It is evident, that there is a wide range of beneficiaries of the new age of Kenyan finance.

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  • Since its inception as a commercial bank in 1987, VCB has pursued a vision of client orientation, integrity and professionalism. How has this vision translated into the bank modus operations?

    Our vision has always been to be the leading private bank. What I mean by that is, that we wanted to establish a bank which would be a highly service-oriented one, a bank which would understand the clients’ needs and provide tailor-made solutions. We firmly believe that a one glove fits all cannot work in a highly competitive era. We were not geared at being a retail bank but to be a player in a very niche market and what we were looking at were the corporate entities and high network clients. Thereafter, we defined our segment even further, whereby we focused on corporate entities which were in the SMEs segment but the higher end of the SMEs segment. So, initially when we started it was extremely difficult as you know there were, I think, close to 45 or 47 banks in 1987, so people simply viewed us as just another entrant into the market and wondered why, what you are coming up with that was any different from any of the other banks.
    
    Over time what we did was that we focused on family run enterprises and those who had a certain defined model and certain defined turnovers and we started concentrating on those family businesses to target them as our clients.
    A key aspect to onboarding our clients was that it's all by invitation. So, it's more or less a kind of “club” concept. We don't have any walk-in clients, unlike other institutions where people may walk in and say that they wish to open an account. We usually work the other way around, whereby we would target clients, do their background checks, do our own due diligence and then approach the potential client and invite them to join in. However, as you know, this requires our staff to be 100% client orientated and must always provide the best experience and value add to retain the client.

  • To what do you attribute your strong NPL ratios and consistent growth for more than fifteen years?

    The growth has really come largely through very satisfied clients who then refer further clients and its kind of a chain reaction.
    From our client base we've managed to have a retention rate of about 95-97%. Further to that our staff retention is fairly good. On average staff retention is for 20 years at the middle management level. At the senior management level, most of my colleagues have been with me for close to 28 years. It’s been 34 years since the bank’s inception and this says much about staff retention in an industry where the turnover of staff is fairly high.
    
    Therefore, a combination of a highly satisfied client base and availability of staff who are constant and therefore well aware of the functions, the workings and the distinct characteristics of each client entity is well known to each manager which poses a great advantage to the client and to us. This is a reason why we have good growth; due to word of mouth. This level of satisfaction brings in more business from existing clients and also more referrals.
    
    Changes in staff generally mean that for clients they have to kind of “start all over again” and this sometimes does auger well. The harmony that is required in such a business is not achieved.
    On the matter of Non Performing Accounts (NPLs), we have done reasonably well, in comparison to industry levels. Part of the reason is that we do as much of an in-depth background check as possible and further base credit extension on several factors, which result in a stringent credit evaluation and monitoring mechanism. This enables credit checks to be done in a timely manner. Furthermore, staff play a very vital and key role and again the continuity and capacity building of staff concerned does help in having low levels of NPLs.

  • Is your strategy simply to grow organically or is it within your plans to scale up by maybe acquiring another bank?

    Yes, it is part of our strategy to now move to the next tier level and there could be done in two ways. One is of course by acquisition of another institution or bringing in strategic partners who share the same vision and who feel that the manufacturing segment is a key component of the economy and will drive the economy forward. And if they bring in solutions as to how we can grow better and faster organically or open more opportunities for us that could be another way of growing the institution.

  • Have you ever considered going IPO?

    No, so far, we have not thought about it, but we are a public institution and we have over 100 shareholders currently. So, if we did decide I think it could work quite well for us.

  • Kenya is becoming one of the key players for FinTech development at a global level. How has your bank reacted to this development?

    As you correctly said you know Kenya is a key player when it comes to technology and we have recognized that, and we've made technology a key component of our strategic plan.
    
    We put great emphasis on innovative products and their applicability to the local market. The bank’s Board of Directors has recognized this critical component to the future of any business and allocated a substantial budget towards technology software products for the banking industry. The speed of development of software is incredible and indeed difficult to keep abreast off. Nevertheless, we shall keep a keen eye on those products that are specific to the markets that we serve and engage persons from the Board level, to middle level management level who have expertise in technology.

  • How does VCB stand when compared with other banking institutions?

    It's very simple. Let's say that you went to “Pizza Hut” and you had a pizza there and then you went to a very chic Italian restaurant. How would you know which one is better? Which one tastes better? Or if you had a glass of wine at “Pizza Hut” and then you had what one at a fine dining restaurant, how would you differentiate the two?
    
    So, it's simply a way of telling clients to benchmark us, I'm not afraid of competition. Take my product, take my service, benchmark us against any institution and when you feel that satisfaction, bring me more of your business. When I've come to you, give me x percent of your business. Do not give me 100% of your business on day one. Try us out, try out and see if we are able to add value to you, or are your financial matters resolved in an effective manner. Once you feel that VCB is the institution for you, add more business to us. Because it's a partnership, remember. It's almost like a marriage, or it's like going to a doctor and saying “I'm sharing very confidential information with you so let's work on it a little bit and get comfortable”.
    
    Then, when you’ve tasted our service, you've tasted our products, you've tasted the integrative interaction with my staff and you've compared us with others in the market then shift over more. “Join the club”.
    
    That really gives comfort to clients. It’s honest, it’s also de-risking for both the client and for ourselves. Because the volumes are really rising in the world today and I don't want my client to get stuck neither do I want us to get stuck with any one client.

  • What are your selection criteria when working with SMEs? And what has this partnership with Swedfund brought to the Bank?

    It’s brought about an incredible upscale in the reputation of our institution. SwedFund is the development arm of the Swedish government, it's a sovereign fund. When a DFI makes an investment into a financial institution or for that matter into any entity, it does a high level of due diligence. So, in our case it was almost a two year period that they did due diligence before they committed. So, one thing is yes, they give us a fair amount of funding but there was also a lot of women empowerment. What happens is that we've looked at our client base and also potential client base and where women are in authority or in positions of power, we tend to give them funding or we would encourage our clients to have women in positions of power. What has happened is that studies have shown that where women are in positions of power the precision of work is much better, savings are much better and if you look at the lower segments of the economy where we don't do funding, but families are actually taken more care of. Men are more careless to spend the money on whatever activity. Women actually use it for the family, for children for upkeep, for food and so on, so we are actually encouraging more of equality for women and that's actually part of our strategic plan and one of our sustainable development goals for the bank to have women equality to be one of the key goals of the bank to try and promote that as much as we can.
    
