www.pocketmedia.co.ke MAY, 2011 Vol 1. ISSUE: 001 KSH150
Focusing on money
20 pages of ragsto-riche stories s
Know your credit rating
Kenya’s number one entrepreneur Joanne Mwangi shares ideas on debt management
WHERE INVEST ● CEO PROFILE ● SUCCESS TIPS ● REVIEWS May, 2011 WHERE TOTO INVEST ● CEO PROFILE ● SUCCESS TIPS TBJ ● REVIEWS
Thirsty for Success? Look out for these free clinics on entrepreneurship.
A First In Mortgages CFC Stanbic introduces the �rst 100 percent mortgage �nancing product in the market.
Plastic Money Standard Chartered Bank and NIC Bank have launched new credit cards.
Truncation System 11 Cheque Soon and very soon, cheques will be taking only a day to clear.
Agency Banking Idea of spreading banking tentacles through local shops is a lucrative venture for entrepreneurs. ON THE COVER:
10 TBJ May, 2011
Ms JOANNE MWANGI, Professional Marketing Services Group Chief Executive Oﬃcer. As the top entrepreneur in Kenya, she shares tips on debt and money management. TURN TO PAGE 36
TBJ May, 2011
Hides For Success He started a business with a single goat in 1976. Now, he is worth over Ksh60. Count Every Coin Samrat Supermarkets chairman explains his secret of success.
Banking Money: �is is Journal
Where Money Is PUBLISHER: PocketMedia Ltd. CONSULTING EDITOR: Dan Teng’o EDITOR: John Koigi DESIGN: Martin Wanyoike CONTRIBUTORS: Central Bank of Kenya
Waweru Ngunjiri, James Karundu, Alice Onyango
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TBJ May, 2011
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Know Your CEO Meet Hanish Chandaria, Fina Bank CEO. Let’s Go Travel �is car will conquer terrain where tanks would fear to tread. Book Review Want to succeed in business? Learn the seven keys of that’ll unlock your potential.
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et’s talk about money. It has been called a ‘sixth sense’, without which you can’t make much use of the other �ve. We all love money. But making it and keeping it is a challenge. To most people �nancial freedom and security are as elusive as a dollar in the wind. �e Banking Journal is diﬀerent. It’s a business magazine with a diﬀerence. It won’t saddle you with hard-tounderstand business news that are more lullaby than informative. Or numbers that are simply intimidating to look at. Rather, we’ll �lter the relevant pieces of business information that will enable you start or succeed in business, make money and ultimately achieve �nancial freedom and security. Without doubt, banks can be enablers to this. In this launch edition, we bring you inspiring stories of li�le known but very successful business people who have braved loans -high interest rates and all- to build successful enterprises. How did they do it? Which lessons have they picked along the way? Do you know life has a way of giving you exactly what you ask for? Motivational speaker James Karundu’s book, which we’ve reviewed, is a must read for anyone who wishes to succeed. We’ve much more packed in this inaugural edition. Please write to us with queries and compliments. We value your feedback.
TBJ May, 2011
March to your own drumbeat
Drive without stress
Want to be successful in business? Catch one of these �ee business clinics
Gulf African Bank has launched a Shariah-compliant product that’ll enable you drive your dream car. Auto Finance enables you to drive any used or new private car valued between Ksh500,000 and Ksh2 million. The used cars must either be one to ﬁve years old - ﬁnanced up to 70% for four years or ﬁve to seven years- ﬁnanced to the same percentage for a maximum of three years. Eighty percent ﬁnancing is available for new cars for up to a maximum period of ﬁve years.
ant to improve your entrepreneurial skills? Look out for one of these free business clinics coming to a town near you. Small and Medium Enterprises Resource Centre is conducting free clinics throughout the country. We attended one such clinic in Thika town recently. The training is being conducted by James Karundu (right) master motivational speaker and author of 7 Keys of Success Beyond Chance, Hammond Tutu & Gunther, True North and October First Consulting amongst others. The Thika training also had speakers from Equity Bank and Housing Finance mortgage company. Mr Karundu (“the motivational guy”) also appears on the TV programme How To Be Rich. He said there are ﬁve key things an entrepreneur needs to
keep in mind: » Business is the pathway to self actualisation. » What you know has economic value - don’t dismiss your knowledge, experience, expertise, no matter how humble it is. » Be a specialist, not a generalist - a cardiologist is paid more than a general practitioner. » In your business, have a ﬂagship product/service supported by a range of other products. » Minimise the perception of risk - let potential clients believe in you by ﬁnding a way to minimise any fears, uncertainities and doubts they may have about you. * Next trainings will be in Nyeri (May), Kisumu ( July), Mombasa (August), Meru (September) Kericho (October), Eldoret (November) and Kitale in December
Just like a catapult pulls back, there will always be challenges and setbacks in business.
Macdonald Mariga, Kenya’s best paid professional footballer started by playing with a polythene ball. Lesson? Start where you are with what you have.
A magnifying glass cannot ignite paper if the sun ray is not focused on one single spot. Focus on your work. Ignition also takes time. Be patient.
You cannot succeed beyond what you say. The sound of a drum represents the words that come from your mouth. If you say you can’t succeed, then you wont.
TBJ May, 2011
Small and Micro Enterprises Programme (SMEP) has been licensed by Central Bank of Kenya (CBK) as a Deposit Taking Microﬁnance (DTM) institution. It is the ﬁfth such DTM in the country. CBK Governor Prof. Njuguna Ndung’u said the goal is to enhance the reach of ﬁnancial services to more Kenyans. SMEP Chief Executive Ofﬁcer Phyliss Mbungu said, “in addition to to giving out credit, SMEP will now be able to safeguard their customers’ hard earned money through already set-up deposit taking branches as well as mobilising saving from the public for lending. Which means, in the long run customers will enjoy lower borrowing interest rates.”
What is Islamic Banking?
The ‘motivational guy’s’ analogy
Deputy GM Mohamed Harris, CEO Najmul Hassan and GM Abdalla Abdulkhalik during the launch.
he concept of Islamic Banking, pioneered locally by Gulf African Bank has rapidly picked up. Its basic principle is that unlike in the capitalistic method where pursuit of wealth creates monopolies, dominance by a select few and widening of the gap between the rich and the poor, it encourages the circulation of wealth and regards this as important as the �ow of blood in a human body. �rough this Gulf African Bank-sponsored 259-page book, world renowned Islamic Finance expert Dr Muhammad Imran Ashraf explains all the facets of Islamic �nance, interwoven with the
teachings of the Holy Qur’an. �ese include Riba (interest), which is prohibited, rules guiding an Islamic contract, guidelines in a sale and Islamic modes of �nance amongst others. What you’ll �nd interesting in this book is the relative comparison between Islamic �nance and other forms of �nance, notably capitalism. Reading through this enlightening book, you get the feeling that the world would be a much be�er, richer, fairer and peaceful place if we were all to embrace Islamic Finance.
TBJ May, 2011
No ATM fees from Barclays
HSBC eyes Kenyan market
ongkong Shanghai Banking Corporation (HSBC) is to open an oﬃce in Kenya. In an obvious indication of the interest international banks have in the local market, HSBC becomes the third such institution licensed by the Central Bank of Kenya to operate a representative oﬃce, after HDFC Bank of India (licensed in June 2008) and Nedbank of South Africa in June last year. The global bank with operations in Europe, Asia, America, Middle East and Africa is however restricted from mobilising deposits from the public -like fully ﬂedged banks or subsidiaries of international banks do but can conduct marketing and other nontransactional operations. CBK is also said to be processing another application from a South African bank for establishment of a similar oﬃce. There are 43 commercial banks and one mortgage ﬁnance company in Kenya, of which Opening of representative 30 are locally owned oﬃce indicative of optimism in the sector and 13 by foreign institutions. The local banking industry is 13 Foreign-owned expected to continue banks 30 Locallyowned banks performing well this year, in tandem with growth of the economy.
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Middle class apartments in Donholm Estate, developed by Greenspan Housing Ltd. The 100% mortgage ﬁnancing by CFC Stanbic, a ﬁrst one in the local market will tap into the middle class.
Mortgages for the middle class In a move that clearly indicates the next market ba�le front for commercial banks, CFC Stanbic Bank has introduced a 100% mortgage �nancing. It is the �rst such product in Kenya (most banks require up to 30% deposit on the value of the house), and is targeted at the growing middle class. CfC head of personal and business banking Elly Odhong said the move is part of the bank’s continuing commitment to help potential homebuyers realise their dream. “As a major player in mortgage solutions, we’re pleased to be the �rst �nancial institution to oﬀer this program, which builds on our existing suite of �exible home �nancing products,” said Mr Odhong.
