Business Daily (Nairobi)
Steve Mbogo
21 April 2008
K-Rep Bank has announced a change of business model to include institutional and commercial banking, in addition to its core microfinance banking business.
The additional business lines are part of its growth strategy aimed at increasing its customer base. The bank is also eyeing additional income from these two segments. The change includes plans to double its branches across the country by 2010. Currently, the bank has 25.
The bank is increasing products targeting the un-banked and small and medium scale businesses. "Staying in the SME and micro-banking course is crucial to us," said managing director Kimanthi Mutua.
"More importantly, we will also focus on social banking which plays an important role in the country's development where money is serving the people instead of ruling them." The move to institutional banking is because the segment is seen as important in helping grow the income statement.
Banks like K-Rep, which traditionally offer microfinance products, have been forced back to the drawing board after the big banks started massive expansion targeting a similar clientele.
The bank plans to open 10 branches this year, with an additional 15 to be opened next year. The plan is to grow the customer base, from micro bankers and small and medium enterprises, the bank said.
The bank's institutional banking strategy will include aggressive marketing among co-operatives and community organisations. The bank says such institutions have been ring-fenced beyond the purview of commercial banks yet they are important to the low-income earners.
"(The strategy is to) adopt a banking convergence, cutting across socio-economic levels with a seamless inclusion of low, middle and high income earners," said Mr Mutua. He said keeping focus on the two segments and introducing innovative products and services remains some of the key targets for the fast-expanding bank.
The expansion plan will include continuous innovation of new products. In the recent past, the bank has come up with specific products targeted low income, un-banked Kenyans with the latest being Ungana, a group account targeting self help and investment co-operatives.
Last year, the bank partnered with the Kenya Livestock Marketing Council to start an initiative that enables pastoralists to access loans to finance meat market orders and restock herds. Under the K-Rep arrangement, the council guarantees the borrowers and recovers money from them in case of default.
K-REP is financing farmers to service contracts from the Kenya Meat Commission for up to 80 per cent of the stock required. The initiative started last year targeting many of the council's 3,500 members, who can access up to Sh1 million financing.
Earlier, the bank announced that it will supply the branches with an IT system, which will enable it to offer wireless banking. The expansion comes at the backdrop of improved financial performance, with after-tax profits rising to Sh130 million last year, a 30 per cent rise compared to the previous year.
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