    With partners like Swedfund, we have training programmes for women within the bank and as a result of this training we have effected changes that have positively affected the entire organization. Recently, on Women’s Day we held a Pop-up Womens day market and fully sponsored almost 50 women groups. These women were able to participate on a platform which enabled them to establish contacts, to expand their businesses and make good sales during the day. Again, this is possible due to DFI’s such as Swedfund.

  • Can you tell us the impact the pandemic has had on VCB?

    Like you correctly said, it's brought immense pressure and we have not been spared either. What has saved us is, because we've always had this concept of having a partnership concept and working with our clients, we've generally had a much lower impact than the industry in Kenya, the banking industry in Kenya.
    
    The industry average on Covid restructures had gone to almost 20-25% and we were at 6%/. But we had made provisions and taken prudent steps so actually we are net at about 1.5% percent compared to the banking industry average of about 12-13%
    
    But those who are in the hospitality segment unfortunately have been most “hard hit” and for them it's been very difficult. Our exposures is largely in the manufacturing side and yes we worked with them we worked with our clients, we understood their needs, we accommodated them as much as we could and there was a period of 6-9 months where there was difficulty but most of them have started to go back to normal operations, they have started to repay and we’ve seen cash flows coming in again in fact from August last year to February of 2021 we saw an upward trend and actually very good progress. It slowed down again but it was very good from August to February for us.

  • Has it somehow affected your short and long-term strategies?

    It has had, because, but you know the plans that we had in terms of growth and so on have been impacted and we have to revise all of that. But the rebound has made it possible for us to come back to what we had projected in a fairly short time. And I think in about 6 months we would be able to cover up what we had lost.
    
    It's not being tragic, but we could have done much better if the pandemic was not there.

  • We are seeing a kind of garage entrepreneurship culture in Kenya. How is VCB benefiting from and supporting this culture?

    In terms of supporting the manufacturing or the entire industry like I said earlier, we are encouraging usage of technology, a lot of the payment systems and portals can be done online. Our clients can clear all their cheques from their offices. They do not need to come to the bank, which was the case until mid last year. They can import goods, pay for them online, paper usage has dropped considerably. This helps the environment as the negative impact on the environment is much less, so these are some of the areas we've kind of helped clients with. We also train clients on how to safeguard their side from frauds by training them through online courses. We think it's critical because we could have measures within the bank to have secure firewalls; however if our clients software systems are compromised or hacked, ultimately it could result in the bank being dragged into a financial and reputational loss. Such training is deeply appreciated by clients as add-on benefits.
    
    In respect to the various industries such as agriculture or manufacturing, many clients invest in machinery that is more technologically driven. The downside is of course the number of people being employed will drop. That's not something which is good for a country like Kenya where there is a need for more labor-intensive industries, but efficiencies increase, productivity increases, and they are investing in more technologically advanced machinery.

  • In your opinion, is spurring consumption and fueling growth (as done by the Biden’s administration’s enormous stimulus plan) the ideal recipe for countries like Kenya in order to resume the outstanding path of growth of the last few years?

    Yes, I absolutely think so. The potential for growth is still enormous for Kenya. There is a huge middle class coming up. There is a big age group which is between 19-25 years of age that's coming up and the potential for growth is there. But it's the employment levels which really need to really be spiked up.
    
    So, if there are other countries, the big consumers such as the United States or Europe take goods from Kenya and employment is generated then of course the consumption will go up and that can help economic growth, drive up the GDP and keep up the momentum.

  • How do you see the bank in three years’ time, once the effects on the pandemic will be something from the past?

    We definitely see ourselves being in the next tier, which is the tier 2 level. We see ourselves as being one of the leading institutions as far as technological products are concerned and we still want to maintain the advantage that we've created over the years which is on service levels and specialization on corporate and high network clients within a niche model market.

  Focus on Victoria. If you want to experience the ultimate — it’s VCB. This is actually our logo, and we live up to that

  Dr. Yogesh Pattini

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  • The merger between NIC Bank and CBA officially closed by September 2019 had a big impact in the Kenya’s financial landscape. Not easy to navigate in the aftermath of a merger, different cultures, unifying criteria vis a vis the customers.
    Can we now say that NCBA has left behind not only the day-to-day consequences of a merger, but also of the pandemic?

    Well, NIC bank and CBA the merger was consummated in September of 2019. It has been a year and a half since the merger. The Kenyan merger was in 2019, the other countries were done last year. I could say that overall, yes, we are a year and a half old. I think to a large extent mergers happen in 2 stages. The first is called “hardware” which is the systems, the legal, all those things that you really have tick the box to do. Then, there's a software which is the customers’ heart and mind and the staff’s heart and mind. I would say it is the journey towards bringing this software on board, bringing the hearts and minds that has been slow. It's been slow really because of the pandemic. The pandemic obviously forced us to stay at home and as you know, building trust when you are meeting each other in  Zoom is quite difficult as opposed to when you're meeting in person. The good thing is I would say that the “hardware” is done. We are one bank; we have combined all our workforce. We've gone through a process of combining the structure. The third thing is now building the culture. We have brought about a culture program. We have trained about 70 percent of our staff. They participated in this training, and I would say we are on a good journey to greatness. When I look now at our customer feedback which we get from net promoter scores, there is vast movement from where we were mid last year to where we are today. You can see clear improvements which means that this merger is turning out to be very successful for 2 banks of our size. 

  • Your 2020 Results, being the first year of consolidated operations, were quite stimulating, taking into account the global and local impact of COVID 19.
    How did you manage to get these positive results, and what do you expect for 2021?

