization of IT department / division brings into sharp focus how well aligned IT is in response to business. I have served in functional units that were very technology centric. In one instance, I was given the role of “Oracle Applications Database Administrator”. The title of that role looks very vendor product centric, yet the responsbility involved operational support to finance and vertical lines of business in service delivery.

Three domains

The responsibility spanned the three domains of IT value chain including plan, build and run. In the plan domain, there was

SEPTEMBER 2015 BIASHARA LEO

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Information Technology

The effectiveness of service delivery therefore is not so much how compliant the IT function is with standards but how responsive it is to business expectation of input in terms of investment requirements to enhance application and data capabilities to deliver efficient service for premium collection and claims settlement as well as financial reporting of the same for all lines of business. In the build domain, there was an expectation of the incumbent to work with third party solution providers to deliver solutions that would actualize the envisioned capabilities.

On the run side, the incumbent was expected to ensure availability of the deployed capabilities in a usable state, consistently.

The title of the role almost loses the real contribution of the holder in the day to day running of the enterprise. This is a case for many designs of the functional units of an IT department. Traditionally, the design has been based on technology capability rather than business one. In other words, the categorization of functional units takes a deep technology centric approach rather than making reference to the functional units of the business for which IT supports.

Largely, the categorization is based on software applications, hardware and network infrastructure and projects. So you find roles like Infrastructure, IT Support, PMO Office, Analysis & Applications Development and the like.

Horse rider

To the horse rider, that demarcation loses the business intent. In some instances, certain lines of business demand a dedicated IT unit to support them, given the conundrum of overlapping roles involved in resolving technology related business issues. Take for example the effort involved

28} SEPTEMBER 2015 BIASHARA LEO

in activating user access in an ERP system.

An accountant calls the IT service desk, gets a ticket which is assigned to an ERP support analyst who, through some approval process either manual or automated, creates this user in the system and communicates back to the service desk. Then, the service desk alerts the user of the completion of the task and asks them to log in. The user attempts a log in and is unable to do so. He therefore makes a follow up call with the service desk. This time round, the person who handled the ticket is not the one who picks the call and the conversation starts all over again. The ERP analyst finally descends at the frustrated user’s desk and takes him or her through a resolution of the log in issue until they have access. To the end user, the ERP analyst is the go-to person on matters ERP, not the service desk.

The effectiveness of service delivery therefore is not so much how compliant the IT function is with standards but how responsive it is to business. In the case of the accountant, let’s assume he or she required access to be able to process commission payment for brokers. Delayed settlement of commissions means trouble for the business in the context of insurance industry. IT service desk doesn’t have this implication neither does the ERP

A re-look at how IT is organized is important. This cannot be done by the IT department alone. It must be an enterprise exercise that develops a clear cycle of value identification>value planning>value creation-> value realization for all functional units

analyst understand that detail. Perhaps even the accountant only understands the implication in part, but not so the sales and marketing arm.

The question then becomes, “what if functional organization was designed on the basis of value rather than structure?”

If for example business is divided into underwriting, claims, operations, customer support etc, what if the corresponding structures in IT and other horizontal lines of business followed the same path ?

In other words, rather than just having static applications support, there is clear business partnership framework within the verticals. So if you have an underwriting function at the core, you have a finance and IT business partnership for underwriting.

These partners are not only skilled in their domain, but they are trained and have deep understanding of the implications of their actions on the overall value of the vertical to the business. Delayed configuration of tax rules for a particular insurance product by a configuration analyst means delays in product launch and those are performance indicators upon which the configuration analyst is held accountable.

What this means is that, business becomes tightly coupled with each holding functional unit accountable for the actions taken because every action is a part of the whole.

This will accelerate the departure from the notion that there is a business and there is IT. To have that view is to decouple the technical capability from business and in effect isolate it from being an integral part of the whole. This makes IT appear like a third party entity that shares a payroll with the rest of the business and struggles to justify its existence. A re-look at how IT is organized is important. This cannot be done by the IT department alone. It must be an enterprise exercise that develops a clear cycle of value identification->value planning->value creation-> value realization for all functional units. This approach will more likely translate the third view of the horse rider analogy into reality

Web: www.pticonsulting.co.ke Email: peter.muya@pearltouchint.com

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SWEET BUT BITTER

THE PLIGHT OF KENYA’S SMALLHODER COFFEE FARMERS

is on the rise, thereby depressing prices in the mainstream market and decreasing the demand for quality and specialty endcoffee.

After all the hard work, Kenyan farmers do not reap a lot from coffee farming. What needs to be done?

This has led to a sharp decline in supplies of Arabica, Kenya’s main coffee speciality, while supplies of Robusta have increased.

Though Kenyan coffee continues to be among the most sought after in the world, the picture on the ground is that of an industry which is on its knees, with more coffee growers deserting the crop.

By Amos Wachira

F

armers in the Kenyan coffee sector face a peculiar predicament.

They have limited control over their produce and once it passes through the farm gate, they have no knowledge of the grade it will be assigned, or the amount they will be paid or when that payment will be made.

Take William Gachanja, a small scale coffee farmer in Murang’a County for instance. Gachanja uprooted all his coffee trees a few years ago to ‘try’ other crops as he could not realise the benefits of growing coffee, a cash crop. As a matter of fact, his two acre piece of land gave him meagre returns, which were reduced to nothing after a number of deductions at his coffee co operative.

With five young children to feed, and no permanent source of income, the frustrated coffee farmer opted for maize, nappier grass and beans. These plants nowadays

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earn him handsome returns, enough for him to feed and educate his children. Like him, many disgruntled coffee farmers have thrown in the towel, especially after a barrage of woes brought the previously lucrative industry to its knees. Less than two decades ago, coffee farming was a source of livelihood for millions of farmers.

Prior to the liberalization of coffee through the introduction of the Co operatives Societies Act 1997, farmers were guaranteed a minimum return. The unions also provided them with vouchers with which they could buy inputs, pay school fees, and cater for their other needs.

Moreover, while they are supposed to receive payment within 14 days of the coffee auction, many farmers experience payment delays exceeding four months.

Trends in the global coffee chain

In recent years, with the increasing trend of mixing coffee blends, the demand for cheap coffee (which is often of low quality)

According to a report on Kenyan coffee industry published by Food and Agricultural Organization (FAO), Kenyan coffee is widely considered to be of high quality. Its ‘acid’ taste is primarily preferred by Germany (the second largest market) and Scandinavian countries (with the highest per capita consumption) where it commands a high premium. Consumers in the United States (the largest market) and Japan do not accord the same value to acidity, and as such, are unwilling to pay a premium for it. It is therefore understood that Kenya’s product caters to a niche market, and as such doesn’t compete directly with Brazilian and other milder coffees. This is an inherent advantage since this profitable characteristic is a result of the climate of the country’s consistently high growing altitudes. Kenya can accordingly capitalize on this strength and specifically target the German and Scandinavian markets, effectively capturing the new entrants to the coffee drinking market.

Kenya’s farmers produce 250 million pounds of Arabica coffee a year, on 350 000 small farms. The country is Africa’s 2nd largest producer of coffee (250 000 Kenyans involved), right behind its neighbour to the north, Ethiopia .Even when compared with Ethiopia, Africa’s largest exporter, Kenya’s distinct Arabica flavour stands apart from its competitors.

What ails the coffee industry?

“Lack of information and poor dissemination structure, high production and labour costs and slow payments mean that the coffee dependent producer is trapped in a vicious cycle,” says Moses Muya, the co operative chairman for Wathenge Coffee Co operative Society.

coffee farmers have reported increased earnings partly due to value addition that growers have adopted, an indication that the sector can be revived if the correct measures are put in place.

The transformation started when the county government started providing seedlings and fertiliser to farmers and facilitated the formation of a miller and a marketing union.

A coffee farm in Kirinyaga County.

Additionally, the smallholder has the least amount of bargaining power within the value chain. The smallholder is the least powerful and the least satisfied actor in the chain.

On the other hand, the trader is the most powerful and profits the most. According to Oxfam, coffee producers receive only 1 percent (or less) of the price of a cup of coffee sold in a coffee bar. In addition, they receive about 6 percent of the total value of a pack of coffee sold in grocery stores.

Coupled with declining world prices, the power imbalance in the coffee supply chain presents another source of vulnerability to the Kenyan small-scale producer.

The farmer is unable to negotiate effectively and given the limited value addition, the smallholder can only receive the lowest price for the ungraded beans. However, if value addition were to be increased at the smallholder level, a better price could be negotiated, the report states. Since producers mostly sell their coffee in its cherry form, they continue to receive a low percentage of the total value.

Lack of information

Unlike Gachanja who uprooted all his coffee trees, some producers have begun diversifying their income base by planting other crops besides coffee. However, with limited knowledge, they have chosen such crops as maize, which significantly impacts negatively on the quality of the coffee produced.

To the Kenyan producer, the transforming, marketing and selling of coffee is an opaque system and the farmer essentially loses all control and knowledge of coffee beyond the farm gate. Whereas in the past the government would provide information about market prices, and extension services

through a dedicated coffee officer (CO), today the farmer relies on inconsistent and sometimes unclear information. Various industry actors are involved in improving information access. However, there is no central body to monitor the dissemination of information or to control the accuracy of the information provided.

To address the plight of coffee farmers, the Coffee Research Foundation (CRF) has maintained an ‘open door policy’ which encourages farmers to visit the station directly to ask questions and receive advice. In addition, farmers are encouraged to bring soil samples every other year to test for acidity. The foundation’s outreach has shrunk in recent years thanks to a marked decrease in funding. Moreover, the coffee farmers were themselves more proactive, such that the CRF used to receive 6, 000 soil samples annually. Today that figure has dropped to 3, 000.

“Extension services should additionally seek to empower the producer to increase bargaining power. Instead of remaining the price taker, the smallholder should be able to bargain with buyers, factoring in production costs in order to receive appropriate compensation. Such a system would help the producer to see ‘coffee as a business,” reads a report named,”The Africa Export Industry,” prepared by FAO. So far, the stories of coffee renaissance are far and sparse in the country, but one drastic move by a county government has promised to bring the luster back, at least for coffee farmers in Meru.