The dancing robot is back. Barclays Bank Kenya has knocked oﬀ all ATM transaction fees, and is aggressively marketing the service on TV using the dancing robot ﬁrst seen in the late 90s. The bank was charging Ksh30 per transaction. The move to waiver ATM fees will have a compounding eﬀect on consumption as people will be tempted to make more withdrawals. The bank, headed locally by Adan Mohammed, who is also in charge of operations in East and West Africa, has replicated the move in Uganda, Tanzania and Ghana amongst other African countries. At the same time, the bank has launched Hello Money, a mobile phone banking platform that enables customers carry out transactions in real time using their mobile phones. This is for free too. The bank has 236 ATMs and 117 branches countrywide. “This new oﬀers are in line with our strategy to enhance customer service, support Branch expansion and improve management of customer complaints and resolution,” said Mr Mohamed.
Kenya Women Finance Trust executives during a past event.
KWFT feted Kenya Women Finance Trust DTM is the winner of the 2011 Excellence in Leadership Award. �e award by Women’s World Banking (WWB) recognised the micro-�nance’s commitment to gender diversity. WWB is a network of 39 �nancial organisations around the world. Established in 1979, it is headquarted in New York and its main goal is to develop �nancial products, such as savings and insurance, to enable micro�nance organisations better serve their clients and achieve their mission of bringing more people out of poverty.
Another Credit Reference Bureau licenced Metropol Credit Reference Bureau Ltd has been licensed to oﬀer the banking sector credit information sharing services. It’s the second licensed credit reference bureau in Kenya after
CRB Africa Ltd. CRBs facilitate information sharing among institutions licensed under the Banking Act. The licensing of Metropol CRB is expected to enhance competition in the credit information
sharing market. This will lead to increased choice for banks and product variety. “Customers will also have more options in accessing their credit reports,” said CBK.
TBJ May, 2011
Upward trend in use of plastic money
Cheque Truncation System is here
n a move that’s indicative of growing interest in credit cards, Standard Chartered Bank and NIC Bank have launched new cards into the market. Aimed at the premium market segment, the Standard Chartered Platinum and Gold credit cards and the NIC Gold Credit Card come at a time when data from the Central Bank of Kenya indicates there is a gradual increase in the use of credit cards. Since July 2009 and October 2010, the number of credit cards increased 108,049 to 114,058, while the value of transactions increased from Ksh293 million to Ksh314 million. However, the number of transactions decreased from 59,353 to 55,235. The new cards by Standard Chartered are more secure than the conventional ones since they are not prone to card scheming. They also oﬀer rewards and cash back on spending. Platinum Card holders will earn 1.5 points for every Ksh100 spent while Gold Card holders will earn one point on the same spend. The minimum credit limit on the Platinum credit card is Number of card transactions 70,000
Standard Chartered corporate affairs manager Anne Njambi (right) and colleague Caroline Mbui.
Ksh600, 000 and Ksh200, 000 on the Gold one. The NIC Gold Credit Card is targeted at those earning above Ksh200,000 per month, who qualify for higher credit limits than the existing cards in the market oﬀer. Mr James Wainaina, the director of personal banking at the bank said there was strong demand for such a card in this market segment. The existing NIC card has attracted about 15 per cent additional customers every year for the last three years, he said.
�e CTS will bene�t banks and the public in a number of ways. �ese include:
Jul. 09 Oct. 09 Feb. ‘10 May ‘10 Jul. ‘10 Oct. ‘10 Jul. 09 Oct. 09 Feb. ‘10 May ‘10 Jul. ‘10 Oct. ‘10
TBJ May, 2011
in use will be accepted for clearing until 1st June 2011. Banks have
a l r e a d y started replacing old cheques with new Cheque Truncation System compliant cheques. Meanwhile, KBA has picked Safaricom to provide converged data services to banks in Kenya. Through its Enterprise Business Unit, Safaricom will oﬀer connectivity solutions for cheque truncation in all banks that are members of the KBA.
How will this new system bene�t you?
Number of credit cards
he Cheque Truncation System (CTS), another milestone in the modernisation of Kenya’s payment system has been implemented. Cheque truncation refers to a process in which physical cheques presented for payment in a bank by individuals or corporate bodies are converted into electronic form and the image transmitted electronically to the Clearing House for processing and eventual payment by the paying bank (that is, the drawer’s bank). The new system will eliminate the hitherto manual cheque clearing by automating the entire clearing cycle. The system is expected to go live next month. To facilitate implementation of the system, the Kenya Bankers Association (KBA) has introduced new cheques whose design complies with the security and operational requirements of the system. However all current cheques
■ Eﬃcient and streamlined clearing process for cheque payment and reduction of
the cheque clearing days. ■ Reduced costs associated with handling physical cheques. ■ Shorter clearing cycle facilitating early access to funds by cheque bene�ciaries. ■ Reduction of risks associated with manual and longer
cheque clearing cycle and quick detection of fraud. ■ On the go-live date, the whole country will be on one clearing zone at three cheque clearing days (T+3) and this is expected to gradually reduce to one-day cheque clearing (T+1). TBJ May, 2011
Words: JOHN KOIGI Photos: PML
Agency Banking turns out to be a decent money making venture for entrepreneurs
t Ruai trading centre in the peripheries of Nairobi, the couple of Francis and Ruth Njau are contributing to the revolution of Kenya’s ﬁnancial landscape in a big way. They operate two agency banks – by Equity Bank and KCB Bank – and in the process, supplement the income they get from Classic Supermarket, which they own. “This is a good concept,” says Mrs Njau (Right). “We’ve are witnessing a growth eﬀect in sales due to the direct access people have for money.” The Njau’s KCB agency bank is the latest to be oﬃcially launched in this novel concept that is meant to reach the 32% of the adult population in Kenya without access. Dubbed ‘KCB Mtaani’, it comes hot in the heels of Co-operative bank’s ‘Co-op Kwa Jirani’ and Equity Bank’s Equity Agent. Equity, which pioneered this Brazil and Colombia-perfected idea locally has the lion’s share of the 5,000 or so licensed agents. KCB Mtaani’s initial roll out is focused on 500 agents across the country. Among the services the agent banks are oﬀering are cash de-
10 TBJ May, 2011
KCB customers wishing to transact through the agencies must be registered with KCB Connect. “This is a limiting factor,” says Mrs Njau, who facilitates about 25 transactions a day, between the two agencies. “Because we have customers who would like to access the services but are not yet registered. We would also like the banks to provide security.” Co-operative bank’s director of coI’ve Got Money: KCB Group Chief Executive operatives, Catherine Munyiri said Ofﬁcer, Dr Martin Oduor-Otieno (left) making Co-op Kwa Jirani will enable more a transaction at the Classic Supermarket KCB Kenyans in remote and un-banked Mtaani Agent in Ruai. areas access the bank’s ﬁnancial services. the KCB Mtaani pilot involved 30 agents Besides reaching the un-banked, who successfully made over 200 transagency banking is also helping comactions. It expects to recruit over 2000 mercial banks save on the heavy capiagents across the country by the end of tal required in establishing branches. this year.
How the commissions compare Deposits Ksh)
Withdrawals (Ksh) 100-2500
posits, withdrawals, disbursement and repayment of loans, payment of salaries, pension, transfer of funds, and issuance of mini-bank statements. For each transaction, the agent bank (such as the couple’s) earn a commission. Over the last two months, Dr Martin Oduor-Otieno, KCB Group Chief Executive Oﬃcer said,
Customer charges = 25; 10 goes to the bank Charges= 30, shared equally
Levied directly on customer and goes to agent, regardless of amount
Levied directly on customer and goes to agent, regardless of amount
5,000 - no limit Charges= 50; 30 goes to agent 70
On all transactions, regardless of amount, shared 50: 50
TBJ May, 2011
The insurance rulebook is full of things that just ‘can’t be done’. But at APA, we don’t follow the rulebook. That’s why we ensure that upon receipt of all documentation, your claim is paid within hours. For this reason, APA Insurance continues to be rated “A” for our claim-paying ability. If that is breaking the rules, then so be it. We don’t think too many of our customers will complain. Call us on 020 286 2000 or email us on firstname.lastname@example.org 12 TBJ May, 2011
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Victors Mr Karuri Mwangi, Mr Nyambune Mochama, Mr Anil Jakhria and Mr Pius Mwaniki have one thing in common: They are successful entrepreneurs who have wisely utilised bank loans to grow their businesses. Almost from scratch, the quartet have been brave enough to risk it all, prudent enough to manage their earnings against loan repayments and brave enough to keep on borrowing. They share their lessons on debt management and sacriďŹ ces along the way. They are, the DEBT VICTORS.
14 TBJ May, 2011
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Credit as a stepping Interest rates alone should not discourage you �om borrowing. Just as you are borrowing to invest and pro�t, so are banks lending to you inorder to pro�t. It’s a willing-buyer, willing seller arrangement and as ALICE ONYANGO writes, you should only borrow when your expected returns shed oﬀ the interest and leave you with a pro�t.
r Karuri Mwangi is a daring man. Business without huge risks is to him, like strumming a stringless guitar; there are no returns, no excitement and no lessons. He started his business in 1976 (See Page 18), buying a goat for Ksh30 and selling for double that. Thirty ﬁve years and millions in loans later, his company has a net worth of over Ksh60million. Without braving the risk of loans, he’d probably still be a backwater goat dealer in Eldoret town. The prevailing high interest rates charged by banks has resulted in many businesses shying away from taking loans; loans are being perceived as a one-way ticket to ﬁnancial ruin. Nothing can be further from the truth. There are several beneﬁts associated with credit. “Credit enables you access and accumulate assets faster,” says Fina Bank Chief Executive Oﬃcer Hanish Chandaria. These assets include, amongst others, houses, cars and land that require a lot of money at a go. Other beneﬁts of loans are:
Opportunity for prompt expansion of business especially when oppor-
TBJ May, 2011
tunity beckons. In business language, the most common avenues through which loan comes in handy are in bid bonds, performance bonds and overdrafts.