    We just actually announced our results for quarter 1 of 2021 showing very good growth, 60 percent growth in profitability, that's very positive. I think we are actually going to do very well. That's a year over year growth of 60 percent. How are we doing it? I think as I said, the “hardware” has settled. We are now one bank.
    
    On the software side in terms of people, I believe we've got very good people. When you get 2 large banks, anything you get is talent. We’ve got some very good talent and these people have learned to work with the hardware and work with each other. We're seeing good positive vibes and positive feedback from everybody.
    
    The other thing I'd say is that creating a NCBA was created from two banks that were very trusted in this society. We have created a much bigger bank, an extremely trusted bank, I must say.  We have seen deposits grow significantly because people trust our brand, people trust what you're trying to create, we have great governance and that has helped. I would also say, the management from a credit perspective, last year we were squeezed from a credit perspective. I think we took certain steps last year that really drove our evaluation, acceptance and how we provide for risk, and I think that also helps our performance this year. Lastly, which is very important, we had a very big hit on digital mobile services which is the business, the financial inclusion services.  As you can imagine, it is not secured loans for very small businesses, most of them individual businesses.  So, when the lockdown happened and people were sent home and there were no people in the markets, obviously the performance suffered quite a bit. We have seen great recovery in that area where we have some very good lift. 

  • NCBA Group has a strong presence in Eastern Africa, Uganda, Tanzania, Rwanda… But it has also ventured in West Africa, namely Ivory Coast, with the mobile platform M-Shwari. Our report plans to devote a substantial coverage to mobile banking and Kenya as a fin tech hub.
    How is NCBA working to impulse fintech, and a universal and inclusive banking?

    I think it's worth giving just a little bit of history. Our principal institution CBA partners with Safaricom to roll out M-Shwari. I'm sure it has been by large one of the most successful mobile innovations, financial inclusion innovations. We built the technology and working with Safaricom, we were able to distribute those loans and deposit to a massive base of customers. In Kenya we have about 26,000,000 customers and then across Africa we have close to 60,000,000 customers. That product beyond that we have recently partnered to grow another product called “Fuliza”. It is a 30 day loan, “Fuliza” is an overdraft. You are buying something from a trader when you're trying to pay them you don't have enough money, what “Fuliza” does is give you a small loan to complete the transaction. This is really just saying “we don't want your transaction to fail”. There is a credit that helps that transaction to get completed. It's a very short-term loan, as soon as you get back some mobile money, we take back and pay back the loan. We have seen tremendous growth in quarter 1 alone in terms of “digital lending” as we call it. We have earned one hundred and thirty-fourbillion Kenyan shillings. It’s a billion dollars. You can see we have been extremely active in deepening that financial inclusion. Those loans, much as they may look like macro loans, because they are, helped thousands, in fact I'd say millions of small businesses. Because most of the users of those loans are people who are running what we call a small shop on the side, vending machine on the side, coffee truck, all those things that you see on the streets, those businesses that you see on the streets, a newspaper vendor. All of them depend on these loans to buy their supplies. It's a very big area.
    
    So, to your question then, what are we doing? We've gone ahead and reorganized ourselves to form a fin tech. We’ve created a fin tech that is called BanqTech to expand those capabilities and partner with others beyond Safaricom in different countries, to bring this innovation and give access to more families across Africa. That's one area that you've done. Two, as you mentioned we have already rolled out those products in Uganda by partnering with MTN of South Africa. We have rolled out in Tanzania by partnering with a “Vodacom” company in South Africa. We have rolled out with an MTN, we have rolled out in Rwanda and with MTN we have rolled out with Ivory Coast. Ivory Coast is a digital bank there. They offered these two products to the masses.

  • Why do you think Kenya has become and is such a fertile place for the fin tech revolution, which is happening now, not only mobile banking, but block chain, the Internet of Things, Electronic payments?

    Well, for several reasons some of which you actually mentioned earlier.  One is that there was early adoption of mobile money and that creates a network. So, the access or the acceptability of mobile money M-Pesa. The acceptability of M-Pesa was because the bank branch networks were very few, first, the ATMs were very few. The second thing I would say is that we were lucky to have a mobile operator that controlled a large part of the market. That dominance in terms of numbers helped and provided an opportunity. I think we also have a well-developed commerce culture, people’s trust. We do a lot of commerce and there is a high level of trust which is very positive. People are able to do mobile money and transfer quickly. Beyond that is a human capital, I mean Kenya has fantastic human capital, great education, a very well exposed population and that has helped a great deal. And then the adoption of just digital credits, I mean look at Kenya today I think 94 percent of phones sold are smartphones. A really good adoption of technology, that has really helped. Lastly, a very young population helped because of the adoption of technology with the young population is a bit easier. I would say on the other side is the way the market is designed. We're a very competitive banking sector, extremely competitive, very easy to adopt and I think we have adopted. We are fairly flexible and an accommodative regulator and that helps when we can understand because of the exposure that we are able to experiment quite a bit. Obviously, a very enabling environment [has been] provided by the government. When you add all this together that does help. Also, on the previous question you asked how is NCBA working to impulse fintech, and a universal and inclusive banking, I want to mention that whereas we talk about the M-Shwari’s and the Fuliza’s, the core bank as well, we have other products where we are able, through digital, to issue bid bonds in minutes. If somebody's bidding for contracts from a government agency or from a private agency, we are able to get bonds within 30 minutes. Whatever bid bonds that they need we are able to deliver anytime of the night and you print them using your home printer. The other thing we are able to do is partner with the number of large sellers of first moving consumer goods where we are able to find the distribution chain all the way down to the bottom. One of those is the beer manufacturers, we have partnered with them; we are able to actually track the stock to the bar. Now we fund the bar so they're actually able to buy stock all the time, obviously during Covid it was a bit more difficult. It was a hit product because some of these bars don't even know who NCBA is, yet they are being funded by NCBA to buy supplies.

  • The pandemic brought fears of an increase in NPL - Nonperforming loans - all over the world, but it seems Kenya’s banking system has been safeguarded in this regard.
    What is the situation regarding NPL’s at NCBA?