In 2013, the county government of Meru embarked on a project aimed at reviving coffee farming and two years down the line,

The government led by Peter Munya as governor also hired facilities of the Kenya Planters Co-operative Union in Meru Town.

“Most people who brought their coffee in the first round got good prices than in other places. We are likely to have high demand for seedlings this year,” the Meru county Agriculture executive, Prof Kaburu M’Aribu, says. According to him, the Meru county government had helped establish private estates while co-operative societies formed unions for milling and marketing to boost coffee growing. In addition, the county government has approved a number of memoranda of understanding that enable farmers to add value to their produce. It is also focusing on reducing costs of inputs.

Following the formation of the Meru Central Coffee Milling Plant, the sector has recorded higher returns and attracted more dividends.

Meru County Coffee Millers plant milled 86,000kg of coffee between January and May 2015 which was sold in Switzerland and Germany fetching Sh19.4 million.

Prudent management

The money was sent to respective coffee societies for payment to the farmers with the lowest payment being Kshs. 40, and the highest Kshs. 65 per kilogramme, compared to the previous ones which were between Kshs. 21 and Kshs. 27 per kilogramme.

Could this be the solution?

According to Kenya Planters Co operative Union board chairman William Gatei, who lauded the Meru county government for its effort, there is need for coffee value chain players to start thinking of ways of boosting marketing of coffee as well as value addition.

“This is good for the coffee farmers and we can collaborate with them to enable them get good returns for their coffee.

Competition is healthy in the industry and at the end of the day, what farmers want is better prices for their produce,” says Gatei.

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Lilian Wainoi, a coffee farmer.

James Mugo inspecting coffee berries at his farm in Kirinyaga County.

SMALL-SCALE COFFEE FARMERS FACE MULTIPLE CHALLENGES Over the years, small-scale coffee farmers have faced myriad challenges ranging from price fluctuations, expensive farm inputs and mismanagement of cooperative societies

By Jeniffer Kamau

C

offee has been one of the prime movers of the Kenyan economy since independence.

The industry plays a critical role in employment creation, enhancing the lives of rural people, as well as in foreign exchange earnings among others. Generally, the industry is expected to spur rural development.

In Kirinyaga County, over 70 per cent of the residents are small-scale farmers.

The leading income generating farming activities in the region include tea, coffee, dairy farming and horticulture. Fish farming is also being adopted but at a slower pace.

As a high coffee producing region, the county is characterized by cool to hot climate, high rainfall, fertile volcanic soils and high attitude ideal for coffee growing.

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Most of the farmers depend entirely on coffee, thus their lives revolve around its fate.

However, over the years, the economic performance of coffee has had impacts on all spheres of life, both upstream and downstream affecting producers’ capability to pay for education, health services, consumption of goods and investment. The general trends in the contribution made by the industry to the coffee farmers and the total earnings of the country have been fluctuating.

Among the problems that are hampering coffee production include price fluctuations.

“The decline in prices has eroded farm incomes and has resulted in elevated poverty levels in rural areas,” says James Mugo, a coffee farmer at Kirinyaga County.

Mugo, who has 400 coffee trees, produces approximately 3000 kilogrammes each season. In spite of this, the returns are still low and quite discouraging. As a result, the production fluctuates due to lack of adequate inputs.

In some cases, farmers have resolved to quit coffee farming and embark on other economic activities in the region including growing of bananas, French beans and tomatoes, which have high returns.

“So much labour is required before the cherries are harvested and yet at the end of the season, you get little or no returns,” observes Mugo.

Some farmers observe that they are not involved in making decisions on where their coffee cherries should be taken. “Such decisions are made by the management.”

The decline in prices has eroded farm incomes and has resulted in elevated poverty levels in rural areas

Mugo says that in the 2013/2014 crop, farmers did not receive any payout in spite of the fact that their produce was taken to Nyambene Coffee Millers.

Additionally, coffee production costs have increased in the recent years, mostly due to high costs of purchased farm inputs.

Currency devaluation and inflation have been some of the factors behind the increased costs. Another farmer, Lillian Wainoi points out that unlike in the past, they never get farm inputs such as agrochemicals and fertilizers from their factories. The adoption of weed control recommendations and spraying is therefore influenced by cash flow constraints. “This makes the crop vulnerable to pests and diseases, especially coffee leaf rust,” she notes.

The value of what is shared by all the agents involved in the production, processing, distribution and marketing is determined by the average price per kilogramme

The long gestation period between the planting of the coffee seedling to the harvest of cherries is fairly discouraging.

Mugo observes that the initial harvest for a newly planted coffee tree takes place after around two years, while optimal production is reached three years later. Considering this, some of the older trees may have reached the stage of diminishing returns.

In addition, the manner in which the value added is shared by the various stakeholders in the coffee sector is to blame for the low net returns. “The value of what is shared by all the agents involved in the production, processing, distribution and marketing is determined by the average price per kilogramme.”

Coffee co-operative societies have also been mismanaged leading to embezzlement of funds. This has resulted in low income for the farmers.

What should be done?

It is clear that the coffee industry needs to be re-organized to enhance its performance and efficiency. Most remarkably, the need to enhance production at the farm level and improve efficiency in processing, marketing, and payment is paramount. This can partially be achieved by harmonizing the existing legislations.

Mugo observes that the challenge facing the coffee sector is extensive, and requires active government participation.

It should intervene through coordination, policy formulation and funding. These would enhance production and in turn expansion of the industry, increase income, employment, foreign exchange earnings and eventually multiplier effects.

Also, the government should streamline the provision of credit to make it more accessible. Through this, farmers would be in a position to buy farm inputs to prevent attacks by pests and diseases, while increasing productivity. “Initial capital could also be provided to farmers to jumpstart production,” avers Wainoi.

Furthermore, the extension officers provided by the coffee directorate should take initiatives and educate farmers regarding the benefits of quality and sustainable coffees. Wainoi affirms that most farmers are intercropping coffee with other crops, and although this is not allowed, it is the only way to earn extra income.

By and Large, it is important for farmers and policy makers to understand the lasting value of the coffee industry, and adopt sustainable practices as part of a competitive and rural strategy to enhance livelihoods in the rural areas.

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KENYAN COFFEE: A BRIEF HISTORY

Auction system

The Kenyan coffee industry is noted for its democratic auction system. In this system, samples of each lot are made available to bidders prior to a weekly auction. If a bidder (or the bidder’s customers) is interested in a lot of coffee, he enters the auction for that lot. In this transparent auction, the highest bidder wins. No insider deals are cut. The result of this system is that generally the best lots of coffee command a higher price.

Coffee Characteristics

Coffee berries in a factory.

T

he coffee industry of Kenya is noted for its cooperative system of milling and marketing and its high percentage of production from small farms. Kenya is the 21st largest producer of coffee in the world, producing over 50 million kilogrammes (112 million pounds) in 2006.

Coffee exports account for approximately five percent of all exports from Kenya. It is estimated that six million Kenyans are employed directly or indirectly in the coffee industry.

Initially, coffee was grown primarily on large British-run farms in the highlands and auc-

tions were held in London. However, in 1933, Kenya enacted the Coffee Act which would establish the Coffee Board of Kenya and establish the Kenyan auction system.

In 1954, Africans controlled only 5,000 acres of coffee farms. It would not be until the Mau Mau uprising beginning in 1952 that they would begin to control most coffee production in Kenya.

Coffee growing regions

Most Kenyan coffee is grown in the Mount Kenya region, around Nairobi and on the border with Uganda to the west. With high altitude, warm climate, and fertile soil, these regions are well suited for producing Arabica coffee.

WHAT IS THE DIFFERENCE BETWEEN ARABICA AND ROBUSTA?

Arabica is the predominant type of coffee in Kenya. While all coffee harvested from any region will differ from farm-to-farm (and even crop-to-crop), Kenyan coffee has several characteristics that distinguish it from other origins. Kenyan coffees are often medium bodied with a clean cup typical of East African coffees, sometimes displaying a citrus tone. Additionally, many Kenyan coffees are considered to have a winey, acidy taste to them.

Grading system

After milling, the coffee beans are assigned a grade based on characteristics of the bean, most notably size. While the large bean size is considered by many to be a sign of quality, it is important to note that it is but one of the many factors in determining high quality coffee. While there are published standards for the grading coffee, it is not an exact process. The Coffee Board of Kenya refers to grading as “an art.”

A

nybody who is passionate about coffee will have heard about Arabica and Robusta coffee, perhaps even blends of the two.

Arabica (Coffea Arabica) and Robusta (Coffea Canephora) present very different qualities and characteristics - and furthermore are farmed in different ways.

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Ruiru 11 coffee bushes.

Physical qualities

Arabica beans tend to be slightly bigger and have a crack in more of an S-shape, while the crack down a robusta bean tends to be more of a straight line.

You can also usually tell them apart as, prior to roasting, a batch of Arabica beans will

So which one is better?

The most expensive coffees will tend to be

Arabicas and the best blends, ones created purely from the delicate merging of different Arabica beans.

Nevertheless, it is this supposed superior quality that will mean most good espressos are made from Arabica. However, an espresso made from a lesser-quality Arabica may not be as good as the one produced from a high quality Robusta, so yet again the Arabica versus Robusta battle proves to be utterly subjective.

A great percentage of the coffee grown worldwide is Arabica (about 70 per cent) and as with anything that is mass-produced, some of it will not be very good. Therefore, buying Arabica does not always mean you will be buying quality.

CODF: BRIDGING THE GAP BETWEEN COFFEE FARMERS AND FINANCE Millions of coffee farmers lack sufficient credit. Coffee Development Fund is helping them reap from farming

The coffee itself

In their natural form, Robusta beans tend to have higher caffeine content than Arabica ones.

Due to the fall in price of Arabica recently, many roasters have been capitalizing on this and getting a taste for what many may describe as the ‘good stuff’. For example, the recent bumper Arabica crop in Brazil has seen roasters in the South American country increase the amount in their blends.