Payment for emergencies such as medical bills, impromptu travel etc
Payment of utility bills, especially on those dark days when you’ve too much month at the end of the money.
stone to prosperity results recently. Banking products are provided in a willing-buyer willing seller arrangement, he added, implying that the prevailing negative perception on bank loans is misguided. And he is right. Most people borrow without a concrete business plan on how they plan to repay. Or, as one of the debt victors says, they borrow with a certain intention in mind, only to lose focus and invest in the ‘hot’ business of the day. In the end, they are saddled with debt and can’t keep the wolf from the door. Before you take a loan, compare interest rates for the diﬀerent types of loans on oﬀer. Banks have varying interest rates for their various loans and not unless you read the ﬁnal print, you can end up losing on a favourable repayment deal.
If you are borrowing against your salary, the loan also calls for extra discipline in managing ﬁnances since they will be a lesser bank balance every month due to the check-oﬀ system. Analysts say this year, the number of individuals and businesses seeking loans from commercial banks will increase with the expected drop in interest rates as the credit information sharing fully rolls out (See page 42). Basically, credit information sharing will classify your credit worthiness, based on how well you pay your utility bills and loans. If you are the type that borrows from Peter to pay Paul, a serial defaulter, brace yourself for even higher interest rates. But if you have a good track record with your bank, then, you will be able to negotiate favourable
Personal development: You can borrow to further your education and with it, career/ promotion prospects. The role of the Higher Education Loans Board is a good case in point.
Pariah reputation But why do loans have such a pariah reputation? “People shouldn’t just borrow money for the sake of borrowing. They should take into account the return on investment before taking out the loans,” Consolidated Bank Chief Eexcutive Oﬃcer Ndegwa Wachira advised during the announcing of their ﬁnancial
Fina Bank CEO Hanish Chandaria and his Consolidated Bank counterpart Ndegwa Wachira. Loans are good but should be accompanied by a solid investment and repayment plan.
TBJ May, 2011
He started in 1976 by buying a single goat at Ksh30. Now, his business hides and skins export business is worth over Ksh60 million, with markets in India, Pakistan and the Middle East.
Mr Karuri Mwangi, proprietor, Eldoret Hides and Skins 18 TBJ May, 2011
r Karuri Mwangi has never been employed. But the business skills he has picked up in his 40 years of entrepreneurship can match the very best from ivy-league colleges: Proper debt management; how to spot and seize opportunities; re-investing proﬁts; re-inventing oneself to stay relevant in the market place; compound growth; persistence and most importantly, knowing when to exit. He is the proprietor of Eldoret Hides and Skins, an Eldoret-based hides and skins export company. “I started business way back in 1976 while I was still in school. I bought a goat for Ksh30, slaughtered it and sold to neighbours. I made Ksh60 proﬁt.” This stoked an entrepreneurial vigour in him that has been whetted with time, accelerated by loans and actualised through self determination. His company which sells 150 tonnes of hides, skins and wool per month locally and in markets in Pakistan, China and India, is now valued at about Ksh60 million. “In business, you must have vision.”
By JOHN KOIGI From his anonymous two-roomed oﬃce at the Ksh25 million godown in Eldoret town, Mr Karuri oversees a business that employees 40 people full time and hundreds more on contractual basis. “Loans enable businesses accelerate growth and adjust to market risks.” Born and bred in Kapsuswa, Eldoret, Mr Karuri recalls that his family was so poor, he occasionally dropped out of Eldoret Harambee school where he was a student. By the time he ﬁnished in 1977, he had already made a resolve never to be poor. “I applied for a job as a clerk at Raymonds Blanket Factory. The pay was Ksh350 per month. But I ﬁgured out that if I bought a goat for Ksh50 and sold the meat for Ksh150 in a day or two, I’d be earning the equivalent of my salary in about a week.” By the time he left Form Four, Mr Karuri already had a butchery and a capital of Ksh2,500. He expanded his customer base aggressively, from slaughtering one goat a day to about 50 by 1979. He was only 25
TBJ May, 2011
when he bought his ﬁrst car, a Peugeot for Ksh25,000. Meanwhile, his capital increased from Ksh2,500 to Ksh15,000 in a year and Ksh100,000 by the fourth year. It was also at the age of 25 when he bought his ﬁrst plot for Ksh80,000. “I paid a down payment of Ksh45,000 and the rest in six month instalments of Ksh7,000 each.” He would later build a family home on it; the plot is now valued at Ksh15 million. “Every year, I was buying a “Politics is bad for business,” says Mr Karuri piece of land. In 1979, I bought Mwangi, an entrepreneur who does not recognise seven acres at Ksh25,000 each. the words ‘failure’ and ‘dreaming small’. ” The following year, I bought business were ﬁnally over. His business another one for Ksh50,000.” He recalls that he took out his ﬁrst loan and ﬁnancial status spiralled down to from a bank in the ‘80s. It was a Ksh5,000 almost zero. He had spent almost all his overdraft to pay for part of the Ksh7,500 savings in ﬂagging his dying business. ““I he needed to buy 120 animals. “Based had to start all over again. I sold a plot on the amount of money I was depos- for about Ksh1.3 million and was paid a iting every day, the bank just called me ﬁrst instalment of Ksh30,000. When I reand alerted me about the presence of ceived this money, I immediately walked unsecured loans.” A bank manager then, into a restaurant to eat. Yes, I was that recalls Mr Karuri, was earning Ksh4,500 hungry, then did some shopping for my a month. But this success would later wife. Afterwards, I paid most of debts be the apex of the learning curve for Mr and was left with only Ksh100,000. My Karuri, which saw him go burst and start wife took Ksh50,000 to start a Mitumba almost from scratch again. The down- business, while I ventured into the unturn began in 1992, right about the time known with the rest.” for the General Elections. “Politics is bad The unknown for him was hides and for business. Some people, envious of skins business. The business, he says, my success started spreading rumours was close-knit, almost secretive and carthat I was poisoning people at my eater- tel-like. “I always wondered why a trader ies. From slaughtering 60 animals a day in hides and skins would advance money at a proﬁt of Ksh300 each, I was selling to the owner of a slaughterhouse -to buy his stock. It meant the hides and skins virtually none.” But he pressed on, injecting more capital had more money than meat.” Mr Karuri in renovating his premises and market- started by placing orders for the hides at ing but in 1998, his days in meat supply the local slaughterhouse at Ksh20 a kilo 30 TBJ May, 2011
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22 TBJ May, 2011
When taking out a loan, always borrow an amount you can easily oﬀset using your other existing assets. This is regardless of how well your business is doing.
Business is very unpredictable. Everything can go wrong anytime and you ﬁnd yourself in serious ﬁnancial problems. You must be tough. Don’t borrow an additional loan before you ﬁnish repaying the one you already have. Don’t overburden yourself with unnecessary risk.
Work at Eldoret Hides and Skins godown bought for Ksh10 million through a bank loan.
nity to spread his investments, and not rely entirely on the ﬂuid hides and skins business. “We could only raise Ksh5 million. We approached a bank who lent us the rest. Our good association with banks has enabled us stay aﬂoat in very trying times. In total, he has borrowed Ksh11.1 million from a bank, which he pays in monthly instalments of Ksh300,000. What has he learnt? “Always get a loan package where there are no hidden charges.”
If you take a loan to ﬁnance asset acquisition, ensure that the income from the assets is more than double the amount of monthly repayment. (He pays Ksh450,000 a month to two banks-Ksh150,000 to Equity and Ksh300,000 to Fina, Ksh200,000 to other
creditors, Ksh50,000 for Safaricom shares and Ksh400,000 for operational overheads. “We ensure we get about 1.5 million every month just to stay aﬂoat”)
Don’t be excited about money. You may lose it all and won’t be able to absorb the shock or bounce back.
The more you risk, the more you stand to gain once you succeed.
Pay yourself a salary and separate this from income from your business.
Add value: By curing the hides and skins, I venture into a more exclusive and lucrative market ﬁeld. They could be about 3,000 people dealing in raw hides and skins, while only ﬁve are into those that’ve been cured.
