STANDING OUT NIC bank trains its guns on (SMEs)

NIC BANK TRAINS ITS GUNS ON SMALL AND MEDIUM ENTERPRISES (SMEs)

After consolidating its leadership in corporate banking, innovative lender opens its doors to SMEs as it aims on growing its profits and customer base

By Amos Wachira

Renowned for pioneering the asset finance product in the Kenyan market, NIC Bank is now finding its footing on financing the fast growing small and medium enterprises (SMEs) market segment, estimated to have one of the biggest funding gaps in the country.

According to estimates by the International Finance Corporation (IFC), the World Bank’s private sector lending arm, SMEs in Kenya have an annual credit gap of over $6 billion ( Kshs. 600 billion), which affects their ability to compete with bigger businesses. It is for this reason that NIC Bank’s foray into the segment is gaining traction.

Natural progression

Mr. Robert Kibaara, Director of Retail Banking at NIC Bank explains:”NIC Bank has had a strong asset finance business for many years. However, most of these customers are business people who needed a wide range of solutions. Our venture into the SME market segment is a natural progression from offering just a few financial services to a wide range of solutions.”

The bank’s strategy has borne fruits. In the last three years, the

Mr. Robert Kibaara, Director of Retail Banking at NIC Bank.

SMEs Banking segment has attracted more than 17,300 customers in Kenya, showing that there was latent demand for solutions tailored for this segment.

“We have a full range of transactional accounts and products including trade finance, term loan, project financing, distributor and supply chain financing and cash management solutions,” says Mr. Kibaara. In Kenya, efficiency and speed are prerequisites for anyone wishing to finance the SME sector, which needs fast and affordable credit to grow.

Footprint

Banking on the values of efficiency and speed to tap into this market, NIC Bank is now powering thousands of enterprises that are keen on thriving. Mr. Kibaara says that the bank has disbursed over Kshs. 9 billion to SMEs so far. The bank has also managed to grow its regional footprint with 33 branches in Kenya, 6 in Tanzania and 2 in Uganda.

“We have already opened 6 new branches as our expansion drive gains pace. Our aim is to reach 50 branches by 2017.” He added.

In its quest to be a ‘one stop shop’ financial service solutions provider in the market, the tier-2 lender has formed subsidiaries in Kenya as well as in the East African region. NIC Capital was established in 2008 to provide investment banking solutions to Kenyan and East African corporate organizations. NIC Securities Ltd is a Capital Markets Authority (CMA) licensed brokerage firm and a member of the Nairobi Securities Exchange.

Also in its stable are NIC Insurance Agents and NIC Leasing LLP, covering the insurance and leasing needs of customers respectively.

Going down memory lane

But the Nairobi Securities Exchangelisted firm has not been a financial services hub all along. Formed in 1959 as National Industrial Credit Bank Limited (NIC Bank) after a merger between Standard Bank Limited and Mercantile Credit Limited (both based in the United Kingdom),the company was amongst the first non-bank financial institutions to provide hire purchase and installment credit finance facilities in Kenya.

After obtaining a commercial banking licence in 1995, NIC Bank focused on growing its range of products and services. In 1997, the financial institution merged with African Mercantile Bank Limited, as its quest for growth gathered more steam. It later rebranded to NIC Bank in 2005.

Its journey has been characterized by major milestones in the financial services industry, which have enabled it to enhance its market position, provide a broader and more efficient range of services to its customers and increase the returns to shareholders.

Unique partnership

In 2014, NIC Bank partnered with Africa Trade Insurance (ATI), a financial institution that covers the trade and investment risks of companies doing business in Africa, to further bolster SME lending. Under the unique partnership, the lender took up ATI’s new insurance cover so as to protect NIC’s entire portfolio of trade finance borrowers against the risks of insolvency and non-payment – risks that have traditionally inhibited most African banks from lending to SMEs.

When the lender attracted the attention of The European Investment Bank in May this year, it solidified its SMEs business by a wide margin.

The European Investment Bank provided EUR 50 Million (Kshs. 5.6 billion) for investment by companies across East Africa.

It is easy to see the lender’s passion in growing this market segment. Recently, NIC Bank Group partnered with Junior Achievement (JA) Kenya and Craft Silicon Foundation to roll out an innovation challenge in a bid to provide a platform that encourages innovative and technical thinking in addressing the financial services sector.

The challenge targets both high school and university students who are members of the Junior Achievement club and seeks to encourage participants to develop transformational innovative solutions that will drive positive change in the financial sector to benefit individuals and communities across the nation.

The challenge aims to identify the most innovative ideas that offer solutions that address financial inclusion, financial literacy and practical financial solutions.

Hurdles

Despite the bank’s success in the SMEs’ market segment, it has had to overcome a few hurdles, especially at a time when the banking industry in Kenya is reeling from a banking turmoil, fuelled by three lenders being put under statutory management in a quick succession.

“The market has been tough with regards to escalating interest rates and delayed payments from government. However, the best way of dealing with non-performing loans is by building relationship with customers. NIC Bank Group is strong in building such relationships to help customers solve their financial problems,” says Kibaara.

Innovations

Technology has for a long time played a significant role in transforming the financial services sector. For NIC Bank, which has invested heavily in technology that is its lifeblood.

The lender recently launched a fully automated online platform which enables employees of corporate organizations to apply for loans online. The innovative portal will significantly streamline the loan application process as it will also allow for online approval and processing. The portal, which will specifically target the employees of companies that have taken up the bank’s scheme product offering, will see the loan application time reduced by more than fifty per cent.

The customers who apply will also be able to track the progress of their loan application for unsecured personal loans, mortgages, car loans and plot purchase loans.

Other innovations are in the pipeline.”We are in the process of building an automated lending platform as we aspire to go paperless. Our mobile banking portal makes it easy for customers to access money quickly,” says the director. Even with improved efficiency, the banking industry has come under scrutiny for failing to arrest the escalation of interest rates. In that respect, Mr. Kibaara observes that the lender is among the few financial institutions in the country offering low interest rates, thanks to its highly efficient systems. “We offer very competitive rates as we can control some of the factors that lead to the escalation of the same,” Mr. Kibaara observes.

Innovation is not the only area that the bank has shown leadership in. It has also won accolades in corporate governance. Recently, NIC Bank Group emerged the overall winner of the Champions of Governance Awards at this year’s Institute of Certified Public Secretaries of Kenya (ICPSK) 6th edition of the Champions of Governance (COG) Awards.

The Champions of Governance Awards, inaugurated in 2010, annually celebrates organizations and individuals that exhibit the highest standards in the practice of good governance. Kibaara is confident that NIC bank will soon grow to be the first choice bank for SME’s in the region. “That dream is taking shape.” He ends.