With increasing demand for instant blends which tend to be produced using Robusta, only time will tell which one will come out on top - and whether or not it will stay there.

been sold at the auction, which may be six months after they have first delivered their beans to a primary cooperative. So farmers are heavily reliant on credit, charged at high rates of interest, and on the provision of education, health and input credits from their cooperative or local credit unions.

Over the past few decades, coffee farmers have struggled to get funds to finance coffee inputs like fertilizers, proper coffee seedlings, pruning equipment as well as pesticides for their coffee plantations, leading to poor quality produce.

Growing

This is what makes Robusta beans cheaper to farm. The process is less potentially problematic and each individual tree will produce more cherries per unit, meaning it is easier to mass produce in terms of square metre of plantation.

The only way to ensure you are buying quality Arabica coffee is by going to a responsible supplier that affords absolute traceability, a variety of grades and standards, meticulous quality control and a genuine passion for delivering a product that is simply second to none.

Coffee Development Fund (CoDF) was established in 2006 with the mandate to enable the coffee industry to access affordable credit facilities in a sustainable manner for the purpose of improving coffee quality and quantity and to stabilize farmers’ income.

By Amos Wachira

be a slightly darker shade of green than Robusta ones. The latter will also be generally rounder, whereas an Arabica bean will be ever so slightly oval in shape in comparison.

While robusta plants favour warmer, more humid climates at lower altitudes, some of the best Arabica crop originates from more mountainous regions in subtropical climates. This is because Arabica plants tend to be more delicate than hardier Robusta ones, which are therefore less susceptible to plagues or pests, bouts of bad weather and suffering as result of rough handling.

A farmer surveys Arabica coffee bushes in Othaya.

Arabica beans, depending of course on how they are roasted, can result in a wider range of flavours once cupped. The tastes can range from sweet to acidic, combining fruity aromas with some perhaps sharper overtones. A coffee made with Robusta beans, meanwhile, may be more full-bodied - almost grain-like and earthier in some cases - with an ever so slightly nutty aftertaste.

As far as trading is concerned, Robusta beans retail at around 25 per cent less of the price of an Arabica crop, due to the aforementioned lower production costs - although this of course depends on the fluid state of the market and, as with any traded commodity, the natural behaviour of supply and demand.

CoDF was established as part of a reform agenda which would lead to a vibrant, efficient and effective coffee industry aimed at benefiting the coffee growers in particular.

S

elling coffee is vital to the livelihoods of millions of smallholder farmers in Africa.

Growing coffee as a cash crop on small pieces of land in Kenya is not easy. The conditions for coffee farmers in East Africa have become more unpredictable in the last ten years. Erratic and often adverse changes to weather patterns make coffee growing a pain for them.

Rains often start late, delaying crop planting and resulting in late coffee flowering and berry ripening. That means delays for farmers in earning income from their coffee. Rains also fall more heavily in intense cloud bursts, causing localised flooding, flattening crops, and knocking coffee cherries off coffee bushes.

Farmers in Kenya do not actually get paid for their coffee crop until after it has

“The concept and formation of CoDF fits well with the Comprehensive Africa Agriculture Development Programme (CAADP) framework which recognizes agriculture as central for the alleviation of poverty and hunger and as a means for achieving the Millennium Development Goals (MDGs),” says CoDF acting managing trustee Nancy Cheruiyot.

In addition, it fits within the government’s Strategy for Revitalization of Agriculture (SRA) which has a vision to accelerate the

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The service which aims to significantly improve the speed of credit delivery has

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been piloted in several coffee societies and the initial results are very encouraging.

A cherry advance payment to an individual farmer, for instance, can be made within forty eight hours of application.

The service is a great respite especially to smallholders who have cash flow challenges after harvesting their crop, with a quick alternative being is to sell coffee to middlemen at throw-away prices, a practice commonly known as cherry hawking.

“This has made these farmers lose in a big way, as the beneficiaries of their efforts are these middle men,” says Nancy Cheruiyot, acting managing trustee of the Coffee Development Fund. “This is why the Fund has come up with an ICT based leverage in form of M-kahawa service, to safe our hardworking farmers the agony of losing their financial benefits from their hard earned coffee produce.”

“M-kahawa is a huge relief to our farmers.

The payments are prompt, our farmers now feel in control of their finances and production,” says Joseph Koskei, the chairman of Kamiwa society, one of the societies involved in piloting M-kahawa service.

0711 082 111 www.urithihousing.co.ke

T

he increase in mobile use and growing trust in mobile money platforms has opened an array of opportunities for business. To further capitalize on opportunities offered by mobile money, the Coffee Development Fund (CoDF) in partnership with Safaricom has launched a mobile money service dubbed M-Kahawa (‘M’ for mobile and ‘Kahawa’ a swahili term for coffee) targeting coffee industry.

“We will continually improve our quality management system through enhanced customer service delivery; hence achieve a vibrant, sustainable and profitable coffee industry,” says Cheruiyot.

R

M –KAHAWA: MOBILE MONEY SERVICE ENHANCING COFFEE PRODUCTION

CoDF is run by a 10-member Board of Trustees, comprising three government representatives, six members appointed by name and the managing trustee who is its chief executive officer.

Key Features

According to CoDF, farmers access these loans through direct lending or the now

It is through such efforts by CoDF that might revive the coffee sector to its former glory, when thousands of small scale farmers used to depend on the cash crop to sustain them.

The Nyumba Mia

The facility is a short term working capital advance offered to registered coffee farmers co-operatives societies, coffee associations and estates growers to enhance their primary processing (pulping) capacities.

Kenyan coffee farmers are yet to start earning handsome returns from coffee cultivation, despite the fact that Kenyan coffee is hugely popular in the world for its acidic and unique taste.

- Semi-Detached, (double walls) - 40 x 60 plot with Title 2 - 100 M 3 bed room Master Ensuite - Unceasing Water Supply (onsite Bore Hole) - Payment By Installment Allowed - Financing Available - Per Unit Bio digester Kit. - Proper Made internal Roads, Live hedge & Greeneries

This facility targets estate growers, cooperative societies, coffee unions and associations with loans amounting to Kshs.

5 million per factory. However, the amount offered to the estate or mill will depend on production and processing capacity subject to a maximum limit of 30 million per case. .

The Cherry Advance (VunaKahawa) product aims to reduce side-selling among smallholder growers by encouraging farmers to market their coffee through the established coffee supply chain. The product aims at availing part of the coffee payment (percentage of the expected coffee

Coffee processing is an intensive process which requires huge amounts of money to execute. With increased numbers of large scale farmers and co operatives now preferring to process their own coffee in their bid to get the best quality produce, CoDF has introduced the Coffee Processing Loan (TayarishaKahawa).

CoDF prides itself of being in the frontline of provision of sustainable, affordable credit and advances to coffee farmers for farm inputs, operations and price stabilization.

We shall resettle your Family ...

The Coffee Machinery and Equipment Loan (MkopoWaVifaa) facility targets borrowers who want to replace old and obsolete coffee processing or pulping units or install new coffee eco-processing unit to cope with increased coffee production.

On the other hand, direct lending model entails disbursement of funds directly to the borrower without using an intermediary.

The aim of direct lending is to minimize credit risk exposure occasioned by the agency lending model due to inefficiency and non-compliance with loan agency agreement.

THE JUJA PLAINS Phase 2 Now Selling

These include Coffee Rehabilitation Loan (ImarishaKahawa), a medium term loan facility that is only offered to estate coffee growers to rehabilitate coffee trees within three coffee crop cycles. Under this facility, the estate grower applies for loans for each coffee crop production cycle separately. A borrower is required to have repaid at least 70% of the previous year’s loan to qualify for the facility. Since the subsequent credit facility will be a top-up loan, the balance outstanding is deducted from the loan applied.

For the new coffee growers who want to establish farms, or farmers who want to expand their coffee acreage (coffee expansion), Coffee Farm Establishment Loan (AnzishaKahawa) covers their needs.

Additionally, farmers benefit from advances (OkoaKahawa) which are designed to support coffee farmers especially estate growers who are not able to meet their coffee production and processing financial needs on their own within a coffee production cycle. The product is targeted at an applicant requiring immediate financial support on activities during the season or is unable to finance part of the coffee production and processing stages on their own. The product targets small, medium and large estate coffee growers as well as smallholder coffee growers who have other sources of income to service the loan before coffee is sold.

Along the Juja Farm Rd Only 2 km From Juja Town.

The fund runs a wide variety of loan products specifically targeted to the coffee farmer.

popular agency lending model. The agency lending model utilizes intermediaries to reach the farmer as an end beneficiary.

This way, the fund has partnered with 28 intermediaries from all coffee growing regions in the country, through which coffee farmers can access credit facilities.

Neighbourhod

Coffee loans

proceeds) to coffee farmers during picking or harvesting period. The payment acts as an incentive to coffee farmers to deliver their coffee through respective societies.

- 30 km only from Muthaiga, 40min drive - Juja South Estate (neighbors) - JKUAT Coop Scheme (neighboring) - Elmark Estate, 1km - St Bakita, Juja Preparatory, Juja St Peters - Ultra Modern Railway Station, 2km - Along a TO Be Carpeted Bypass Loop (Connecting the Super Hway & The G.E. Bypass)

process of liberalizing coffee and targets improvement of access to financial services and credit.

Main Story

M-kahawa is designed to work seamlessly with the M-Pesa platform hence farmers do not need to use different PIN numbers to access their funds. Key among other benefits is the affordability of the service.

Coffee farmers can now lodge their loan application at their respective societies and access funds from the comfort of their phones thus considerably lowering travel costs to previous pay points.

Main Story

Despite the rapid uptake of mobile money use in various business sectors, the agricultural sector is yet to maximize the full potential of mobile money.

During the piloting of the service, some 1,000 subscribers registered and a cumulative Kshs. 4 million was disbursed in form of micro-credit.

“Our intention is to make M-Kahawa a fully fledged mobile information and

banking service for coffee farmers. Mobile money can be a huge incentive to coffee production due to improved cash flows to coffee farmers,” says Mr. John Amimo, the resource officer at Coffee Development Fund.