Success Trip Exports
25million 10 million
Hides and skins
Ksh5 million The most amount of money Mr Karuri has ever lost in a deal
and sell at Ksh35, fresh and uncured. By selling 100 kilos in a day, he could make Ksh45,000 a month. He was back into spinning money. “In about one year, my Ksh50,000 had multiplied to Ksh500,000. From then on, I was growing by about Ksh1 million every year. This is a better business than the meat supply one because there is always a ready market for the hides.” He exported his ﬁrst batch of hides and skins in 2006 (50 tonnes), enabled through a Ksh1.5 million bank overdraft. In 2007, the post election brought out another secret to Mr Karuri’s success: reinvention. “We had to change the branding on our vehicles and source for stock in Uganda and Tanzania. Traditionally, we buy from Western Nyanza, North Rift and parts of Central. In 2008, Mr Karuri’s business, which relies heavily on the fortunes in global trade was severely affected by the economic downturn. “We lost a lot of money during the recession. Before, we had 300 tonnes in stock worth Ksh35million. But this came down to stock worth only Ksh10 million. At around this time, Mr Karuri got wind that there was demand for fur in Turkey, yet in Jerusalem, it was being incinerated. True to his adventurous, entrepreneurial self, he hopped onto a plane, packaged two containers of fur in Jerusalem and shipped them to Turkey. Back home, the bank where he held an account thought the reduced stock meant his business was in the red. “No one in life wants to associate with you when they think you are sinking.” He had spotted a prime property in the upmarket Muthangari area in Nairobi which was going for Ksh10 million. To him, it represented the perfect opportu-
Goat business Back to zero
TBJ May, 2011
Bridges-to-riches When Mr Nyambune Mochama started his small construction company 10 years ago, he did not envision the enormous growth.
Clockwise, from top left: One of the two Ford Rangers bought at Ksh3.5 million each through an Ecobank loan. Likewise, one of the two 10-tonne trucks worth Ksh12 million, a signboard identifying him as a government contractor in Kisii town and photos of some of his ﬁnished projects.
M Mr Mochama and a colleague walk through one of the footbridges in Kisii County constructed by his company, Gesure Building Contractors.
24 TBJ May, 2011
r John Nyambune Mochama is a meticulous man. From his insistence that I don’t misspell his middle name (most people mistake it for ‘Nyambane’ ) to his neat oﬃce and choice of brand new vehicles for his work, he is a man who settles for nothing but the best. As the proprietor of Kisii-based Gesure Building Contractors, meticulousness is one of the qualities that has seen his business grow in 10 short years from a one-man plaster and mortar outﬁt to a major government contractor. Along the way, there have been several odds, roadblocks and a
very helpful partner - Ecobank. “For sure, without the backing of Ecobank, I’d still be a struggling mason,” says Mr Nyambune, who has a diploma in building and construction. His company employs up to 50 people and amongst its notable past projects have been the construction of Manga and Nyamache Disctrict Headquarters and the District Oﬃcers’ oﬃces, St Paul’s Nyabururu Teacher’s Training College women’s hostel and numerous footbridges that dot the undulating Kisii landscape. Each such project is capital involving, with cost of materials and labour running into millions of TBJ May, 2011
shillings. Ideally, he seeks the tenders, implements them -using his capital-, and then invoices for payment. The construction of district headquarters, for instance cost at least Ksh30 million. In such a scenario, he says, having a bank that can promptly process cheques and overdrafts spells the diﬀerence between ability -and lack thereof- of implementing a project. “Ecobank has particularly assisted me through loans and overdrafts, especially those I need in emergency cases. For instance, when undertaking a project, I must pay my workers every Friday. It happens that some payment cheques have not been processed at certain times and the bank advances me money for such needs.” Mr Nyambune was among the ﬁrst customers of the Ecobank Kisii branch. “Actually, I was introduced to them by a client. He had seen the trouble I was going through in terms of day-to-day cash
Mr Mochama with a photo of Manga District headquarters constructed by his company. 26 TBJ May, 2011
ﬂow and suggested Ecobank. “I’ve never regretted,” says the 42-year-old father of four. It took the bank a very short time to process his application for a 10-tonne truck, an Isuzu tipper he uses to carry construction material. “This was from the time of valuation of collateral (a one storey building with six units of two-bedroom houses that earn him Ksh30,000 a month in rental income) to when the money actually reﬂected in his account. “The deal also gave me another perspective of the bank. Prior to purchasing the truck, I had travelled to Nairobi and identiﬁed a dealer who was selling it at Ksh7million. But the bank had contacts of another dealer who was selling the same at Ksh6million. This kind of value addition and holding-your-arm till you succeed separates Ecobank from the rest. Last December, after more and more contracts ﬂowed in, Mr Nyambune needed another truck. He had not yet repaid the whole amount for the previous loan and still had Ksh72,000 in monthly instalments pending. He was pleasantly surprised when Ecobank advanced him an addition Ksh3.5 million for a second truck, which he is repaying. That was in December last year. He has since purchased two brand new pick-ups at Ksh3.5 million each. Another of Ecobank’s appealling qualities is accessibility of staﬀ. “I can walk into the bank any time and see the manager, without the need for an appointment. This attention is very welcoming. Improvements? “Yes, I’d like the bank to start ﬁnancing bid bonds, especially for customers with a proven track record.”
Mr Nyambune’s keys to business success
Discipline: Construction involves handling a lot of money, in the millions. But you’ve to reconcile your accounts to identify how much really is your proﬁt. You also have to prioritise, that is know which expenses are important and urgent - such as staﬀ salaries - and which ones aren’t.
Honesty: Always keep your when dealing with the bank, clients and suppliers. A reputation for honesty is very important for success.
of business, no matter how tempting it is to follow the Joneses. I’ve seen people hastily register construction companies, win contracts but still make serious losses purely because they dont’ve a background in managing construction projects.
Quality: Never compromise on quality, even if it means your proﬁts will be marginal or none at all. This will ensure that you get repeat contracts.
Projection: Before you borrow money from a bank, have a written down projection on how you will repay the loan. Stick to your plan no matter what.
Focus: Often, people borrow money for a speciﬁc purpose but once the loan is processed, they ﬁnd some more seemingly enticing deals. But the time they realise their mistake, they’ve already burned their ﬁngers and can’t even repay the loans.
Records: Keep records of your everyday transactions to the last possible detail. This way, you can track your income against expenses and monitor your money.
Monitor: For the best results, don’t delegate your projects. Monitor them personally. What you know: Stick to your line
Mr Nyambune Mochama: Book keeping in business is very important
�e deal also gave me another perspective of the bank
TBJ May, 2011
At Samrat Supermarkets, a chain with branches in Nyeri, Meru and soon-to-be opened Ukunda, Mr Anil Jakhria, the chairman has one philosophy:
Count every coin; because every coin counts
eru, best known as a khat town, is a bristling commercial centre some 300 kilometres or so North Eastern of Nairobi. There is rampant enterprise everywhere you look – from the massive billboards that usher you in to the aggressive hawkers and commercial banks at every corner. It’s a town with a unique entrepreneurial drive. Last September, after successfully establishing his foothold in Nyeri and giving the more recognisable retail giant Uchumi Supermarkets a run for its money with his Samrat Supermarkets Ltd, Mr Anil Jakhria decided to branch into Meru. “The idea was to concentrate on the Mount Kenya region since we felt it had been underserved by the big boys,” he says. The big boys he is talking about are Tuskys, Uchumi, Nakumatt and Naivas, all who have stores in Meru. “With 28
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a good strategy of competitive pricing and quality customer service, we ﬁgured out that we could carve out a decent market share for ourselves.” He spotted space that was available for rent, at Muthui Building along the EmbuMeru Highway. Rent was Ksh376,000 per
A cashier at Samrat supermarkets, Meru, counts part of the day’s collection. The expansive store, the second one in Central Province by Mr Anil Jakhria, is giving established stores more competition.
month which he could easily raise from the returns of his Nyeri branch. But he needed money for shelving, purchase of furniture and initial stock. His new supermarket, 18,000 square footbig has three ﬂoors: consumables and
toiletry on the ground ﬂoor, electronics and household appliances on the ﬁrst ﬂoor and clothes on the second ﬂoor. “It would’ve been impossible for us to open without a bank loan.”
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stores, proﬁt is often measured in collective cents. For instance, a kilo of sugar returns only Ksh1 proﬁt, while a two kilogram packet of maize ﬂour returns Ksh2 only. It’s the volume of goods sold that spells the diﬀerence between success and failure. Repeat customers are therefore, equally as important as ﬁrst time customers. To run a retail store successfully, you’ve to count every coin because every coin counts, says Mr Anil. Currently, Samrat is making plans for a new Ksh8 million store in Ukunda, South Coast.
BUSY SERVING: Filling the till at the Samrat Supermarket store in Meru.
Samrat Supermarket’s TIPS for Business Success THE ONLY WAY IS UP: Ramesh Sumaria, Director (LEFT) and Anil Jakhria, the Chairman. Their newlyopened Meru store has a stock of about Ksh29 million. Daily sales gross over Ksh500,000.