    If you look at quarter one of this year, for example,  the banking industry NPL is about 14.9 percent I believe. If you reflect on us, we got about 13.6  I believe. But even at 13.6 is quite high so, I would say that we haven’t been fully spared. One of the things that the banks did early last year was being very accommodative, be willing to listen to their customers. We worked with the regulator, the Central Bank of Kenya, and we were the first to encourage our customers to come forward and explain to us how they thought the pandemic was going to affect their businesses. Based on those compositions we are able to give a lot of accommodation through moratoriums, through extension of loads to customers. That has helped, because we have seen a lot of those customers now come back to us after paying their loans, after taking  six month holidays for some of them, a number of them have gotten one year holiday. They have come back and now started to make payments as that year comes to an end. I think it was a very proactive approach, I think the other thing we agreed early on is we will not charge fees for those accommodations. Before the customers would be afraid to come and talk to you because they know that you charge them fees for any changes they ask for. We agreed and announced that there are no fees charged for the compositions of those changes. The other thing that we did was that we have kept interest rates actually lower than where they were when the pandemic came. I think all of those things helped NPL stay well managed.

  • It's a very customer centric approach which at the end I'm sure that the customers are receiving it and the will to pay back comes from that approach as well, right?

    Absolutely, a very customer centric approach. Before the pandemic hit, banks were hated so much that we used to be compared to politicians. But during the pandemic actually a net promoter view from the public, the rated banks the most understanding of the various industries. You can see that change from being hated like a politician to being liked like a church overnight.

  • While creativity and working under limited resources has been the pattern of tech entrepreneurs, at some point, tech companies need to obtain financial resources for growth and the expansion of their activities.
    How is the bank supporting the tech community?

    I've always believed that fintechs and banks will converge at some point. I think you need the fintechs for creativity and agility. But to your point, if they start to grow they would need the banking system. Personally, I don't view fintechs as a threat. I view them as a parallel that has to converge at some point. We're very comfortable to support fintechs, we are able to invest their point of view, fintechs that we also support through loans,  sometimes advisory. I personally spent quite a bit of time with founders of fintechs. We want to pick my brain on the banking industry or what they can do to disrupt the banking industry. And I offered it free because I truly believe we will converge. We also learned a great deal from whatever fintechs are doing because, at the end of the day banks have the resources to do what fintechs are doing. So, we will copy very fast, we will not have the people to do it at first, to think it through. Once we know the idea, copying it's very easy. We're very happy to encourage ideas.

  • Our report will not only cover the fintech revolution taking place in Kenya but also how manufacturing and industrialization is working in the direction of also becoming a global hub.
    Same question as before, how do the bank’s lending policies help the sector to grow?

    In a lot of ways, I would say. One of the strengths NIC bank was known for was in asset finance which is vehicle and asset financing. A lot of those borrowers tend to be SMEs either they're in the transportation industry or sell goods that require transportation. We understood their needs very well. The same with CBA, for them it was more of supporting businesspeople from high network individuals’ respective which is very strong in that. They had a few partnerships with the likes of Africa Guarantee Fund to finance and support SMEs. Together now as NCBA we have continued on that journey. One of the things that we identified early on was that there was a need to just not give money but also build capacity. We partnered with Strathmore University, one of the biggest universities in Kenya, where we actually do training for SMEs. That's a program that has been running for a few years, we give them discounted rates, so we pay a portion of those fees for them to get training to build that capacity. Also, through the university we also support their businesses by giving them continuous advisory. That's the journey that we see them taking towards growing to be very large.
    
    I gave you an example of the distributorship that we support, those are SME’s growing to be larger companies. So, manufacturing is starting to grow. I think lastly, I would say, from a corporate business we are by far the largest local corporate banking institution. We support a lot of indigenous corporate manufacturing, whether that be in steel manufacturing, cement manufacturing, sugar, and many other industries that we support. I would say overall NCBA, part of our story of coming together was to be able to fund local manufacturing. We realized that as small banks we could not support big industry, now we can and we're doing it.

  • Would you say that one of the competitive advantages of the group has been the combination of those or the continuation of those strategies that both NIC and CBA had separately but by merging and becoming a larger bank you can fulfill in a much more impactful way?

    Yes, absolutely. There was a client who visited me just yesterday and they want to build a big factory. One of the conversations we had was previously as NIC we were trying to tell the customer “Please find another bank because we had reached our limits”. Now NCBA we're way below our limits. We can completely fund the new project without having to involve any other back. That makes a difference for them because they don't want to explain their business plan to three banks. They would rather find someone who understands them and supports them. So, coming together, continuing the strategies that we had with a much bigger balance sheet and being able to take much bigger risks, that helps the manufacturing industry. 

  • When it comes to foreign investment coming into Kenya. I mean Kenya does have some competitive advantages to actually become a manufacturing hub for Africa whether it be the geographic location, the high quality of the workforce, the low cost of operations and also an improving the network in terms of transportation and energy generation. There are foreign investors eyeing Kenya. Why should they choose NCBA group and not another bank without naming any?

    I would start by saying we are a “trusted” bank. One that knows and understand the market well. One that knows the local market extremely well, understands the local players and can finance any products that you want in the world. Our connectivity to correspondent banks across the world. We are connected to almost every country, almost any large currency. We can do deals in almost any currency, access to currency.  And obviously our own product know-how. Our own people, those are the key ones.

  • Your professional career is certainly inspiring. Born in big family, with 11 siblings, you were the first to attend college, and you managed to obtain the resources to attend some of most prestigious US academic institutions like MIT and Wharton. A long career in the US and then moving to Africa and finally heading NCBA Group.  How have you translated what you learnt in business in the US to the African financial environment and particularly the one in Kenya?