Coffee Development Fund serves 400 coffee cooperatives and over 700 coffee estates. The lives of over 67,000 coffee farmers have been transformed since the fund started its operations in 2006.

Working with national partners in over 30 countries, networks of plant clinics are established, whereby plant doctors offer free plant health expertise and practical advice in dealing with pests.

When fully rolled out, this app will act as an additional way to access the online and downloadable resources of the Plantwise knowledge bank, a global gateway to factsheets on many types of plant problems, which has been used by plant specialists as their ‘Knowledge Bible’ for years.

The Plantwise app gives plant doctors everything they need to diagnose and make

PLANTWISE APP GIVES REMOTE FARMERS HELP FOR CROP TROUBLES

recommendations with easy, instant access offline, enabling them to consult scientific facts, images and best practices. This ensures that the advice they give to farmers is well informed and up-to-date. The app also delivers valuable usage statistics back to CABI to help with ongoing product and service development.

A pilot programme for the Plantwise app on low cost Lenovo A3000 tablets is now underway in Kenya.

“It’s in my pocket, it’s like a mobile office, so anytime you need a service from me…I

EMPOWERING FEMALE COFFEE FARMERS A new women’s coffee project aims to improve coffee yields and grow the market for fair trade practice in East Africa

T

A woman coffee farmer.

he Growing Women in Coffee project will encourage the transfer of coffee bush ownership to 150 women coffee farmers, enabling them to earn an independent income for the first time.

Despite contributing up to 70% of the labour required to plant, grow and harvest coffee, women farmers in Kenya rarely own their land or the coffee bushes that they tend – they usually belong to the men in the family. As a result, these women are unable to join farming co-operatives or earn an income for their labour.

A plant clinic in Machakos County.

P

lantwise, in partnership with Oxford-based White October, last year launched an application that helps to improve world food security and the livelihoods of farmers in developing countries and remote locations. The Plantwise ‘Factsheets library’ is an Android app designed to be

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very effective on low cost tablets making knowledge on pests accessible anywhere.

and knowledge on pests are often faced with devastating yield losses.

The firm has developed the new Plantwise mobile app ‘Factsheets library,’ which gives plant specialists the knowledge and connectivity they need to advise farmers on handling pest problems with their crops.

Farmers in rural areas who lack resources

CABI’s Plantwise programme works to improve food security in many ways, such as helping countries provide best-practice advice directly to farmers to safely manage crop problems and to secure food and income for their families.

Yet research shows that when women are in control of more of the household income, there are improved outcomes for the community across a range of areas including health, education and investments.

In recognition of this, Fairtrade Africa and the UK-based Fair Trade Foundation are collaborating on a new, three-year project, which will empower hundreds of women coffee farmers in Kenya and enable them to develop a branded “women’s coffee” for sale to local markets.

Launched earlier this year with a grant from the Big Lottery Fund plus additional funding from the Guernsey Overseas Aid Commission, the Growing Women in Coffee project will encourage the transfer of coffee bush ownership to 150 women coffee farmers in the Kapkiyai Co-operative, enabling them to earn an independent income for the first time.

Asset transfer

A further 300 women within the Kabngetuny Co-operative, who have already benefited from an asset transfer programme, will receive training on good agricultural practices with the aim of improving the way that they farm, increasing the yield and quality of their coffee. These women and their families will also benefit from the construction of “green energy” biogas units for their homes, which will reduce exposure to smoke and reduce the time they spend collecting firewood – with positive impacts for their health, the environment and their productivity.

But the benefits of the project will reach much further than the 450 women from these two co-operatives and their families.

just deliver – immediately!” says plant doctor Daniel Kamaru at the Mbogoni plant clinic in Meru, Kenya. “Plantwise knowledge bank has been working since its inception to close the gap between scientific research on pests and the farmers who need this information,” says Plantwise Knowledge Bank Head of Technical Solutions, Tim Holmes. “This app puts the information in the hands of anyone with a smartphone, and that number is growing all the time.”

Following a phase of refinements and further testing, it will be rolled out across Kenya and other countries worldwide.

Kipkelion Union, which brings together 32 co-operatives including Kapkiyai and Kabngetuny, will be supported by Fairtrade Africa to develop and market a branded, Fairtrade-certified “women’s coffee” for sale within Kenya and potentially other markets, helping to grow the East African market for Fairtrade produce. Kipkelion Union will also be able to share the lessons from this pilot with the other 30 co-operatives that it represents, enabling its benefits to reach thousands of additional farmers and their communities.

When farmers sell their coffee on fair trade terms they earn a minimum price for their beans, or the market price if higher, which acts as a vital safety net when prices fall and gives them the stability to plan for the future. They also earn a fair trade premium, which can be invested as the farmers choose, in order to benefit their business and community.

At least 25% must be used to enhance their productivity or quality of their coffee, with the reminder being invested in social projects such as the provision of healthcare, educational grants, or access to clean water for their community.

Commenting on the launch of the project, Fairtrade Foundation’s fundraising manager David Finlay said: “We are looking forward to working with Fairtrade Africa on this project, which will directly empower hundreds of women farmers and has the potential to benefit thousands more. By working with the women in these co-operatives to roast, grind, package and sell their beans as ‘women’s coffee’, we hope they will be able to increase the amount they sell on Fairtrade terms, which will bring benefits for their whole community”.

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Main Story

Feature

John Kaguru, chairman, Ndimi factory.

CONTRIBUTION OF CO-OPERATIVE SOCIETIES TO THE GROWTH OF THE COFFEE

By Jeniffer Kamau

K

enya coffee industry is composed of two categories of farms: the plantation sub-sector comprising large-scale producers and the cooperative sub-sector consisting of smallholder farmers.

Over the years, co-operative societies have played a key role by giving members competitive credit and advisory services.

The cooperative movement is organized into producer and service entities that cut across different sectors focusing on both private and public enterprises.

Located on the southwest slopes of Mt. Kenya, an area rich in volcanic soil and abundant rains, Inoi Farmers Cooperative Society is one of the largest coffee societies in Kenya. “Consisting of eleven factories including Rutui, Kiandieri, Kariko, Kaitheri, Karia, Ndimi, Kerugoya, Kiamwenja, Kiamburi and Thaita, the cooperative society focuses on producing high quality coffee in order to guarantee good prices for the farmers,” says John Kaguru, chairman of Ndimi factory. The members are small-

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scale farmers with low incomes and coffee is their main source of livelihood.

Additionally, Inoi Farmers focuses on empowering its members by creating value for their produce. The aim is to ensure that the concept of cooperatives works well for farmers in the region.

Kilogrammes in the years 2012/2013.”

However, this is an improvement compared to 2006/2007 when farmers managed to produce only 86,000 kilogrammes.

Failure of coffee millers to pay farmers paints a bad image for the cooperative societies. “In 2013/2014, Inoi Farmers took their coffee to Nyambene Coffee Millers, and up to now, no payment has been given for that crop,” says Kaguru, adding that the milling company owes the cooperative society Kshs. 9.6 million.

However, the report has been presented to Joseph Ndathi, Kirinyaga County governor and Joseph Gachoki, the member of parliament, Kirinyaga Central. It is waiting to be tabled in the parliament. Kaguru hopes that through this intervention, farmers will be able to get their full share.

Kaguru observes that due to the cooperative movement, coffee cherries for all the eleven factories are taken to the same miller. However, net returns always vary depending on the prevailing economic environment. “For instance, in the year 2014/2015, farmers at Kaguyu factory received Kshs. 63 per kilogramme while those at Ndimi received Kshs. 49.85 for the same.”

In the recent times, most cooperative societies have faced major challenges ranging from poor financial management, weak governance structures and legislations among others. “In that vein, the need to embark on urgent reforms in the sector is vital to ensure responsiveness while streamlining operations,” observes Kaguru.

In this regard, different and fluctuating coffee prices over the years have affected production levels as well as the quality of produce. “Between 1978 and 1981, the production at Ndimi factory stood at 1.5 million Kilogrammes. This has dropped significantly to as low as 311,000

Besides, the government should take the centre stage to help revive the coffee industry. Through such support, Inoi Farmers can access affordable farm inputs to enhance on its quality for premium prices. “Coffee is gold,” Kaguru says, adding that if it goes back to its glorious past, rural development will be accelerated.

Citibank CEO Joyce Ann Wainaina , Makao Mashinani MD Aleke Dodo(red tie), Kenya National Federation of Jua Kali Associations CEO Richard Muteti and Ruth Odera, director, Microfinance House Limited compare notes during the Summit.

THE EAST AFRICAN MICROFINANCE SUMMIT LIVES UP TO ITS BILLING

Microfinance players and stakeholders reviewed the gains made in the regional microfinance industry as well as the role of these institutions in alleviating poverty

By Amos Wachira

O

ver 500 delegates from the East African community and across the globe in the microfinance field, investors, donor agencies, governments, education institutions and other stakeholders gathered to assess the progress made by microfinance players towards poverty alleviation and promotion of best practices.

The East Africa Microfinance Summit 2015 lived up to its billing, with seasoned and renowned speakers drawn from the micro credit sector across the world discussing ways of stimulating growth in the local microfinance sector while sharing knowledge and innovation.

The three day conference, which was themed, ”Microfinance, Enhancing Lives through Innovations,” focused on a number

of topics including the impact of mobile banking and agent-based banking for promoting financial inclusion; the role of regulation in encouraging innovation; the benefits of credit information sharing and the role of youth and women in advancing social and economic development. Other topics of discussion were microfinance and socially-responsible enterprise; and developments and trends observed in the East African microfinance industry in the recent past.

“The difference between commercial banks and microfinance institutions is not about the product offering, but how we deliver our products. We look at very specific areas like clean energy to solve the problems of many clients and this ultimately leads to economic empowerment,” said Mr. Mwangi

Githaiga, the managing director of Kenya Women Microfinance Bank during the event.

In Kenya, a huge percentage of people still remain under banked while a small population is unbanked. Microfinance industry has been hailed as a game changer in the lives of many, especially after opening up to accommodate clients at the bottom of the economic pyramid, a segment that had been ignored by many financial institutions.