The Meru branch was opened in July last year and in barely a year, it is grossing daily sales of over Ksh500,000. The current stock is valued at Ksh29 million, says Mr Alpesh Jakhria, one of the directors. So how did Samrat ﬁnance this stock? “We borrowed Ksh10 million from Fina Bank in September last year with an overdraft of Ksh15 million. We are repaying Ksh480,000 per month, for the next 24 months.” A good percentage of this loan went to shelving, which Mr Anil describes as a “long term investment.” Samrat employs 115 people at both its branches. These consist of cashiers, cleaners, shelf attendants and security oﬃcers. In total, his daily sales from both supermarkets amount to about Ksh1.8 million. “It hasn’t been easy, especially with the Meru branch. We are the newest entrants in a market dominated by the big boys,” says Mr Anil. 30 TBJ May, 2011
To beat the big boys, Samrat focused on three things: Stocking genuine products, unparalleled customer service and impeccable reputation driven by competitive pricing. “Reputation in business is everything. Since we opened our Meru branch, our competitors have been forced to reduce their prices.” In the absence of a Fina Bank branch in Nyeri, Samrat deposits the daily sales at an account held at a diﬀerent bank and then transfers to the Meru branch of Fina. He says his bank’s products are ﬂexible. “I particularly like the fact that you can negotiate with them, case-bycase basis. They don’t close doors on entrepreneurs. The loan approval process is also quick and hassle-free,” says Mr Anil. Though supermarkets business is always a multi-million undertaking, by virtue of stock-in-place and size of
Count every coin for every coin counts. If you take care of your coins, the pounds will take care of themselves, or so the maxim goes.
Reputation is everything. Always have a good reputation with your clients, banks and suppliers. You really cannot make it without a good reputation, regardless of how much ﬁnancial muscle you have.
Be ready for competition. Where there’s competition
means there is money. Be ready to ﬁght it out with the competition but through quality service/goods and competitive pricing.
Focus on proﬁts. In running a supermarket, the proﬁts are determined by daily sales and frequency of repeat customers. Your daily turnover should be high since the proﬁt margins per item are very slim.
Get a good bank. Running a capital intensive day-to-day business demands that you have a bank that can process overdrafts and other loan facilities promptly. Access to quick ﬁnancing will enable you stay ahead of the competition. You can’t achieve this without a bank that’s very supportive.
TBJ May, 2011
The colour of money When Pius Mwaniki quit his accounting job at PanPaper Ltd, he had only Ksh170,000. Today, his paints supply business in Eldoret town is worth Ksh6.7 million.
TBJ May, 2011
lion, employs three full time employees and boasts some notable clients such as the Moi Barracks and Eldoret Bullet Factory. He has also rented two stores within St Rehema Complex for his machines and stock. So how did Mwaniki do it? “One thing: a good relationship with my bank and suppliers. They have been at the cornerstone of our success.” Out of the Ksh170,000, Mwaniki paid rent and goodwill for the premises, amounting to Ksh68,000. The balance went into stocking the shop, albeit sparsely. In 2005, he took a Ksh420,000
Mr Mwaniki with the Ksh1.6 million paint-mixing machine and RIGHT, an image of the post-election violence that negatively affected businesses in Eldoret town
Words & Photos: MARTIN WANYOIKE
orking as an accountant at Panpaper Mills in the 1990s, Pius Mwaniki was not content with his Ksh2,300 monthly salary. He tried his hand in entrepreneurialship, a decision that would later see him quit employment for good. “My brother-in-law gave me a half an acre piece of land, which I tilled and harvested six bags of maize. I sold each at Ksh580, so I made Ksh3,480. This was more than my salary.” He reinvested this
I sold the truck for Ksh400,000, paid a Sacco loan of Ksh230,000 the balance was capital to start a business. Any business. I wasn’t certain what exactly I wanted to do but I had already made up my mind that whatever business I chose, it had to be in my heart. In addition, I chose to narrow down on a fast moving consumer commodity that didn’t have a sell-by date.” Out of curiosity, Mr Mwaniki visited several hardware stores in Eldoret town and established the cost of decorative and automotive paints. He then called up several suppliers and realized that
income in two acres (where he harvested 16 bags) and later, 30 acres. The year was 1998 and I was then earning a basic salary of Ksh 8,000. From his maize sales and borrowing from his employer’s Sacco, Mr Mwaniki had bought a small truck for trade in the agricultural-rich Eldoret area. One afternoon after an assignment, he tendered his resignation and ventured into the murky world of business full time. “But I wasn’t going into maize farming.”
there were decent margins to be made. “I resolved there and then that I wanted a piece of the pie,” recalls the jovial Mr Mwaniki at his well stocked Munjowa General Merchants in Eldoret town. “You know, the best thing about the paints business is that the product is not perishable and can stay in store for over a year without losing either its quality or value.” He opened the enterprise on March 6, 2004. From the Ksh170,000 capital, Munjowa now has stock worth over Ksh6 mil-
bank loan to boost his stock. Three years later, he transferred his business account to a diﬀerent bank, who assumed the responsibility for the loan and gave him an additional Ksh1 million. Using this money, Mr Mwaniki bought more stock. This boosted his market position and he is now among the top ﬁve wholesale and retail paint sellers in the town. “For you to supply to the barracks, for example, they’ve to visit your premises and gauge your ability,” he says. Recently, Munjowa received an additionTBJ May, 2011
al Ksh1.6 million from a bank to purchase a state-of-the-art paint-mixing machine. He is currently paying the loan in monthly installments of Ksh69,000. “I’ll clear by September.” His other monthly expenses include Ksh32,100 rent for the shop and two stores and Ksh 60,000 in salaries. “We don’t strain to repay the loan. We get the money from the sales at the shop,” says the 38 year old father of two. This unﬂagging faith in his business saw him return a proﬁt even in 2007/ 08, when majority of businesses in Eldoret town and the larger Rift Valley were reeling from the eﬀects of post-election violence. “I was paying Ksh 41,000 a month for an outstanding bank loan then. I didn’t skip even a month. As an entrepreneur, you must’ve a good track record with the bank, regardless of the business circumstances.” Mr Mwaniki says as an SME, one should choose a bank that oﬀers friendly loan packages. He says that his bank pays his due cheques to suppliers when the grace period for payment lapses.
Have a good relationship with your bank. Such a relationship will be crucial in accessing credit, overdrafts etc.
Keep a diary. This will help you set out what you must do at particular days/ times so as to meet your targets.
If you already have a business and are planning to expand, do it systemati-
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cally. Let the mother branch serve as the feeder to the branches.
Don’t discriminate on your clients: We sell paint worth as little as Ksh20.
Don’t borrow money if you don’t have a concrete investment and repayment plan.
If you are running your business day-to-day, be a team player, not a boss.
Self sacriﬁce and proper use of time are a must for success.
Cut your car expenses (He owns a Toyota Allion but spends only Ksh4,000 per month on it. To save on parking fees, for instance, he parks at the Eldoret Catholic church yard for Ksh50 a day, rather than pay Ksh100 for street parking).
Medical insurance for the family. Illness can drain your business. And it has no measurable budget. (He is a gold card member with AAR) the last minute rush in 10 Avoid paying for compulsories, such
as school fees as this will enable you to plan ﬁnancially well in advance. (He pays every November preceding a New Year)
TBJ May, 2011
business using Ksh150,000 borrowed from friends and relatives. “ It was a blessing,” she says. “Through meticulous budgeting and discipline I was able pay back the money.” Her company, Professional Marketing Services (PMS Group) provides a wide range of services to a myriad of clients. These services include advertising, public relations, event management, trade promotions, consumer promotions, trade merchandising and marketing strategy development. Her clients include Uchumi Supermarkets, Reckitt Benckiser, Safaricom and Bidco.
I started with only Ksh150,000!
Photos: David Gichuru & PMS
Words: Martin Wanyoike
Kenya’s number one entrepreneur Joanne Mwangi (pictured), the CEO and founder of Professional Marketing Services has never borrowed from a bank. But, she says, proper debt management is the back bone of business success. he is no longer a ‘new’ face in business and indeed news. Since she won the coveted top slot in the Top 100 SME survey by KPMG/ Nation Media Group last year, her status as an entrepreneur par excellence has skyrocketed. She is an ubiquitous inter-
TBJ May, 2011
viewee in various fora, except on one topic: Credit and money management, the cornerstone of any business success. Interestingly, in her 13-year spirited rise from virtually unknown to universally sought-after, Joanne Mwangi has never borrowed from a bank. She started her
aﬀordable credit to women entrepreneurs. In 2010 Professional Marketing Services Limited emerged number one in the recently announced Top 100 SME competition in Kenya. Mwangi also won the leading lady entrepreneur award at the competition. Professional Marketing Services beat 247 contestants to win the competition this honours Kenya’s fastest growing and well-managed small and medium sized companies. The PMS Group consists of three companies 3marketeers, Innovateus and Retail synergy. Mwangi decided to diversify following market demand for
Ms Mwangi started her career as a brand manager, but left I borrowed from friends and relatives, inher high paying salary to vested and through meticulous budgeting pursue her enand discipline, I was able to repay. trepreneurial dream. It was during her work as a professional that more services. She adds that by diversifyMwangi saw an opportunity for the fu- ing and having her ﬁrms compete for the ture in the market. “Every time I wanted same job tenders put her in a better poto organise an event or carry out a pro- sition to command the market and win motion I would have to handle all the job contracts. “We currently have oﬃces details since there were no companies to in Tanzania, Uganda and Rwanda and outsource from. This was time consum- hope to have each of the branches fully ing, tiring and doubled my duties, but ﬂedged to mitigate against risks where the experience created an opportunity one country aﬀected by political turmoil to start a ﬁrm that would outsource these ends up paralysing the entire business,” services to other ﬁrms,” Ms Mwangi, the says Mwangi. current chair of Kenya’s umbrella associ- In 2009, she beat women entrepreneurs ation for women in business; Federation from 75 countries across the globe to of Women Entrepreneur Associations emerge the winner of the Organization (FEWA) is quoted as saying. of Women in International Trade (OWIT) Woman of the Year award. Working as a Sacco, FEWA provides
TBJ May, 2011
‘Always get a loan that’s within your budget’ Joanne Mwangi says lack of adequate skills in debt and money management is a major problem facing small and medium-sized companies. In her spirited rise from virtually unknown 13 years ago to a much-sought-after marketer at the crest of the Nation Media Group/KPMG, Top 100 SMEs survey -, she has never taken out a loan. She spoke to JOHN KOIGI.