    In a lot of ways. One is that, let us start with the simplest one about how to manage people. I manage people through inspiring them and that is perhaps an American culture more than anywhere else. I think there is a change of leadership going from a cane kind of leadership to a carrot sort of leadership. Understanding the new generation of employees. I think I bring a lot of that cultural change to the workplace. I would say the second is insistence on good governance and integrity. There's too much talk out there about Africa and corruption. Integrity, I think one of the things I bring, and I insist on, is that the way we run NCBA, the decisions we make, the policies in place, our own governance. NCBA should be able to stand up to any organization in the world, we cannot be any less. I think that what I bring to the organization is that strong belief that the way we do our things, our processes must be world class. I always compare myself to my old employer Credit Suisse. I think today NCBA is run better than Credit Suisse, it has to be. I say, “today I can’t solve these problems but run better than the previous week”, that’s my comparison, it has to be. Lastly is openness, these ideas that are being tried every day knowing that you have to try new ideas that you fail. Even when I was in America, we tried many things that did not work. That's you must keep pushing people to be entrepreneurs. Every day try to create something new, try to invest in something new. You might fail but you have to try it. Some of the things I think I bring to the organization. 

  "Silicon Savannah is open for business. You will find the right people to work with. Human capital is abundant, people who have been educated in Kenya and overseas with great exposure, willing to try new things. Our own population is very receptive to new ideas, and willing to try. Our network from a mobile money network, a banking network and many other networks are deep rooted. And therefore, access to the market is a lot easier than in most countries. The government has provided a very enabling environment, working very closely with the private sector to drive this environment. That provides the right setting for doing business in Africa. In a previous role one of my jobs was doing exactly this: going to talk to international companies to come and do business in Africa. Marketing the bank that I was working for them but more important to be the adviser to those companies coming to do business in Africa. It always started with, you know, I came to your country, I went to this country, I talked to the president, I saw the minister. In Kenya you don't have to talk to the president, you don't have to talk to the minister because our processes work, our judicial system works, our tax system works. Your investment would be protected because of the laws, not because you know somebody and for that reason, please, come and invest in Kenya."

  Mr. John Gachora

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  • The banking sector in Kenya is at the forefront of finance development not only in East Africa, where it is the undisputed leader, but in Africa as a whole.
    Can you describe the main factors that led to the growth, resilience, and innovation of the sector?

    The COVID-19 pandemic has had a significant impact, not only on the banking sector but on the economy as a whole. The banking sector has been at the center of the health crisis in terms of supporting post-pandemic economic recovery. The support has involved facilitating access to much-needed credit to various sectors of the economy that are struggling. For the financial industry to step in effectively and optimize its role in augmenting economic recovery, innovation has been crucial.
    
    On the operational front, it was important to encourage customers to utilize digital banking platforms. Banks that were already on the journey towards the digital space have been in a much better position to support their customers than those that were still predominantly operating in the physical space. We appreciate the collaboration between banks and mobile network operators (MNOs) in making this transition seamless.
    
    And it is not possible to discuss mobile banking in Kenya without referring to M-PESA. Notably at the beginning, M-PESA came into the market almost as a competitor to the banking sector. There was an initial opposition towards the platform, but later a number of banks realized it was better to collaborate. As a result, banks that have established working relationships with M-PESA have done much better. Already, some banks have developed products delivered through the platform. M-PESA is useful, as it aids banks to leverage the platform to access an enhanced customer base.

  • Kenya is becoming a global hub for FinTech, one of the homes of the new revolution in the sector.
    Why would you say the Kenyan society has been so permeable to these innovations?

    Before M-PESA, transferring money from point A to point B was not only slow but also very expensive. Initially, you had to go to a bus station and then deliver your money through somebody who was traveling to point B. The money would reach the intended person the next day. Chances were that not the full amount would be received.
    
    M-PESA came in and created a very convenient way of sending money almost in real time, and the person at the other end could confirm receipt. Considering the situation before the advent of M-PESA, the solution presented options.
    
    In the banking sector, the need to leverage on M-PESA has been motivated by convenience. The initial arrangement was just to facilitate payments, but it has since grown into enabling banks to offer other services across channels. It is noteworthy that some banks have gone ahead and designed products or innovated on existing products’ bases, expanding the financing scope from initial payments support to aiding deposit mobilization or extending credit to more customers.
    
    As I’ve mentioned, this growth was particularly instrumental during the COVID-19 pandemic period, given that one of the containment measures requires avoiding physical contact. Customers are discouraged from handling physical cash whenever possible. There is evidence that banks grew their customer base in the early days of COVID-19, not only in terms of enabling existing customers to conduct more transactions on digital platforms, but by bringing onboard new customers. These developments will mark the way forward for the industry, even post pandemic.

  • Could you elaborate on some new advances and their impact on Kenya’s innovative scenario?

    There is an innovative product being driven by the banking sector in Kenya: PesaLink. PesaLink enables customers to move money from one bank account to another in real time across platforms, including mobile platforms. Given that M-PESA offers convenience, banks came up with PesaLink to provide a similar level of convenience, adding value by enabling bank-to-bank-account real-time transactions.
    
    The M-Shwari solution also stands out because it leverages the partnership between banks and M-PESA. It not only enables customers to effect payments, it also enables savings. The credit functionality uses an algorithm that tracks your performance, giving a credit score on that basis. The integrated system can work out credit appraisal and adjust limit bases in line with the customer’s behavior. This product now aids deposit mobilization for banks, significantly supporting credit extension to customers. Some banks have leveraged the platform to create unique products. For instance, KCB Bank has created the KCB-M-PESA product.
    
    Broadly speaking, almost every bank has partnered with M-PESA, mainly because it is a leading MNO. Of course, there are other MNOs such as Telkom and Airtel that also offer mobile payment platforms. It is evident that the sector is rapidly innovating, leveraging these partnerships between the mobile network operators and banks.

  • Could you describe how Kenyan banks support new and innovative companies in the implementation of their endeavors?

    Banks recognize the importance of FinTech entities. Many of them are developed and owned by very young entrepreneurs. Banks see the need to leverage these innovations to reach their customers. FinTechs are closer to the customer, addressing specific customer needs. Banks, on the other hand, have financing products. By leveraging FinTechs, it is possible to achieve mutually beneficial objectives.
    