Many microfinance institutions (MFIs) have weathered the storm of rural economies and empowered women and youth to establish innovative enterprises.

A shining example

Take Kenya Women Microfinance Bank for instance. From a very humble beginning as a micro lender, it is currently the leading microfinance bank in Kenya, with a countrywide presence and an array of innovative product offering. Over the years, the institution’s customer base has grown to over 600,000.

“With a loan book of Kshs. 22 billion and savings of Kshs. 18.9 billion, we are now serving our niche market as well as a

SEPTEMBER 2015 BIASHARA LEO

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The East Africa Microfinance Summit and Exhibition

The East Africa Microfinance Summit and Exhibition

We have shared positive credit information very well within just a short period of time, but we have also realized that not all credit providers have the technical capacity to use the analysis of credit information to assess the risks of the borrowers Simon Ngigi, the CEO of U&I Microfinance bank explains that due to the high risks associated with microfinance loans, the interest rates are high to cover cost of defaulters.

However, these loans are set to become cheaper in the near future if the gains being made by regulations on credit information sharing are anything to go by.

Credit information sharing (CIS)

KWFT MD Mwangi Githaiga. growing portfolio of small and medium enterprises,” observed Mr. Githaiga.

The bank has a wide product offering ranging from loans to finance purchase of dairy cattle, water tanks, solar systems, energy saving cookers as well as savings products.

It also has established partnerships with major mobile money platforms like Western Union, M-Pesa and Airtel Money to help its customers access their money.

However, despite the financial inclusion gains made in the microfinance industry in recent years, Mr. Githaiga believes that players can still improve on customer service, and ultimately fulfill the goals and aspirations of the industry which are hinged on transformation of lives.

We need to change our mindsets and start recognizing microfinance institutions as banks

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”We need to change our mindsets and start recognizing microfinance institutions as banks,” he quipped.

While governments partner with microfinance institutions to reach people in far flung rural areas, Mwangi reckoned that it sometimes gives the industry a raw deal.”Government funds distort the interest rates yet they are not enough for everybody, prompting us to raise funds on our own to continue the implementation of the same.

The government should stop direct lending and partner with microfinance institutions.”

Bad debts

Many borrowers make a lot of effort to repay their loans, but do not get rewarded for it because this good repayment history is not available to the bank that they approach for new loans. On the other hand, whenever borrowers fail to repay their loans, banks are forced to pass on the cost of defaults to other customers through increased interest rates and other fees. CIS is a process where credit providers such as commercial and microfinance banks submit information about their borrowers to licensed credit reference bureaus (CRBs) so that it can be shared with other credit providers. The CRBs are licensed by the Central Bank of Kenya. CIS enables lenders to know how borrowers repay their loans.

In addition to this, the problem of bad debts continues to dog the microfinance industry. As it stands, some borrowers view microfinance loans as grants, and therefore borrow with no intention of ever repaying.

This has subsequently affected the service delivery of most microfinance institutions, as they move to cushion themselves from the high incidents of defaulting that are evident in most East African countries.

In addition, it allows lenders to distinguish between good and bad borrowers.

Someone who has failed to pay his or her loan at one bank will not simply be able to walk to another for financing without being detected. Over time, potential borrowers with a good credit report or history should be able to access loans more cheaply and easily than the defaulters.

A spot check reveals that most loan products being offered by MFIs are more expensive than the ones from commercial banks.

“We have shared positive credit information very well within just a short period of time, but we have also realized that not all credit providers have the technical capacity to use the analysis of credit information to assess

Anne Gathuku, GM, Greenland Fedha, Adet Kachi, CEO Yehu Microfinance, Lydia Njoroge, CEO, Opportunity Kenya, Charles Njoroge, CEO, Letshego, Mwangi Githaiga, CEO, KWFT, Benjamin Nkungi, CEO, AMFI and Jeff Njagi, AMFI Chairman pose for a group photo. the risks of the borrowers,” said Habil Olaka, the CEO of Kenya Bankers Association.

According to him, regulators and credit providers need to apply more creativity while using the credit reports so as not to punish good borrowers unknowingly.

Jared Getenga, the CEO of CIS Kenya said that credit information sharing has a number of opportunities for all members.

Housing deficit

Sam Omukoko, the founder and managing director of Metropol CRB on the other hand observed that the gains made after the onset of credit information sharing are numerous.

Another challenge that has dogged many Kenyans is inadequate housing. Estimates put the housing deficit at 2 million units a year. Despite this challenge, few people can afford mortgages. This means that there are opportunities for organizations that can innovate to come up with cheaper housing models that can address this problem.

“We have seen more accounts being opened since the new era of credit information sharing. We are seeing CIS now being used help in financial inclusion,” said Omukoko.

Habitat for Humanity International is an organization that helps build homes for communities in the USA and around the world.

The number of non performing loans averaged 13 per cent in 2012 but since positive information started kicking in 2013, the level of these loans has drastically dropped to stand at 5.7 per cent.

The organization’s core business involves building simple, decent and affordable housing. Since it was founded 39 years ago, the organization has effectively addressed the issue of poor housing all over the world.

Habitat for Humanity has since helped over 7,200 families in 250 communities across 9 regions.

“Access to finance has really shot up. Kenya is now only second to Mauritius in terms of access. With more information becoming available, better products can be tailored by credit providers.”

The housing deficit in Kenya, according to Habitat for Humanity, continues to grow at a rate of 200, 000 units per year.

This means that there is a proliferation of informal settlements in urban areas with 60 per cent of the population living in slums. “Housing is one of the most viable investments. However, we have only 20 000 mortgages in Kenya today,” said Ruth Odera, the director of Microfinance House Limited(MFHL), a Habitat Kenya funded project that seeks to avail better housing to the Kenyan population.

She said that affordability of housing remains a major challenge and there is therefore need for the local microfinance and housing industries to continuously innovate so as to deliver housing solutions.

“We support financial institutions develop innovative solutions to housing,” she added.

Odera called on all players in the housing sector to come up with appropriate building materials and technology that will effectively reduce the cost of housing in the country.

The summit was attended by high-level government officials, microfinance practitioners and ICT solution providers who gave keynote addresses and firsthand practical experience to the delegates.

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The East Africa Microfinance Summit and Exhibition

EXHIBITORS CONVERGE AT KICC TO SHOWCASE THEIR PRODUCTS AND SERVICES

By Jeniffer Kamau

T

he inaugural East Africa Microfinance Summit attracted many individuals active and interested in the field of microfinance including practitioners, policy makers, consultants, researchers, donors, academicians and investors.

The summit, whose theme was, ‘enhancing livelihoods through innovations’ was also in line with the industry’s social mission of transforming people’s lives by creating economic opportunities.

While delegates assembled at the Hilton Hotel where they discussed key topics in the microfinance industry including best

The East Africa Microfinance Summit and Exhibition

BL Magazine practices, challenges and ways through which innovation and technology can be accelerated, a huge exhibition was held at the Kenyatta International Convention Centre (KICC).

window for its team to compare notes with its readers and consequently gain invaluable knowledge on how to develop better content.

The exhibition presented an opportunity for the participants including microfinance institutions, banks, entrepreneurs and innovators as well as private companies to showcase their products and services that have played a key role in changing individuals’ lives both socially and economically. Besides, they were able to share information regarding their contribution to the industry.

Among those who participated included Biashara leo (BL) magazine, BIMAS, Letshego, Kenya Women Microfinance Bank, Opportunity Kenya, MESPT, Equity Bank and Rafiki Microfinance Bank.

What They Said

BIMAS and the client’s financial status is put into consideration while deciding on the repayment schedule,” affirmed Backson Ndiba, the marketing manager. “Our focus is to empower clients through small but financially viable projects,” he added.

The exhibition acted as a two way communication where visitors questioned and gave feedback on the magazine. Most importantly, most of the clients who visited the BL stand the copies on sale in bulk.

SERVICE WITH A SMILE: A customer buying copies of BL magazine during the exhibition.

B

iashara Leo (BL), a monthly business and management magazine had the opportunity to showcase itself at the East Africa Microfinance Summit.

The magazine, which has a strong entrepreneurship agenda and a cordial working relationship with the microfinance industry was able to meet some of its major clients at the exhibition. It was also

MICRO ENTERPRISE SUPPORT PROGRAMME TRUST - MESPT

Taking part in the exhibition created a customer database from the visitors on the display booth. Through this, BIMAS was able to understand clients’ needs, while taking the opportunity to explain its offerings and how customers can access them.

Additionally, networking participants. relationships existing ones.

(Left): BIMAS sales representative Erasmus Ndwiga, marketing manager Backson Ndiba and Nairobi Branch manager Samson Katonde showcasing some of the products during the exhibition.

B

IMAS, a microfinance institution that started in the rural areas of Embu County was happy to take part in the event.

According to Erasmus Ndwiga, sales representative in the social department, exhibiting provided a great opportunity for the organization to market its products.

44} SEPTEMBER 2015 BIASHARA LEO

“We have created a lot of awareness about our brand which is good for our business,” remarked Ndwiga .

In addition to the services provided by the institution, BIMAS also showcased a range of innovative products including water purifier, pressure cooker and Jiko Poa. “These products are provided on credit

Going forward, BL will endevour to create value for its clients. Indeed, customers are the most important pillar of our business and future growth, and hence the need to serve them in the best way possible.

A

ccording to Margaret Miano, the marketing and logistics officer at Micro Enterprises Support Programme Trust (MESPT), the exhibition was very helpful. It brought the organization’s partners together, and this provided a good platform for interaction and strengthening relationships.

MESPT has developed a wide range of products and services that are grouped into financial, non-financial and special projects.

They target micro, small, and medium enterprises (MSMEs). Besides, the financial services, MESPT showcased innovative products including wood and charcoal Jikos.

The organization also focuses on training and capacity building, value chain and enterprise development and green growth.

the event provided great opportunities for the That meant forging new while strengthening the

By and large, the exhibition acted as a learning experience. “We were able to learn from each other, particularly in respect to the new innovations in the industry,” said Samson Katonde, BIMAS’ Nairobi branch manager.