TBJ: In running Professional Market-
ing Services, have you at one time taken out a business loan from a bank or �nancial institution? If yes, please tell us how much it was, purpose and the sacri�ces/ disciplinar y measure you took to ensure
prompt repayment of the loan.
Joanne: I have been fortunate enough
not to take out a business loan from any ﬁnancial institution so far. However, when starting out my business, capital was very limited and I turned to my friends and relatives for ﬁnancial support. It was a blessing when they lent me the money (Ksh150,000), and through meticulous budgeting and discipline I was able pay back the money. I also invested Ksh800,000 of my savings. Since then I have ploughed back all proﬁts (and my savings) into the business.
TBJ: In your experience as a marketer,
would you say that lack of adequate skills in debt and money management is a problem that sti�es the growth/ success of many local enterprises?
Joanne: Yes, lack of adequate skills
in debt and money management is a major problem in small and medium sized companies. I know of several companies who have closed shop because they were unable to repay their loans.
TBJ May, 2011
The ﬁrst step is always to get a loan which is within your budget. It is very easy to get carried away and request for more money than you actually need, and end up splurging on items or services that you business does not require. Any individual whether employed or an entrepreneur needs proper ﬁnancial advice to ensure both personal and professional growth. It is also important to calculate carefully the real cost of money borrowed as ﬁnancial institutions are out to maximise proﬁts.
business. A business cannot grow without adequate capital and so loans will sometimes be the key to success. Financial institutions should go a step further to educate the public on how to manage their ﬁnances. This will ensure the longevity and success of businesses. Loans are vital to people who do not have adequate startup capital or if their business is undergoing ﬁnancial constraints, but once the company is up and running there should be a strategic ﬁnancial plan to ensure success.
TBJ: What has been your most extrav-
TBJ: What would you say is the number
Joanne: My most extravagant mon-
Joanne: Businesses may default on
agant monetary undertaking so far – for which you regret? etary undertaking is to ensure we have the highest technology and broadband internet access at PMS Group. I spent Ksh2.5 million. But I don’t regret it. The only regrets I have had in relation to money is that earlier in life, I lent hard earned money imprudently and did not get paid-, which I regret. I have since learnt the lesson and refer borrowers, unless tried and proven, to the ﬁnancial institutions who can best assess and deal with them.
TBJ: In your view, are loans necessary for the success of a business?
Joanne: I believe the need for ﬁnancial
education is stronger now more than ever. More and more people are turning to entrepreneurship without adequate ﬁnancial literacy. Receiving a loan is not an automatic pass to the success of the
one reason as to why businesses default on loans? loans for a variety of reasons, but lack of proper structuring of the loan repayment and misuse of the money is a major reason for nonpayment. Companies may regard their ﬁnancial situation as unmanageable or out of control, and view loan defaulting as their only way out.
TBJ: Do you believe in loans? Joanne: I believe loans have several
advantages and have assisted numerous businesses to succeed. If the speciﬁc need for the money is applicable and the loan is suitably structured, loans are a good way of building ones business. I would advise any individual or business looking to get a loan, to weigh the pros and cons heavily, seek ﬁnancial advice and if the beneﬁts prevail over the disadvantages, go for it!
TBJ May, 2011
Financial manageme �e single most challenge small and medium enterprises face is �nancial management in a way that’ll generate cash, create wealth and provide an adequate return on investment, writes �nancial consultant WAWERU NGUNJIRI (pictured). But, this is a skill that can be acquired.
he process of managing the ﬁnancial resources, including accounting and ﬁnancial reporting, budgeting, collecting accounts receivable, risk management, and insurance remains a challenge for many SMEs. In setting up a ﬁnancial management system, ﬁrst decide whether you will personally manage your ﬁnancial records or you will outsource. Either way, what is absolutely crucial is book keeping - recording of routine transactions within the appropriate accounts. There are three key elements in the process of ﬁnancial management: Financial Planning You need to ensure that there is enough funding at the right time to meet the needs of your business. In short term, funding could be for equipment and stock, salaries and for funding sales made on credit. In the medium and long-term, funding could be for signiﬁcant additions to the produc40 TBJ May, 2011
tive capacity of the business or to make acquisitions. Financial Control This helps your business ensure that it meets its objectives. Financial control addresses questions such as; » Are the assets being used eﬃciently? » Are the business’ assets secure? » Does management act in the best interest of shareholders and in accordance with the business rules? Financial Decision Making This relates to investment, ﬁnancing and dividends. Since investments must be ﬁnanced in some way, the alternatives include borrowing from banks and taking credit from suppliers. A key ﬁnancing decision is whether proﬁts earned by the business should be retained or distributed to shareholders via dividends. If dividends are too high,
nt tips for local SMEs Must-knows for business success Patience
•Give your business time to mature •Remember, everything comes to a man who waits
Bookkeeping and planning
•Records will guide you on formulating vision and mission, and will be required by banks for appraisals •A goal without a plan is just a wish
wage bill •Reward and motivate your staﬀ •Show concern by asking how they are doing and their families
Your a�itude as the employer
•Perfect business performance should always be on your mind •Remember your a�itude is everything
•You never know what you can get away with until you try it (“Every business is risk taking and life is an experiment” - Ralph Emerson) •Ask yourself if your business is at high risk of debt •Take calculated risks and insure your business
•Concentrate on one speci�c �eld;don’t be a jack of all trades and a master of none •Don’t just listen to people’s ideas, stick to your goal
•Stop stealing/vandalising your own business through unplanned expenses •Avoid over borrowing and practice monetary eﬃciency
•Be physically �t and allocate time for exercise •Don’t just concentrate on making money; good health is the best wealth
•Always go an extra mile to ensure your customers come back •Remember the customer is always your boss; he may be wrong sometimes but must always win the ar gument
•Employ quali�ed workers; remember cheap is expensive. Don’t hire untrained staﬀ just to save on the
•Be humble even at boom time •Treat customers/employees with respect •Emulate other prominent people in their humility
To reach Mr Ngunjiri, write to email@example.com
TBJ May, 2011
CBK: It’s your right to know your credit rating
to request for their entitled credit reports from the CRBs in writing. › Customers have a right to dispute information contained in their credit reports if they believe it to be inaccurate, erroneous or outdated. The CRBs are expected to investigate disputed information, which in the meantime bears a note attached to it that it is disputed and is under investigation. Investigations on disputed information must be completed within 30 days from the date the dispute is raised.
Words: CENTRAL BANK OF KENYA Photos: LIBRARY
s a banking customer, you have the right to access information on your credit rating from both the banks and Credit Reference Bureaus (CRBs). This credit rating forms the basis of how a bank will lend you money as a customer. It’s governed by the Banking Regulations 2008 and came into effect on July 31, 2010. In summary, the information to be shared among banks includes that on:
» Non-performing loans » Dishonour of cheques other than for
is taken into account by banks while assessing your applications for loans and other bank facilities. Further, licensed CRBs are required under the CRB Regulations to hold information on non-performing loans submitted to them by banks for at least seven years after the date of ﬁnal settlement of the amount in default. Customers may also consent to their banks sharing positive information on their performing loans. Positive information sharing contributes to the building of information capital that may be used in negotiating for competitive interest rates for credit facilities.