    There is another way of looking at it. For instance, a bank can develop a FinTech to create a product internally that is separate from the bank itself but related to its operations. As the innovation evolves, various combinations come into play. The bank can, for example, consider upgrading the internal FinTech into its mainstream operations, or it could join forces with an external FinTech that has developed a solution with potential mutual benefits. By combining the scope of innovations, acquiring a FinTech, or having some sort of partnership like a joint venture between the entities, it is possible to create shared value.
    
    The reason banks may sometimes not pursue the development of a FinTech internally is that it is not where their competitive strengths lie. The effort of trying to develop something internally can be quite disruptive both in terms of focus and internal capacity, which can prove expensive. So, if one entity is in a better position to develop that capacity, it is possible to leverage on each other’s strengths to achieve feasible mutual objectives. The possibilities of collaboration are many, but I see these two as the main ones.

  • The Kenya Bankers Association is promoting and actively participating in the upgrade of the sector’s labor community to sustain industry growth.
    Could you describe your main programs and their impact?

    We have various initiatives that are geared towards supporting banks to upscale capacity. After conceptualizing the banking industry’s Sustainable Finance Initiative (SFI), the next step was essentially to bolster capacity within the industry to support implementation. We have realized that to build that capacity, it is necessary to create an e-learning platform to cover the scope of the initiative. Banks have done very well in taking up the training modules. Currently, almost 44,000 employees have undergone the training.
    
    We also track the progress in the implementation of SFI principles by creating a reporting framework. It is something that is evolving, meanwhile enabling banks to build capacity to walk that path.
    
    This law was really steering the market towards the high-quality borrowers who could then be priced within the cap rate. The higher-risk ones, whose appropriate pricing fell above the cap, were being left out of the borrowing arena. The only way of bringing them back was trying to de-risk them by building the capacity to address the issues that made their risk go up. The measures included enabling the enterprises to create financial statements, having efficient governance structures, developing financial reporting frameworks to their stakeholders, having a linkage between the market and the product that they are producing, or properly pricing their products.
    
    These elements help in reducing the enterprises’ risk profile in terms of the risk perception by the credit provider; by bringing it low enough, they would then be able to access credit. Even after the cap was lifted, the access problem persisted. We, then, recognized that de-risking the businesses was still important.

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  • In the presentation of this year's first-quarter financial results, all indicators showed outstanding growth and an optimistic outlook for the year as a whole.
    Could you describe the policies put in place by the group to offset the impact of the pandemic in its operations and Kenya’s society as a whole?

    We thought we could deal with COVID-19 pandemic by prioritizing people and lives beyond profit. As a result, we took a significant amount of money, including US$17 million, to protect our communities and stakeholders. We adopted 56 county and national hospitals, 60 faith-based hospitals and offered to provide PPEs (Public Private Equity) to those hospitals for a period of up to three years so that they could be there as a second line of defense to the Kenyan citizens. That essentially also meant that we needed to keep the lights of the economy on.
    
    We decided that to accommodate businesses struggling with their loan schedules, we would reschedule loans for 32% of all our customers to the tune of US$181 million. That essentially gave stability to the businesses. Entrepreneurs could focus on supporting their employees and their families during the crisis. We also protected our staff, supporting them throughout the crisis just as we supported our customer base, which is a subset of the community.
    
    The prioritization of people above profits seems to have handed us a very significant social-trust capital. That has somehow played out to drive growth. People have consolidated their banking with us. All this happened because Equity put purpose first.
    
    Our purpose as an institution is to protect lives, change lives, give dignity and spread opportunities. It explains why the shareholders have skipped the dividends for two years, to fortify and create the capital buffers that could enable the bank to reschedule loans and give assurance that the shareholders, together with management, are standing with the customers and the general public.
    
    I think that aspect of who we are can be described as shared prosperity.

  • Taking advantage of consumers´ lifestyle changes, your group has adapted its strategy and executed a rapid business transformation that saw 98% of all transactions becoming digital, accounting for 65% of volume by value.
    How do you see these trends and figures evolving this year and in the short term?

    I think COVID induced human-behavior change. It has been very transformational, as people try to avoid touching services, as people social distance, as people avoid public places. And brick and mortar, whether it is ATMs or branches, are public places with touching services.
    
    As the adoption of online business becomes permanent, digital solutions seem to be the “in” thing: our staff working from home, compressing the distance for our staff and the customers, moving banking from the place where you go to what you do on the devices, and using payments for lifestyle fulfilment. To me, that is a behavior that has been adopted and is unlikely to be lost because it has brought convenience and ease.
    
    Maybe COVID’s positive aspect is transformation. I think it will add even more as a tailwind of adoption of digital solutions, of online businesses. It will be a catalyst of digitization around the world. 

  • In your opinion, what are the forces that have led to Kenya becoming the new FinTech hub in Africa?

    I think the first thing is our youthful demographic profile. We have a median age of 20, a population that is born and brought up during the digital era. They are digital natives. As a result, the adoption of digital solutions from that perspective is good.
    
    Secondly, this is a mobile generation. They’ve been born and brought up with—and cannot imagine a world without—a mobile phone. That’s why they have adopted, and as natives have become very innovative. And why they have made Kenya a leader in mobile innovations and solutions.
    
    Thirdly, there is the structure of our economy. The economy is de-corporatized, and this youthful population is seeking solutions for their micro and small businesses. As they aggregate, they transform into the fully formal sector, the private sector. The private sector thus becomes the leader of this transformation as opposed to the public sector, simply because of the structure of the economy.
    
    The fourth aspect, of course, is pragmatic leadership. I must praise the administration of President Uhuru for adopting technology and innovation as a strategic plan, and for pushing that agenda very significantly.
    
    Lastly, Equity Group and Safaricom are global leaders in the digitization of banking, and mobile financial solutions for Safaricom. That leadership then inspires the entire population. The generosity of these two companies in exposing their APIs to the youthful population to develop innovative solutions is the backbone of these huge organizations; to me, that has inspired the population but has also provided a platform upon which innovations can be adopted. 
    