Consequently, participants were able to stay abreast of industry developments. It was also a good chance to benchmark with the competition.

BIMAS will continue to target the economically active, albeit low income individuals, as it endeavours to improve their livelihoods.

In addition to generating sales leads, the event helped in maintaining customer relations and it was a good forum for marketing and building the BL brand. It also provided a flexible environment through which a range of marketing objectives were attained.

“We are committed to the fundamental green growth principles and are prepared to lead and follow green growth initiatives into the future,” said Miano.

(Left): MESPT marketing and logistics officer Margaret Miano, Environfit business development manager (EA) Julien Wachira and a collegue at the KICC.

Green growth is a new area of focus. To this end, Miano observed that the event provided a good platform to test its initiatives.

SEPTEMBER 2015 BIASHARA LEO

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Information Technology

Information Technology

Over the years, Techno Brain has diversified its offerings, which now include ICT solutions, IT training and BPO/ ITES services Business Process Outsourcing (BPO) and training to public, private and nongovernmental organizations globally.

Since inception, the company has been committed to its mission of continuously investing in people to become leaders in technology. It is people oriented and offers a conducive work environment and opportunity for people to lead and grow, while empowering clients by building their capacity.

“From a CMMI Level 3, Techno Brain is the only company in Sub-Saharan Africa that has recently received a CMMI Level 5 certification,” observes Shanker.

Exponential growth

Manoj Shanker, Group CEO and Director, Techno Brain.

TECHNO BRAIN: PROVIDING A WHOLE SUITE OF ICT SOLUTIONS

The company offers ICT solutions that help clients accelerate innovation, optimize business processes and maximize value from their IT investments

By Jeniffer Kamau

I

nformation and communication technology (ICT) has become a key building block of the modern society.

ICT solutions help reduce costs, improve processes, boost innovation and increase productivity in different sectors of the economy.

Against this background, a number of local and global companies have been set up

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with the aim of developing IT solutions that meet the rising needs of the 21st century.

One such firm is Techno Brain, which started operation from humble beginnings in 1997 as a small information technology (IT) training centre in Dar-es-Salaam, Tanzania.

According to the company’s group CEO and director, Manoj Shanker, the need to set up Techno Brain originated from the desire

to provide IT training and education while increasing automation in Africa.

The I.T firm bet on providing exposure and building capacity to help African youths with the rest of the world. In 1999, the company expanded its operations to Kenya.

Shanker, who joined the company in 1998, says that starting from scratch was difficult due to lack of basic skills, resources and government support. “We also wanted to bring change in people and this was not easy.”

With time, the company identified the great opportunities the African continent had to offer, and made a strategic move to provide ICT solutions in the region. The purpose was to advance the way organizations do business. Currently, Techno Brain provides industry leading technology solutions,

From a small training institution, Techno Brain has grown in leaps and bounds and has presence in 25 countries globally all spread in five continents. Out of these, 19 are in Africa. Some of them include United States, India, United Arab Emirates, South Africa, Ghana, Nigeria, and United Kingdom.

In 2014, it moved into new corporate headquarters in Nairobi, Kenya. Shanker observes that Kenya is a technology hub which boasts of a pool of skilled manpower and is well connected to other African Countries.

Over the years, Techno Brain has diversified its offerings, which now include ICT solutions, IT training and BPO/ITES services.

“It has 70 unique solutions and 11 products with own IP.” The company endevours to deliver tailored IT solutions that allow its customers to meet their business and technology needs and achieve better business results. To achieve this, it leverages local and global resources, in-depth domain expertise, as well as vast experience.

The solutions are offered in the areas of identity management, healthcare,

enterprise business, banking, financial services and insurance, as well as public finance and revenue management among others. These help customers expedite innovation, optimize business processes and maximize value from their IT investments.

Africa first initiative

Shanker points out that some years back, there was a big problem in Africa in terms of project completion, adding that youths were not exposed to the world and formal skill based training. “We therefore realized that Africa needed local solutions.” To this end, Techno Brain started developing solutions that are tailor made for Africa while helping the continent make economic and social progress.

The guiding principle of the company’s initiative is to create ‘’Made in Africa” solutions that support self-sustenance, economic stability, social empowerment and sustainability. By working closely with the private and public sector, Techno Brain understands the challenges facing individuals and implements projects to address the same.

The BPO division creates employment opportunities for young Africans to be part of the global outsourcing industry that is dominated by India, Philippines and European countries. “In BPO, we have over 700 people,” affirms Shanker.

In addition, the training division taps into the local pool of African talent available and churn out industry ready IT professionals, who are accustomed with latest technologies and quality practices.

Milestones

Since inception, Techno Brain has demonstrated outstanding achievement and has been feted with many awards.

Among them, the Deloitte Technology Africa Fast 50 ranked the company as the second fastest growing technology company in Africa in 2014. Rankings are based on percentage revenue growth over five years.

Additionally, it was honoured with Microsoft YouthSpark Citizenship Partner of the Year 2013 Award.

Other than the awards, the company has expanded and diversified it offerings, while at the same time, delivering real value to its customers. “Thus far, Techno Brain has become a large-scale global company

from Africa that competes globally,” avers Shanker.

The group CEO, who has seen the company grow from its humble beginnings, has been instrumental in creating success in all spheres. Shanker says that his recognition by the CNBC All Africa Business Leadership Awards as the entrepreneur of the year 2014 for East Africa was a remarkable gesture. He was also named by Earnest and Young as the master finalist entrepreneur of the year 2014.

Techno Brain has made major strides that have a direct effect in the operations of both public and private sector.

In Kenya, it has implemented a range of projects among them, the Kenya Child help line. “By upgrading the infrastructure, providing necessary tools and training, Childline Kenya is able to handle 90 per cent of the calls,” observes Shanker.

Besides, it oversaw the digitization of patients’ records at the Kenyatta National Hospital. Doctors are now able to view files and serve patients faster thus reducing turnaround time. Additionally, Techno Brain has implemented projects for Postal Corporation of Kenya and Retirement Benefits Authority, and others around the globe. “In total, we have executed 450 projects in the region.”

On the environmental aspect, Techno Brain has planted 20,000 trees this year. The group CEO, who is passionate about wildlife and nature, says that people should try and protect what they have.

What the future holds

Eighteen years down the line, Techno Brain has built a world class company that addresses each market as per the requirements.

By differentiating itself through the Africa First initiative, building complex software applications, and the ability to innovate and anticipate what the market needs, has greatly contributed in retaining its leadership.

According to Shanker, the company’s strategy is to become a large entity that employs about 10,000 people and expand in more African countries. “Our business is about people. Getting and retaining talent is a top priority”. To this end, Techno Brain invests, trains, satisfies, and provides exposure to its people.

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Information Technology

Information Technology

Our main aim is fulfilling lives. We want to change the lives of as many people as possible The company’s core business is provision of infrastructural and technological solutions, solar street lighting equipment, internet bandwidth (Wi-Fi), CCTV surveillance solutions among other ICT services.

With a team of well versed ICT professionals providing unique resources and insights into IT solutions for the 21st century, LITES is geared towards easing business processes for clients both in private and public sector.

Other than this, LITES offers data center, archiving and digitization of documents services to a growing number of clients.

Tony Olang, head of Laser Infrastructure and Technology Solutions (LITES).

LITES: CUTTING EDGE DIGITAL SOLUTIONS LITES is a subsidiary of CPF Financial Services

By Amos Wachira.

T

he CPF Group of companies operating in Eastern Africa offering a dynamic pool of services in Scheme Administration, Retirement Benefits Services, Training and Consultancy.

The company’s core mandate is pension’s administration. CPF Financial Services (formerly Laptrust Administration Services Ltd) currently administers Local Authorities Pension Trust (a Defined Benefits Scheme) and Laptrust (Umbrella) Retirement Fund

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(a Defined Contributions Scheme) and CPF (Individual) Pension Scheme.

However, after years of manually managing over 30 000 members and 5000 pensioners records spread across various parts of the country, the company realized a gap. This process of manual filing was taking up valuable resources, besides being slow, cumbersome and error strewn.

CPF then came up with the idea of digitizing all documents, thereby streamlining their

services while greatly improving efficiency.

“We then realized that we had latent capacity that was not being used and therefore mooted the idea of establishing a subsidiary that could help other organizations to reap the benefits of information technology,” says Tony Olang, the head of Laser Infrastructure and Technology Solutions (LITES), CPF’s subsidiary.

LITES started operations in September 2013 after its incorporation.

LITES’s vision is to engineer effective, cost efficient, business oriented and customer focused sustainable IT and Infrastructure Solutions. As a division of CPF Group, LITES’ main role is to ensure organizations utilize the latest technologies by implementing efficient solutions that increase productivity, save time and operational costs. “Excellent products and superior customer service are our main priorities and the hallmark of our success,” shares Olang.

The biggest project so far, according to the chief executive, is when the company was contracted to digitize more than 100 million national identification application and replacement papers by the immagration department of the national government.

Diversified services

“We have improved service efficiency in this area. Before then, the records used to be kept in the basement of Jogoo house in stacks.” After didgitization any record is just a click away.

LITES has diversified its services to include IT services, telecommunications services besides offering solar street lighting solutions and investing in renewable energy sources such as solar farms.

In view of the challenges posed by the Power deficit in the region and Kenya in particular, LITES has explored applications of solar energy aimed at providing a multifaceted approach to provision of solutions.

Solar power offers substantial opportunities

for lighting up streets and providing reliable alternative source of energy, with additional benefits of avoiding the negative environmental effects. The modular nature of solar energy technologies make them particularly suitable for capital constrained countries like Kenya.

“We are going big on renewable energy.

Energy is a necessity and we have a passion for that.”

Their cutting edge range of products includes Intellinx, an innovative end-toend internal control and enterprise fraud management solution that can cover financial risks in institutions.

Another product, the Intellipark Parking Solution is aimed at simplifying parking systems. “We are not simply a “product supplier”, we understand that our customers need complete and integrated parking solutions.”

Parking services present serious challenges for city governments.

