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Digital mobile banking emerges as new opportunities for banks to reach SME’s and Chamas

The banking sector is leveraging digital and mobile banking to expand financing to Small and Medium Enterprises (SMEs) to boost economic growth.

With SME’s contribution to the country’s Gross Domestic Product (GDP) estimated to be around 40 to 50%, banks are seeking to reach these crucial sectors by availing more funds to chamas and other groups.

Kenya Bankers Association (KBA) Chief Executive Officer Halib Olaka acknowledged the big steps the KBS had taken towards digitization of banking services from the use of pass books in the mid and late 90s to fully digitized systems which include the ATM (1989) cards and even mobile banking applications (Apps).

Speaking on Wednesday at a Nairobi hotel during the I&M media engagement themed “Venturing into new frontiers into the creation of shared values”, Olaka however noted that the transformation was not a walk in the park, as between 1980s and 1990s the systems had faced several challenges including the collapsing of some banks the last of these were Chase bank, Imperial bank, and Dubai bank.

He said that out of all these drawbacks the KBA emerged with better legal regulations to ensure no redundancy.

At the end of 2022, Over 44,000 banking sector staff have completed sustainability training through E-Learning platform, and by 2023, they are among Africa’s readiest sectors to make climate-related disclosures.

Financial Sector Deepening (FSD) Kenya Chief Executive Officer Tamara Cook, spoke on the role of Financial Service Industry in value creation in communities. Despite the advent of digital technology, the banking industry has only managed to reach 25% of the national population with accounts 115 years into its existence.

Cook highlighted that many Kenyans were still incapable or skeptical of joining the banks or opening an account, this did not mean that the general public didn’t get financial funding, they did but from other financial institutions.

She insisted that this was as a result of a gap in the banking system. She suggested that banks should fund microfinance groups to achieve financial liberation and involve common mwananchi in the growing banking system.

However, she spoke of the future of finance, a type of finance that allowed you to work freely as it supported you in the background. Cook highlighted that this could only be attained if the Kenya Bureau Standard changed some regulations including the interest rates and transaction costs.

Gul Khan said that the bank’s 2024-2026 strategy has a long term ambition to be the leading financial partner for growth in the country. It intends to do so through brand relevance, group synergies, resilience, digitization, and cultural transformation.

Khan said that I&M bank has undergone several changes to accommodate and include all parts of the society. From formerly a Tier one corporate and business bank to now opening its doors to all SMEs and Microfinance, with a target of increasing its members from 560,000 to 1000,000 by 2026.

“There’s a massive last mile economy in Kenya and sub-Saharan Africa, and banks due to whatever reasons have just not done a good job in servicing that last mile economy and we believe at I&M bank the way we can do that really well is through partnerships,” said Khan.

He explained that I&M bank has launched a mobile banking application, simplifying transactions, money transfers, savings, and credit eligibility. I&M Group PLC Regional CEO Kiara Maina highlighted the company’s strong focus on innovation and seamless finance in the manufacturing sector.

“We have created products such as the International Finance Corporation (IFC) Trade Lines which became really popular with our clients as it enabled them to grow their business without having to pay upfront all the cash that was required to invest in the business,” said Kihara.

Kihara also pioneered partnering with insurance companies to form I&M Assurance Intermediary Limited in 2014 that helped with medical bills of the bank’s members, this was made possible through Digital Transformation and Partnerships.

By Billy Sabari and Abundance Mutave

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