It’s notable that sharing of negative credit information doesn’t amount to blacklisting. However, such information
Customer Rights › Banks are required under the CRB Regulations to notify each customer of the name and address of the CRBs to which they have submitted the customer’s information. This notice is to be issued within 30 days of the ﬁrst listing of the customer’s information with the CRBs. › Banks are required to issue a notice to a customer when a decision has been taken not to grant a loan or other facilities based on a credit report(s) obtained from CRBs. This is known as adverse action notice which will detail that:-
technical reasons »Accounts compulsorily closed other than for administrative reasons »Proven cases of frauds and forgeries »Proven cases of cheque kitting »False declarations and statements »Receiverships, bankruptcies and liquidations »Credit defaults or late payments on all types of facilities »Tendering of false securities »Misapplication of borrowed funds
42 TBJ May, 2011
The customer’s credit report played a role in the decision. The name, address and telephone number of the CRBs that provided the credit reports. The customer’s right to obtain a free copy of the credit report from the CRB(s). The customer’s right to dispute information in the credit report(s), and if erroneous or outdated, have it corrected. Right to dispute info Banks are deemed to have notiﬁed their customers when they send the notiﬁcations to the customer’s last known address by registered mail or by certiﬁcate of posting. › A customer is entitled to a free copy of the customer’s credit report at least once a year and within 30 days of receiving an adverse notice. Customers are expected
› A bureau protects the conﬁdentiality of the customers information by only releasing it to the customer concerned, the Central Bank of Kenya, those authorised in writing by the customer concerned and as required by law. › CRBs will only release customers’ credit reports to banks that require it to evaluate the customers’ application for credit or other customer initiated business transaction. › Banks can share their customers’ positive information subject to receipt of the concerned customers’ consent. Sharing of positive information will enhance the credit worthiness of the customers who can use their positive credit proﬁle to negotiate for better terms and conditions when sourcing for facilities from their banks. For more info, refer to the Central Bank of Kenya website www.centralbank.go.ke
TBJ May, 2011
KNOW YOUR CEO
KNOW YOUR CEO
Hands-oﬀ manager Words: JOHN KOIGI Photo: COURTESY
My door is always open to staﬀ and customers, says youthful FINA Bank team leader
r Hanish Chandaria does not seat on the back left of his oﬃcial company car. He ﬁnds that position exclusive and far removed from the regular Kenyan SME account holder who his bank targets. He prefers the front seat, where he can chat with his driver and notice trends along the way
44 TBJ May, 2011
to work, in true symbolism of ‘leading from the front.” At only 38, he is at the helm of Fina Bank, a 25-year old institution with branches in Kenya, Uganda and Rwanda. “My title is actually executive director,” says Mr Chandaria, whose simple and humorous demeanor belies his true self: a well-
educated brilliant businessman with an appetite for calculated risk. Inside his executively designed, quiet oﬃce at the second ﬂoor of Fina Bank House, Kimathi Street, Mr Chandaria (no relationship with the famous industrialists) prefers we sit round a modest meeting table rather than his large mahogany desk. He wants me to be closer to him, I gather. Closeness and togetherness are principles widely applied by Fina while servicing its customers. “My door is always open, to both employees and customers,” says Mr Chandaria, who joined the bank in 2007 in a non-executive role. Fina Bank has over the last few years increased its footprint in the market. It has 13 branches in Kenya, three in Uganda and six in Rwanda. “My goal is to engage customers the same way Steve Jobs (Founder of the Apple brand) does it. People queue for any of his new products he is launching. It’s simply amazing, isn’t it?” Born and bred in Parklands, Nairobi, Mr Chandaria attended Nairobi Academy till age 16, when he went to boarding school in the UK. He started his career in the world of ﬁnance soon after graduating with an Economics and Mathematics degree from Bristol University, 13 years ago. “I started in investment banking and fund management,” he says. He is a founding partner of a UK-based investment ﬁrm and has previously worked for Societe Generale in London. Mr Chandaria has a Masters degree in International Business from Ecole Supérieure de Commerce, Grenoble, France. As the executive director, Mr Chandaria overseas both the Kenyan and overall operations of the bank. But each of the subsidiaries in Rwanda and
Uganda have a managing director. Fina’s key values are captured in the acronym AFRICA. That is, Acting together, Fostering trust, Responsibility, Integrity, Customer oriented and to serve as Agents for change and innovation.
» » » » »
Facts about Fina Incorporated as a non-banking ﬁnancial institution on 15th January 1986. It was then known as “Finance International Limited” and later “The Finance Institution of Africa.” The original owners were the Francis Da Gama Rose family. It became a full ﬂedged bank on 14th February 1996, operating as “Fina Bank Limited”. In 2005, it changed its strategy to focus on Small and Medium Enterprises. In 2007, the bank won the Best SME Bank and Best Bank in Customer Satisfaction awards in Kenya. It has also won three Financial Reporting awards in the past. TBJ May, 2011
KNOW YOUR CEO
Describe yourself in one word
Describe your bank in one word
one of the largest data ﬁrms around and I earned ﬁve times my initial investment.
Beach or game park? Beach
If you weren’t a banker, what would you be doing now? Probably
Best book or movie?
Cash or credit?
Historical ﬁgure most admire?
Historical ﬁgure most detest?
running another business. I’m very entrepreneurial. I’d be in the IT-service industry.
Varies, case by case. Credit to buy large assets since cost is spread over a longer period. Cash for short term purchases.
Worst investment decision?
While in the UK in 1999, I invested in a start-up that developed electronic trading platforms. It was known as EGS (and later changed to Advanced Financial Applications), with oﬃces in the US and UK. The people running it weren’t focused enough. I lost about $50,000 (Ksh4 million)
Best investment decision?
It was soon after 9-11 and the Enron collapse in the US. Companies wanted their ﬁles archived electronically and I invested about $50,000 in another start-up called K-Volt that provided these services. The company was later bought by
46 TBJ May, 2011
Shawshank Redemption (A
prison tale on victory against all odds, starring Morgan Freeman and Tim Robbins-See Review Page 55)
Mahatma Gandhi (1869 -1948, leader of the Indian Indepence Movement and peace symbol)
PolPot (1925 -1998, leader of the
Khmer Rouge in Cambodia, killed up to 2 million people)
����������������� ���������������������������������������������� ���������������������������������������������� ��������������������������������� ����������������������������������������� ���������������������������������������������� ����������
TBJ May, 2011
Let’s Go Travel �e LandRover Discovery 4 rewrote the 4x4 pantheon by perfectly combining luxury and oﬀroad performance.
�is SUV is a byword for versatility. It will conquer terrain that would make tank commanders think twice. And with the same tempo as it will carry seven Savile-Row suited executives in ultimate comfort. It’s the 2011 Land Rover Discovery 4. 48 TBJ May, 2011
TBJ May, 2011
ou can count the number of local magazines that have test driven the new LandRover Discovery 4 V8 by one ﬁnger. We are that ﬁnger. And after more than 500 kilometres of challenging the “Disco” in tarmac, dirt, bush and wet skid pans, we’ve drawn one conclusion: This is one of the most versatile cars in production today. The Disco 4 has sublimely managed to blend a three-cars-in-one philosophy: It’s an executive saloon, a family Multi-Purpose Vehicle and a very serious oﬀ-roader. Simply put, on a typical Rhino Charge weekend, you can drive it to the oﬃce on a Friday morning, haul your camping kit in the afternoon for Mogoswok (or any other remotely-named venue), maul the competition on Saturday morning and be back in town for the Sunday afternoon ice-cream run with your family. ...without breaking a sweat or suspension!
Buying and owning
The new engines available for 2011 models are the SDV6 3.0 (diesel) and the LR-V8 (petrol). They both drive through 6-speed automatic transmission. While the SDV6 (SD, by the way, stands for ‘Sequential Turbo Diesel’) is a torque king – 600Nm at only 2,000 rpm - , the V8 is a veritable tar muncher with the pace of a pocket rocket; rest to 100Kph in only 7.9 seconds!
Prices at CMC, the local dealer, start at Ksh9.9 million for the basic SE to 11.7 million for the High Spec Edition 3.0L SDV6. The 5.0L V8 is not yet around. You get three years warranty and full service back-up from CMC. It’s not cheap, but for the kit you are getting, its a deal.
When it comes to safety, Land Rover goes beyond airbags and ABS. Of course, you have eight airbags and an ABS system that allows you to stop the car in a straight line on wet surfaces (you can even swivel and change direction without ﬂipping over) but it’s the two new features- Hill Start Assist and Gradient Acceleration Control - that separate the Disco from the rest of the pack. Hill Start Assist ensures the car doesn’t roll back in case you’ve to start oﬀ a hill, while Gradient Acceleration Control limits your speed (to 5Kph) when navigating very steep slopes. Practicality and the Disco 4 are synonymous. The car has three rows of seats, arranged in theatre-like fashion. They can comfortably seat seven adults and can be arranged in …listen to this….. 100 diﬀerent conﬁgurations. Engaging all occupants with movie-theatre-like seats and independent air conditioning.
Disco 4 ventures in terrain that tanks would fear to tread...............
It has more equipment than a jet ﬁghter. Trying to dissect the workings of each is like attending a NASA class, so we’ll leave that out for now. For instance, its the only car I know of that you can engage reverse gear while in forward ﬂight without spoiling the gear box. Incase you engage the parking brake while in motion, it stops in a straight line. And did you know you can adjust its height via remote?