The E-pay solution for Revenue Management is designed to take the complexity out of profitability. Today’s service provider often has to navigate dozens of billing applications, customer information systems, and financial applications in order to get an accurate view of the customer.

Enterprise resource planning (ERP) is a cross-functional enterprise system driven by an integrated suite of software modules that supports the basic internal business processes of a company. ERP gives a company an integrated real-time view of its core business processes such as production, order processing, and inventory management, tied together by ERP applications software and a common database maintained by a database management system.

Mobile applications

Other services like e-document management systems and web and mobile applications complete LITES full suite of products.

LITES has in the recent years concentrated its efforts to creation of mobile applications like m-Pension, which already has over 10, 000 clients.

Currently, major trends in the ICT industry include convergence of internet and mobile applications. This provides LITES with an excellent opportunity of tailor making mobile applications for local organizations.

Another trend in the industry is the increased demand for data centers. Olang says that this need led to the introduction of clean energy in LITES portfolio, geared at serving the high power requirements of a data centre “We realized that big data needs a lot of power and in case of shut downs, entire businesses are affected. We decided to come up with effective renewable energy solutions that can address these challenges.”

Olang says that LITES services have been well received in the market. “Our colleagues spend a lot of their time handling visitors who come to see what we are doing. From foreign government representatives, to cabinet ministers, we are very pleased to see the interest.” So far, the company has hosted a number of interested parties from as far as Mozambique, Zambia, Tanzania and Uganda.

The company is banking on innovation to emerge a market leader in provision of ICT solutions.

One challenge facing the industry is people’s resistance to change. Many people fear new technology and are always skeptical before adopting new innovations.

LITES is mitigating this by conducting extensive training and marketing drives to show existing and prospective clients the value they get when they subscribe to LITES services.

The company’s core values of innovation, integrity, professionalism, team spirit, customer focus and product differentiation give the company a completive edge especially against heightened competition.

Currently, the company has a branch in South Sudan and serves thousands of clients spread in most counties in the country.

“Our main aim is fulfilling lives. We want to change the lives of as many people as possible,” ends Olang.

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ACHIEVING UNIVERSAL HEALTHCARE WITH LOW EXPENDITURE: KENYA’S MODEL

Further to improving on quality service to its members, the NHIF has already attained ISO 9001:2000 certification which will enable the organization to improve its responsiveness to customer requirements by putting in place Quality Management Systems (QMS).

NHIF is certified in Occupational Health and Safety OHSAS 18001:2007 to ensure its premises meet the safety requirements for staff and customers alike.

The organization was recently ranked second best nationally in the government performance evaluation for state corporations. This is a major achievement for NHIF as it is evidence of compliance with the government reforms introduced through performance contracts efficiency.

T

o many, out-of-pocket payments to access healthcare prevents them from seeking and receiving the needed services as many do not have enough resources. Some opt for alternative methods of accessing treatment such as traditional doctors while others die helplessly as the cost of health services is skyrocketting on a daily basis.

Many countries are now working on ways to offer its population universal coverage of health services but one of the main questions facing these countries is how their financing system can maintain this.

Universal healthcare or coverage means everyone is covered for basic healthcare services, and no one is denied care as long as they are legal residents of a country.

While it takes years to achieve universal coverage, many countries are striving towards this goal. According to World Health Organization, Singapore is generally acknowledged as having one of the most successful healthcare systems in the world, in terms of both efficiency in financing and

the results achieved in community health outcomes.

The key to Singapore’s success in offering universal coverage to its citizens is the emphasis on the individual to assume responsibility towards their own health.

The use of compulsory deductions has also helped significantly in private funding for hospital expenses. According to Singapore Ministry of Health, the government has also ensured that overall health expenditure does not fall victim to the inflationary pressures by regulating the supply and prices of healthcare services.

It is however important to note that while Singapore is tops in universal coverage, their system runs concurrently with development of the country which is politically stable and the fact that it has a small population.

It might not be as easy for other larger countries but definitely achievable.

Kenya has also made strides with their system. The National Hospital Insurance Fund (NHIF) is the primary provider of

health insurance in Kenya with a mandate to enable all Kenyans access quality and affordable health services. It offers a family based health insurance cover which is available to the contributor, spouse and children regardless of whether they are in the formal or informal sector.

Like Singapore, Kenya’s system has been running concurrently with the development of the country allowing successive governments to introduce consistent measures relating to individual responsibility, compulsory savings and regulatory control of healthcare services and costs.

Indeed NHIF has continuously improved its cover since its inception over 40 years ago.

The NHIF health cover has been expanded to allow as many Kenyans as possible to benefit and has been achieved by opening membership to informal sector, with no age limit and no discrimination based on ailment.

However, while there has been increased awareness of importance of being

insured against unforeseen situations like sickness in the country, there is still a gap in a large percentage of the population, especially the poor, vulnerable and pastoral communities who cannot access quality healthcare. Hence the increased emphasis in the capturing of the informal sector membership by NHIF as it strives to reach out to all these groups.

Kenya’s NHIF covers dependents of the member automatically including spouse, children under the age of 18, students (even if over the age of 18 as long there is proof that they are attending school/ college or are disabled and are dependent on their parents for support. Other adult family members require separate premium contributions to be covered.

NHIF requires compulsory membership for all salaried employees with contributions automatically being deducted through payroll. These contributions are remitted by the employer on a graduated scale based on their gross income. The self- employed members and retirees contribute a standard amount of Kshs. 160 per month. NHIF has about 2 million contributors spread across 41,000 employers. Together with their dependants makes more than 10 million people who the Fund takes care of.

Although a new proposed increase in premiums gazetted in June 2010 was

met with bottlenecks, plans are still underway to revise the rates which have been in existence for at least the last two decades. According to a study conducted

by PriceWaterHouse Coopers (PWC) and International Finance Corporation (IFC), there is need to revise the rates to go hand in hand with the ever increasing cost of living. The proposed changes will also see other sectors of the government, nongovernmental organizations and other wellwishers able to purchase NHIF cover for indigents.

Once the rates are increased, NHIF plans to introduce outpatient care. However, the proposed changes are currently under judicial review and have not yet been implemented.

NHIF members’ benefits package includes comprehensive inpatient cover and maternity cases. NHIF has put hospitals under: Category A which mainly includes government hospitals where members enjoy a full comprehensive cover including surgery. Category B includes non-profit private hospitals, faith-based hospitals, and private hospitals in rural areas or areas not adequately served by the public sector where members enjoy comprehensive benefits but in the case of surgery, the contributor may be required to chip in.

Category C includes higher cost private hospitals where NHIF provides a rebate per day of hospitalization.

NHIF works with a wide network of over 600 accredited government, private and faith-based health providers spread across the country and repays hospital claims as per agreed contracts. Contract A and B providers are reimbursed through feefor-service provider payments. Contract C providers are reimbursed through a rebate system. Claims are submitted to the Fund by the hospitals or in some cases contributors

after members have been discharged from the hospital. NHIF has computerized the claims processes and strives to pay within 14 days upon receipt of the claim.

The organization has managed to stay on top partly due to visionary Board of management. The representative board comprise of persons from diverse specializations who therefore enrich the vision of the Board. Such stakeholders represented include the Ministries of Medical Services, Treasury and the Directorate of Personnel Management, Kenya Medical Association (KMA), Christian Health Association of Kenya (CHAK), Kenya National Union of Teachers (KNUT), Central Organization of Trade Unions (COTU), Federation of Kenya Employers (FKE), Nongovernmental Organizations (NGO) and KNFU. To enhance service delivery, NHIF has also put in place an efficient system of member identification in form of electronic photo cards which are designed to solve key concerns such as contribution compliance, identification and surveillance.

NHIF has now embarked on a hospital connectivity exercise where most of its over 600 accredited hospitals are being equipped with a magnetic card reader.

Linked hospitals can now connected directly to the NHIF database and access online information on the status of contributions and confirm the member’s declared dependents.

NHIF has a well-organized branch network spread across the country’s major towns and smaller offices in national, provincial and district hospitals. The branch offices are connected to the headquarters in Nairobi for effective and efficient service delivery to the customers.

Farming Solutions

Farming Solutions

Co-founders of Farmdrive. (left): Rita Kimani, Peris Nyaboe, James Kimani and Caroline Muteti. Photo/SALATON NJAU

FARMDRIVE: CONNECTING SMALLHOLDER FARMERS WITH FINANCIERS The company seeks to transform the way smallholder farmers get access to finance

By Jeniffer Kamau

M

ost smallholder farmers in Kenya and beyond lack access to finance. The underlying problem is the lack of aggregated data making it hard for financial institutions to carry out credit assessments. Such farmers are therefore perceived as high risk clients, something that locks them out of the formal financial systems. “Currently, only 1% of commercial loans in the East African region is diverted to agriculture,” says Rita Kimani, chief executive officer of FarmDrive.

Financiers require important data before extending loans to their clients. However, the majority of smallholder farmers lack a record keeping infrastructure of their farming activities and financial transactions.

“This makes their loan applications to be rejected, limiting their capacity to acquire and use modern tools hence contributing to the vicious circle of poverty,” observes Kimani.

In 2014, Kimani, a holder of BSc. in Computer Science from the University of Nairobi together with her co-founder Peris Bosire brainstormed ways through

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which technology could be used to enhance financial inclusion and transform unproductive farming activities into sustainable livelihoods. They came up with the FarmDrive mobile app that provides farmers with new financing options by connecting them with lenders. Having grown up in rural farming communities, they had a profound understanding of the challenges facing farmers, ranging from the use of inferior inputs and lack of access to finances. “At FarmDrive, the name of the game is using technology to innovate for smallholder farmers.”

Kimani affirms that the company is Africa’s first social enterprise that develops innovative credit assessment tools using aggregated farming activity data to enhance credit access to over 50 million farmers who are financially excluded. FarmDrive seeks to transform the way smallholder farmers get access to financial services. This is in line with its vision of driving economic sustainability in Africa by enabling selfsustenance. “The company achieves this by offering reliable information to financial institutions to facilitate credit evaluations, providing a simple digital record-keeping

platform that enables farmers to keep track of their farming activities, while improving their productivity,” affirms Kimani.