    I will add one more factor that has stimulated the transformation of Kenya. It is globalization, allowing young Kenyans to be serving the American Silicon Valley while in Kenya. Business-processes outsourcing has become a major link to opportunities. Of course, the issue is not just the business-process outsourcing but the use of technology. Technology has become a very big enabler to serve and develop the market and the global technology of companies while still being at home. Online work has become a major motivator in the adoption of these innovative approaches.

  • A recent article featured on Bloomberg.com, states that Equity, as Kenya’s biggest bank, is targeting a seven-fold customer growth by 2025, with special consideration to the potential of DRC and Ethiopian markets.
    How do you plan to lead the international expansion of the group in this direction? 

    Equity has now defined what is called East and Central African post-COVID resilience and recovery program. Equity has partnered with UN coordinators and all the UN agencies here for initiatives that correspond to 17 sustainable development causes.  The UN is building capacity for those who want to borrow, they are doing their training.
    
    Other foundations have also come onboard and committed US$100 million, delisting young people to borrow, to achieve their dreams. We’re using credit guarantees of about US$350 million to support young people.
    
    Sixteen international development banks, such as AFE, African Development Bank, European Investment Bank, have supported the fund and committed US$1 million to support the initiative so that we are able to create a balanced portfolio. Equity has committed US$4.2 billion to the fund. 
    
    The objective is to support a manufacturing sector, an industry-transformation hub in Kenya, but using the African Continental Free Trade Area to allow East and Central Africa to operate as a single market.  And using East African Community protocols that allow free trade of goods, services and products across the border.
    
    The objective of Equity is to fund and provide credit for five million small and medium businesses using that US$ 4.2 billion of its own fund and US$1 billion dollars from long-term funds.
    
    The five million companies, we hope, each will provide between five and ten jobs; we take a minimum as five. That gives us 25 million direct jobs and these jobs might create another 25 million indirect jobs.
    
    It’s not about seeking 100 million customers by 2025 but about investing through the private sector. Some people call it the “Marshall Plan,” but for me this is a resilience and recovery plan for East and Central Africa. 

  • In March of this year, we saw the group sign a US$75-million deal with AFG to boost post-COVID-19 recovery for women-led businesses in East and Central Africa.
    What are Equity policies concerning women entrepreneurship and gender equality at business?

    Equity believes in the doctrine of equal opportunities in respect to gender. We demonstrated that by having a board of four women and four men. We’ve also implemented that in my management team, with seven executives being women and six men. Essentially, that is what we want modern society to learn: A better and more recipient society, a more sustainable society, is that which gives equal opportunities both for men and women without discrimination.
    
    We know that we are up against some challenges like culture, but we have gathered the courage and boldness to be the pacesetter. We use our finances in two aspects: first of all, building capacity in women; secondly when securities for borrowing are a challenge, we offer them guarantees. It’s an affirmative action, but the most important thing is capacity-building, mentorship and coaching. We have started the program called Quick to equip them with the competencies and capabilities and then provide them with the financing.
    
    The last point is mentorship and coaching by supporting them to populate the supply chains of our corporate customers, and using the corporate customers as the mentors and coaches to women in their supply chains which is specific and customized to their environment, to the sector, and the industry they operate in.

  • The Equity Group’s foundation has six cluster thematic areas: education and leadership development; financial literacy and access; entrepreneurship; agriculture; health; innovations and environment. You basically cover the main economy.
    What are the programs you see having a bigger impact on Kenya’s society?

    I'm really glad that you made that observation, that we’ve covered the main economy. We focused on agriculture, enterprises, education and health because those are the sectors that form the backbone of emerging economies.
    
    The essence of the foundation is to de-risk those sectors so the population can actively participate and obtain credit and be active in those sectors because those sectors provide livelihood, and those sectors provide them with employment. They generate currency; they are the sources for exports, and that’s where imports also come to. Essentially, we need to place people at the center and the heart of the economy to ensure that they’re able to provide a livelihood to the economy.
    
    We also felt that credit was not a sufficient condition for success. There are issues that need to be dealt with, and we’d best deal with them in collaboration with all likeminded people who share our dream of a more prosperous Africa. People who believe that nobody should be left behind, people who believe that the purpose of humanity is important.
    
    The foundation becomes a platform of collaboration with development banks, foundations, the development of institutions and the support of the corresponding pillar of the economy.
    
    Those pillars are integrated because the person seeking health is the same person seeking education for their children. The person who is a farmer is the same person who has a small business. That is the integrative approach of the foundation. The foundation de-risks, and then the bank scales up by providing credit to those who have been de-risked and whose capacity has been enhanced through the training. 

  • First quarter results in the world’s leading economies like China and the USA are indicating that the resumption of global trade and investment flows may be stronger than anticipated, and that public policies have been moving in the right direction.
    What changes are you foreseeing in Kenya’s financial landscape in the coming months and years, and how will Equity evolve in this context?

    I'll talk about Kenya and the East African region. One of the biggest strengths is that all of them have adopted Chapter 4 with the International Monetary Fund, and as a result, predictable market prices, inflation, exchange rates and interest rates. That is a prerequisite for a good recovery.
    
    The second aspect is an issue of giving incentives to drive investment behavior. Kenya has done very well positioning itself, opening itself to Public-Private Partnerships (PPPs). Most of the infrastructure now being built in the country is done on a PPP basis. It doesn’t have to be funded by the Kenyan government’s budget, which is limited. That opens the country to international markets.
    
    The other aspect is fiscal and financial discipline.
    
    Lastly, Kenya has been upfront in seeking markets for its products. Kenya has been very strong with America through the African Growth and Opportunity Act. It has now been seeking a bilateral trade partnership with America.  We have signed up a partnership with the UK, with the European Union. We were the first or second signatory to the African Continental Free Trade Area. And at the moment, Kenya is the chair of the East African Community. It’s a champion of trade. That creates an environment that is suitable for investment.
    
    Kenya for the last 15 years has massively invested in enabling infrastructure. The basic infrastructure is there for the private sector to drive investment in East Africa, making Kenya a manufacturing hub.
    