In the words of Phil Popham, Jaguar Land Rover Managing Director, “The Discovery 4 remains one of the most capable and versatile vehicles on and oﬀ the road. It’s the ideal tow vehicle, can tackle the most challenging oﬀ-road conditions and delivers superb on-road reﬁnement to rival the best executive saloons. As the ultimate all purpose vehicle, the Discovery 4 is in a class of its own.” We concur.
Torque is not cheap; take your pick 5.0L V8
ZF 6HP28 6-speed auto
ZF 6HP28 ZF 6HP28 6-speed auto 6-speed auto
Std locking centre differential. Optional locking rear axle diﬀerential with Air Suspension + Terrain ResponseTM
Std locking centre differential. Optional locking rear axle diﬀerential with Air Suspension + Terrain ResponseTM
Four wheel-drive system
Std locking centre differential. Optional locking rear axle diﬀerential with Air Suspension + Terrain ResponseTM 600 @ 2000rpm
Max torque (Nm)
510 @ 3500rpm
520 @ 2000rpm
Max power (kW)
375 @ 6500rpm
Top Speed (Kph)
Consumption (Km/L) Price (Ksh)
50 TBJ May, 2011
TBJ May, 2011
Can they beat the Disco in a mud dance? Mercedes Benz ML
Its 4MATIC permanent allwheel drive system is tasked with performance both on and oﬀ-road.
Merc’s reputation as a luxury car maker is evident in the opulent everywhere. A COMAND system brings major controls closer to the driver.
Engines include the V6 and V8 petrol or diesel in the ML350, the ML350 CDI and the ML500, mated to a sevenspeed 7G-TRONIC automatic transmission gearbox.
Premium cabin is complemented by several driver-assist systems, notably the iDrive that literally puts all your essential controls at your ﬁngertips.
You get a V8 and straight sixcylinder petrols and two versions of six-cylinder diesels. Power output ranges from 180 kW to 300 kW. They are mated to an eight-speed automatic transmission.
Its the most ‘driveable’ of the SUVs. An xDrive technology incorporates a four-wheel drive system for oﬀ-road traction and on-road stability.
Toyota Prado VX
Some call it the ‘master of Africa’ and its VX model is the most serious oﬀ-road challenger to the LR4. It has a terrain select function, crawl assist, all round cameras and others you’ll ﬁnd in the Disco. 52 TBJ May, 2011
Premium cabin is complemented by several driver-assist systems. These include Active Cruise Control, Lane Departure Warning, Adaptive Cornering Head-
Both in comfort and functionality, the new Prado is a clean sheet design from the truck-ey design of the run-out model, very popular in the local used car market.
Two variations: 3.0 diesel and 4.0 petrol. The diesel has a maximum torque of 400Nm and a power of 140kW while the petrol churns out 202kW and 381Nm of torque. TBJ May, 2011
Title: The Shawshank Duration: Available: Movie shops Rating: * * * * *
Title: 7 Keys For Success Beyond Chance Author: James N Karundu Price: Ksh500 Available: Wells Bookshop, Nakumatt Lifestyle building or call 43 43 158 or 0722 625 329
Want to succeed? This should be your ﬁrst port of call
his book goes beyond giving you tips of success to give you ideas on wholesome living. Though the author does not say it overtly, the seven keys for success also contain lessons on how to get along with people, an essential element of . And as they say, good relations and networking will win you wealth. The First Key to success, according to the author is “mastering your thoughts”. What you think about in your life will most likely happen. Think debt? You will be in debt. 54
TBJ May, 2011
Think riches? You will be rich. The Second Key is realisation that you are here for a purpose, which leads to pursuit of what you want. “I believe your purpose is to discover what you love doing and are passionate about. You will be rewarded to the degree you go about harnessing your passion, and ﬁning ways to serve and be of value to others.” Key number Three is aiming for a specific target through attainable goals, while Key number Four is having an attitude of gratitude. “The message that thankfulness and gratitude sends out to the universe is: Thank you for this, send me more,” he writes. Managing disappointments, which are expected in daily life, is the next Key while calming the mind through meditation is Key number Six. Finally, always stay on course in your area of work and you will succeed. This short and easy-to-read book (only 60 pages) is life changing. Favourite quote: “Life is not unfair. There is no one out there playing chess with your life and apparently making you lose. No on is kept in poverty by the limitation in the supply of riches; there is more than enough for all”.
Movie with several vital lessons for entrepreneurs
his is an old movie. It was ﬁrst released in theatres in 1994. Though the reception was lukewarm, it slowly gained acceptance to become one of the greatest movies of all time. Successful people often cite it as their best movie (See CEO pro�le, Page 44). The movie tells the story of Andy Dufresne, a successful banker who is wrongly imprisoned in the maximum security … prison for murdering his wife. He has a passion for geology and loves books. Using a small rock hammer, Andy tunnels through the prison wall to freedom. This is a must see movie for entrepreneurs. Lesson One – There’s nothing like overnight success Andy tunneled through the concrete prison wall chip by chip every night for 19 years. Finally he was free. Entrepreneurs go for years trying each day without reaching the levels of success they aim for. Then one day, there’s a payoﬀ. So, keep trying. Lesson Two – Get Busy Living, or Get Busy Dying To announce his intention to escape to his best friend Red, Andy uses the cryptic phrase, ‘Get busy dying or get busy dying.’ Entrepreneurship is not for every-
one. And certainly not for people who are comfortable in employment. Spend too much time in employment and you’ll be working for a pension, not wealth. An entrepreneur matches to the beat of his own drum. Lesson Three -Proﬁt is larger than risk The warden, knowing the risks of getting caught for his ‘dirty scams’ evaluates the risk and controls it by spreading fear. From his perspective, he decides that the proﬁt is larger than the risk. Lesson Four - Success, no matter what Andy uses his knowledge and implements it in new situations. He succeeds within an environment of bureaucracy and red tape. He is a real survivor, a real entrepreneur, who would succeed regardless of the situation. TBJ May, 2011
CROSSWORD ACROSS 1. Kenya’s largest bank in terms of number of account holders 3. Slip you sign/deposit authorising payment 4. First name of ﬁrst African CBK Governor 5. Fewer
1. Electronic Funds Transfer 2. Local bank whose logo is a crown 3. Interest Rates 4. Deprived, without ﬁnancial means 5. One who lenders 6. Swahili for money
ACROSS: 1. Equity 3. Cheque 4. Philip 5. Lesser DOWN: 1. LEFT 2. Imperial 4. Poor 6. Pesa
SUDOKU Enter a digit from 1 through 9 in each cell, star�ng from the digits given in some cells. Each row, column, and region must contain only one instance of each numeral. Solu�ons will be published in next month’s edi�on.
TBJ May, 2011
TBJ May, 2011
KENYA SCHOOL OF MONETARY STUDIES
GRADUATE, DIPLOMA, CERTIFICATE AND PROFESSIONAL PROGRAMS FOR THE FINANCIAL SECTOR - 2011/2012 INTAKE KSMS/JKUAT COLLABORATIVE PROGRAMS ��� ������������������������������������������ ��� ������������������������������������ ��� ������������������������������������������������� ���� ��������������������������������������������������������������������������������� ��� ���������������������������������������������������������������������� ���� �������������������������������������������������������� ��� �������������������������������������������������������������������������������� ���� ���������������������� ���� ��������������������� ���� ������������������ ���� ������������������������ ���� ����������������������
KSMS/MOI UNIVERSITY COLLABORATIVE PROGRAMS ��� �������������������������������������������������������������� ���� ������������� ���� ���������������� ���� ������������������� ���� ����������������������� ��� ����������������������������������������������������
REGIONAL CERTIFICATE IN AGRICULTURAL FINANCE (CAF)
�������� The programme targets the following institutions in Kenya and the wider Eastern African Region: �� ����������������� �� ������������������������������� �� �������������������� �� ������������������������������������������ �� �������������������������������������������������������
Classes start date:
�������������������������������������������� ��������������������������������������������� ����������������������������������
KSMS DIPLOMA IN BUSINESS SCIENCES PROGRAMS ��� ���������������������������������������� ������������������ ��� �������������������������������������������� ������������������ ��� ������������������������������������������� ��� ����������������������������������������� Information Technology ��� �������������������������������� �������������������������� ��� ���������������������������������������
PROFESSIONAL BANKING PROGRAMS ��� ��������������������������������������������������� ��� ���������������������������������������������� Who should apply? �� ������������������������������������������������ ��������������������������� �� ������������������������������������������� requirements and application forms. Program Special Features: �� ��������������������������������������������� ����������������������������������������� ��������������������������������������� �� ���������������������������������������������� ������� How long is each program? CAF:����������������������������������������������� and 9 months for normal mode. Other Courses: ��������������������������� depending on the program chosen and the mode of ���������������������������������������������
FOR FURTHER APPLICATION DETAILS, CONTACT REGISTRAR ON: Telephone: +254 02 8646000 / 108 / 131 EMAIL: Registrar@ksms.or.ke. TBJ May, 2011Address applications to Executive Director, KSMS: P.O. Box 65041-00618 NAIROBI KENYA.
The banking Journal is a quartely magazine on the Banking Industry in Kenya.