How it works

Through FarmDrive, farmers are able to keep track of their farming activities using their mobile phones. That, combined with existing agricultural data from agro-dealers, agronomists, off-takers, as well as farmers groups, is used in the development of a comprehensive credit profile. When the need for funding arises, financial institutions use the profile for credit assessment.

Additionally, the company uses the records to understand each farmer’s specific needs, which facilitates the provision of tailored information via SMS. “Through this, farmers are able to gain valuable insight into their farming operations while maximizing their farms’ potential,” observes Kimani.

FarmDrive encourages financial institutions to lend more to smallholder farmers, derisking the process by showing clear and transparent records. Lending decisions are made on the basis of cash flows, rather than credit history, which many farmers lack. It also facilitates the creation of products by lenders that are better tailored to smallholder farmers.

Service offering

In order to meet its customers’ needs, the company provides a range of services to farmers as well as financial institutions.

To farmers, a digital record-keeping application that enables them to maintain revenues and expenses is provided.

In addition, there is data analytics which show farm performance including revenues, expenses as well as the amount of yields realized. “We recognized that farmers do not know whether they make profits or loss from their farming activities. With the reports, they are able to understand such aspects as well as the best crops and livestock to keep in order to maximize returns,” affirms Kimani. Through this, some farmers have changed their farming behaviors by focusing on crops that bring forth better yield.

Providing customized information based on farmer’s geographical location on how to improve productivity is also a key service.

The overall aim is to make access to credit easy, by bringing farmers closer to the lenders with favourable terms. Credit assessment is made efficient and costeffective through the provision of credit profiles to financiers. This also helps to bring new clients on board for the financial institutions.

Achievements

“We have been able to train and sign up about 100 small holder farmers in the last few months who have been using our platform to keep records,” avers Kimani.

The feedback received from the users has been significant in helping FarmDrive improve the application.

Currently, the company prides itself in having a network of over 300,000

smallholder farmers that it has began training and signing them up to start using the platform.

creating partnerships, is key to the growth of any company.

The most current achievement has been bringing a financial institution onboard that will be advancing loans to the farmers.

However, Kimani observes that there have been a great challenge to get a financier since the banking sector is not very receptive to innovations. “We have knocked many doors, though many initially show a lot of interest in our innovative solution, they are slow to take it up,” she affirms.

Kimani observes that if you solve a human problem, you are likely to succeed. With this in mind, the company projects to have 210,000 smallholder farmer’s loans being processed by 2018. It also projects to assist over half a million farmers in achieving financing over the next 5 years in Kenya alone. The driving factor will be rapid customer growth fueled by aggressive marketing in the next two years through partnerships.

In spite of these achievements, there is a slow progress in the company’s growth that is linked with lack of access to resources.

Lack of capital makes it impossible to hire skilled people and officers needed to build the platform further and reach out to more farmers, while training them on how to use the application.

Lessons learnt at the global entrepreneurship summit

The Global Entrepreneurship Summit provided a great learning opportunity. One key lesson was on what investors look for in order invest in a business. How well you understand your market, the team as well as the business model are vital aspects.

Moreover, innovators should always introduce new ideas with the global market in mind. It means bringing forth products that are suitable for both the local and international market. This, together with

Going forward

With the vision of driving economic sustainability in Africa, the company plans to expand to other countries where farmers face a similar challenge. The data collected is influential and when aggregated, it will help in informing other vital solutions in order to upscale the agriculture value chain.

By and large, FarmDrive will continue to capitalize on the large underserved market that has been bottlenecked from inaccurate or lack of record-keeping that will now have sufficient data to receive traditional financing.

The company quantifies impact by increasing lending to smallholder farmers, which positively affects the economy and food security of these regions.

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Organic Fertilizer

Organic Fertilizer

Overuse of synthetic fertilizers has made soils more acidic since their primary aim is to feed the plant. The negative effect is that the soils continue to demand more in order to produce the same volume of crops. YAD Bio-Vitalizer has the capacity to reduce soil pH. Microbial diversity in the soils and organic matter are very crucial for continuous production of food in the same piece of land. That is why virgin land yields well without fertilizer application. The organic fertilizer improves microbial life, while preventing scotching or leaching. It also provides readily available nutrients in longer term because it is slow release.

Using YAD Bio-Vitalizer enables the farmer to achieve quality and quantity production, increased product shelf-life while guaranteeing sustainability. In using the vitalizer, farmers also participate in environmental clean-up.

YAD Bio-Vitalizer.

Edwin Kamau, managing director, ECoH Holdings.

TURNING GARBAGE INTO TREASURE YAD Bio-Vitalizer helps to increase agricultural production especially in the food basket regions, where the soils have become acidic due to the use of synthetic fertilizers

Y

“Through scientific research, we have developed a safe and environmentally friendly product that addresses challenges in agriculture, environment, and human health.” says Edwin Kamau, managing director at ECoH Holdings.

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“The quest for safe inputs arose and at the time, there was none in the market which had stable nutrients,” observes Kamau. This resulted in the development of YAD Bio-Vitalizer, and in 2006, the Kenya Agricultural and Livestock Research Organization (KALRO) started conducting research on the product’s efficacy.

What is YAD Bio-Vitalizer?

By Jeniffer Kamau AD Bio-Vitalizer is an organic fertilizer that improves the rejuvenation of soils to enhance crop production. It is a product of ECoH Holdings Limited, a company focused on developing quality products that work towards enhancing human life through healing, restoration as well as revitalization of the environment.

affordable. On the other hand, consumers are able to access safe food.

The genesis of the company stems from two demand sides. Firstly, a corporate social responsibility project was conducted in 2002 that was geared towards addressing the issue of environmental pollution caused by dumped kitchen garbage. This was done by street boys who performed the clean up, and it had a positive impact on their lives.

YAD Bio-Vitalizer is produced from recycling solid organic market and kitchen wastes through advanced enzymatic bioremediation. It offers both macro and micro plant nutrients, improves water holding capacity of the soil and its microbial biodiversity, as well as the revitalization of the soil’s health. Once the soils have been revitalized, they are able to support plant life in the most natural way.

With time, the dumped sites started having mountains of organic matter, making the director, who was then working for an agrochemical based producing company, to look for market. Some of the customers were flower farms, who expressed their need for alternative fertilizers.

Using YAD Bio-Vitalizer is beneficial both to farmers as well as consumers. To farmers, it results in improved productivity both in quality and quantity. Farmers are therefore able to tap into markets that insist on chemical free foods. Besides, it helps in reducing the cost of production as it is

“The fertilizer works well when used together with ECOH Balance, a liquid foliar feed that provides plants with balanced and readily available nutrients,” avers Kamau.

The combination of the two products offers synergy for enhanced crop production.

More noteworthy, the YAD Bio-Vitalizer comes as a two in one product, where it has both basal and top dressing application qualities.

The recycling of the organic waste is not only beneficial to agriculture, but also to the environment. It helps to clean-up the environment and reduce the negative impact of the ozone layer that is resulting in global warming. “That is why we are advocating for - from garbage to cabbage,” affirms Kamau.

Why Choose YAD Bio-Vitalizer over chemical fertilizer?

The greatest investment for farmers is their land. Thus, they must continuously invest in what revitalizes it as this supports and determines the amount of agricultural production. YAD Bio-Vitalizer provides this guarantee and helps revamp the nutrients depleted from soils.

With most consumers becoming more sensitive and conscious of their health, they prefer to eat naturally grown foods. Kamau observes that some Kenyan farmers have incurred losses after shipping their produce abroad, only to be rejected due to the presence of maximum residue levels (MRLs). YAD Bio-Vitalizer helps to mitigate this challenge as it ensures farmers can continuously produce safe foods.

Farmers also obtain better prices for their organically produced crops. Thus, the cumulative net benefit is that farmers responsibly takes care of the environment and produce quality and quantity foods that are safe, resulting to reduced health challenges.

Several private and government organizations such as KARLO, the Kenya Bureau of Standards (KEBS), the Kenya

The fertilizer works well when used together with ECOH Balance, a liquid foliar feed that provides plants with balanced and readily available nutrients

Industrial Research and Development Institute (KIRDI) and the Export Promotion Council of Kenya (EPC) have been key in ensuring that YAD Bio-Vitalizer is enhanced to marketable level for both local and international consumption.

Opportunities provided by the global entrepreneurship summit

Participation in the Global Entrepreneurship Summit (GES) went a long way to validate the company’s slogan “From Garbage to Cabbage”. It provided the opportunity for the concept to be aired on the World Have You Say program on BBC during the second day of the pre-GES. Moreover, ECoH Holdings was in a position to showcase the product development and its impact. Most people showed their interest and demand of the YAD BioVitalizer as they are seeking products that are safe both to the environment as well as their health.

“The GES acted as a launch platform for the YAD product,” says Kamau. This also enabled the company to get product feedback.

Additionally, the summit provided a marketing avenue on the availability of alternative organic fertilizer options that enhance agricultural crop production. This was achieved through the distribution of the product brochures and live discussions held at the stand. Various linkages were made with strategic farmers groups across the country.

Kamau hopes that the company will be able to tap into the government’s commitment and promise to ensure that about 40% of government’s purchases are manufactured locally. This will spur the production capacity while impacting the country’s agricultural product to ensure food security and increased household incomes.

By and large, ECoH Holdings feels the Kenyan government has the right spirit and emphasis towards innovation. “It will be helpful to get support from relevant government departments to ensure the product finds place in the government tenders and budgets.”

The project has great potential to employ Kenyan youth in every county, who could be key in the mopping up of the organic waste for recycling purposes.

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BIASHARA PICTURE

Hatubagui mtu yeyote

Vice Chancellor Prof. Freida Brown with the Chief Guest Rt. Hon. Raila A. Odinga (centre) and the Chancellor Dr. Manu Chandaria (right) during USIU-Africa Commencement Ceremony.

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LEOa 25 A SEPTEMBER f y a Y 2015 e t BIASHARA u. B i m Y e t u.