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K-Rep Bank Finds Gold among Kenya's Slum Dwellers
K-Rep Bank Finds Gold among Kenya's Slum Dwellers
Started as a micro-finance targeting mainly the poor in the slums, K-Rep has been oscillating between maintaining its image as micro-enterprises bank and a fully operational commercial bank targeting the heavy weights in the money market. Now, it seems, the bank has found a profitable middle ground.
K-Rep Bank Managing Director, Dr. Mutua Kimanthi.
Not many banks would have felt comfortable establishing their main office in the home of "Jua Kali", the crime ridden Kawangware slums of Nairobi. But that is exactly where K-Rep chose to set up its main office when it opened fully as a bank, much to the surprise of everyone.
But then, no banks in Kenya have started as micro-finance NGOs. And that is exactly where K-Rep started in 1984. It was then an umbrella organization to channel money from donors to non-governmental organizations (NGOs) in micro-finance and to supervise the sector. But within a short time, it had become the most important source of funds for small and micro-enterprises.
As a micro-finance institution, K-Rep spearheaded a variety of reforms in the sector and benefitted by crossing over to become what it calls, "a commercial bank that targets the micro-finance sector but also provides a wide range of banking services."
K-Rep Bank's mission is "to provide exceptional financial services that create value and enrich the lives of our customers, shareholders, employees and the community." Few commercial enterprises carry such heavy social responsibility. But Marketing Manager, Paula Lanco is confident that the bank has succeeded in its mission. "We have been able to demonstrate that the poor are bankable. Judging from the myriad of players from the conventional banking sectors and the growth of micro-financial institutions, our goal has been more than accomplished.
Legislation for Deposit-taking
"As a bank, the mission is successful too considering that since 1984 we have provided financial services to previously ignored customers from the lower end of the market and we are still going strong as a business. Our outreach continues to expand to reach the majority of Kenyan populace and the product range continues to evolve to meet emerging demands."
In concrete terms, K-Rep has expanded its loan portfolio from Shs 350 million per year in 2000 to over Shs 5 billion to date. Deposits have increased too, from Shs 267 in 2000 to over Shs 4.8 billion.
Focus Remains on the Poor
As a bank, K-Rep's focus remains the same as it was as a financial NGO. Paula told Investment News, "Our focus has not changed. If anything we have refined it.
"Granted the customer base is now diverse, but this is inevitable given the space we are playing in. We should remember though, that micro-finance is about focusing on providing financial services to customers on the lower end of the market, which does not necessarily mean the exclusion of those who don't fall within this category. Today, micro finance is about financial inclusion.
Explaining why K-Rep transformed itself into a bank, Paula says, "The reason we transformed into a commercial bank was first to demonstrate the viability of microfinance as a way of lobbying for special legislation for the sector and to attract other players.
"Secondly, we wanted to broaden and deepen the range of products so as to serve micro entrepreneurs better. Thirdly, we wanted to attract funding by way of equity and debt capital so as to minimize dependency on donors and create a sustainable funding structure."Lastly, we wanted to introduce new products - especially savings - which as an NGO we could not take. Savings is a very crucial microfinance service."
Asset Base
She explained why savings is a crucial service for the small entrepreneurs. "Poor individuals save to primarily build their asset base and to create safety net against emergencies or unforeseen expenses.
"K-Rep has indentified and is aware of the micro-entrepreneur's needs over time and that is why we have continued to develop products that respond to the needs." In relation to this Paula says that K-Rep has continued to revise its savings interest rates upwards so as to attract more and larger deposits to the benefit of the group. "By the year 2000, our interest rates on savings were 2.7 per cent. Now they have increased to 4 per cent on normal accounts," she said.
"Due to the growth, we have maintained our loan interest rates. And we have even ventured to give loans to the SMMEs-the very small enterprises. Our micro-finance interest on loans is 16.5 per cent on reducing balance. It is the lowest in the market.
"Our interest on personal and individual-based loans range from 17-19 per cent."
And finally, why did K-Rep locate in the slums? "One, we wanted to be near our customers and second, we wanted to demonstrate that you don't have to be in the high streets to succeed as a bank. Our roots go deep and wide. We have a network throughout the country, strategically located where we can offer services to most Kenyans."
The next focus for K-Rep is community associations where its initial target is groups that need financial assistance to start water projects. Already the bank has allocated Shs.108 million for the initial part of the project. In the initial part, groups in Kiambu, Thika, Kajiado, Makueni and Machakos districts will benefit.
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