    COVID-19 demonstrated, through the disruption of global supply chains, the fact that Africa could not initially access PPEs and had to develop the manufacturing capacity on its own for PPEs; the fact that Africa did not have access to vaccines and is now busy trying to build its own vaccine factories. That proves that Africa has identified a sweet spot of reducing dependence on the global supply chain, and has demonstrated the need for national and regional supply chains.
    
    That’s Kenya, because it has already invested in infrastructure.

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  • At the end of July 2021, UK Foreign Secretary Dominic Raab welcomed Kenyan President Uhuru Kenyatta in London to announce £132 million of new UK investment in Kenya. He also launched the Nairobi International Financial Center (NIFC) and its formal partnership with the City of London.
    How would you define the potential impact of the NIFC on Kenya’s economic development?

    I must say that we were overwhelmed by the reception we got in the City. The event was attended by most of the UK financial-institutional investors that are either already in Kenya and Africa or looking to come to Africa. That tells me that the partnership with the City of London is significant in the sense that it gives us access to global best practices.
    
    For us, that partnership means we have access to knowledge-sharing with the City of London but also that we can provide a window for the players in London to look into Nairobi. Most of them perhaps think about Tokyo, Hong Kong, New York, Sydney and so on. But suddenly they have a new kid on the block. And even if out of nothing else but curiosity, they will think that if the City has signed the MOU with Nairobi, maybe it is worth taking a look.
    
    It’s up to us to take advantage of that window that we've got to really sell Nairobi. Not sell from hype, but to get the world to see Nairobi and the opportunity that it offers as an investment destination. The City can now send some of their people to Nairobi or their members. They have a contact here that can explain to them how Nairobi and the rest of Africa work. It's really a mutual self-reinforcing partnership that we see benefiting not just Nairobi but also the City, and enabling investors from Europe and the UK to take advantage of the opportunities. That means that if we get it right, and we are optimistic we will, you will start to see significant capital flows backing that confidence that has been generated in Nairobi to support Africa’s development. The impact on the Kenyan and African economies ought to be significant.

  • The center aims at attracting US$2 billion in investments by 2030, and it is a key part of Kenya’s Vision 2030 and the role of FDI in achieving its goals. The NIFC will be competing with already established financial centers like the ones in Casablanca, Mauritius and South Africa.
    What competitive advantages does the NIFC show vis à vis its African counterparts?

    I think Nairobi starts with an advantage because we already are headquarters for a number of global institutions, from the private to the public sector. GE, which is a big company, might have chosen either Casablanca or Johannesburg as its African headquarters. It has regional hubs in Johannesburg and Lagos, but it chose Nairobi. IBM put its first IBM Africa research lab in Kenya. You have a lot of global institutions that already use Nairobi as a headquarters for Africa. There is no other place, with the exception of perhaps Johannesburg, that can boast that distinction.
    
    The reason is that Nairobi's financial institutions and financial system are some of the most developed in Africa, more diverse than the others. It’s smaller than Lagos because in Lagos we talk about billions of dollars; that’s a big economy. But I think in terms of depth and diversity, Nairobi is ahead of most African cities except Johannesburg. This distinction makes Nairobi an attractive place.
    
    The third element that people don't talk about is the cluster effect of institutions. Not only banks: you have institutions of learning, connectivity. Nairobi is unique in Africa in the sense that it's the center of the continent. It’s just four hours from Johannesburg, under four hours to Cairo, five hours to Lagos, and even Casablanca is not out of reach. There is no other country apart from Ethiopia which could compete in terms of having an airline like Kenya Airways.
    
    Finally, one of the attributes of an organization like ours is the ability to attract global talent into a center. Some of the things people look at is to have housing that is acceptable. Do you have access to health facilities? Most importantly, if there is a young family, are there good schools to educate their children? We have all that.
    
    All these attributes already make Nairobi a hub. What we want to do is take it to the next level of excellence so that it is more competitive.

  • After years of uninterrupted economic growth, Kenya is becoming a continental hub for FinTech, manufacturing and ICT.
    How does the NIFC fit into this scenario?

    What distinguishes Nairobi are all these innovations but there is a gap. Most of the funding for early stage in Kenya is coming from offshore, from impact investors, high-net-worth individuals who are familiar with these initiatives. And the entrepreneurs plug into them and get funding. The local financial savings are not participating in these early stages of opportunities. The private equity business has developed quite well in Nairobi, but the venture capital and early-stage investing hasn't happened.
    
    I think there's an opportunity for NIFC to foster the emergence of venture capital and an early-stage investment industry by tapping into the large pool of savings in the domestic market.
    
    Secondly, I think there is a growing accumulation of wealth in this market; there are quite a few high-net-worth individuals who can act as angel investors. We're starting to see them emerge, but they need to have a platform from which to play. I think the NIFC can further support the deepening of the financial sector.
    
    Also, with all the environmental concerns, there's a push for green energy. One of the things we are participating in, especially with the donors’ community like FSD Africa, World Bank and so on, is the development of green finance, especially the green bond market to finance these green energy initiatives.
    
    Then you mentioned FinTech: Nairobi is a leader in FinTech with M-PESA, which is a global leader. I don't have to touch the FinTech subject because it's happening. The real challenge with FinTech is what is the next frontier they have to overcome? We want to be part of that discussion and that story and see how we can help push it to the next frontier.

  • A series of target sectors are mentioned in your website, from green finance, FinTech, investment funds, professional services and hold-cos, corporate headquarters.
    Which of these sectors have more chances to be developed in the short terms?

    I think we're seeing a number of enquiries on people using Nairobi as headquarters. This is sector-agnostic. You see financial institutions that are already players in Africa discussing consolidating their regional operations into one location and putting people at that location to cover the continent. So corporate headquarters is one.
    
    Nairobi is already one of the leaders in terms of deploying private equity after South Africa and Egypt. You’ll see the private-equity players start thinking about where to domicile their funds. The funds business could follow the multinational headquarters because they already have people here and it's easier to coordinate and manage your funds.
    
    The other one that I talked about is the venture-capital industry; there are a lot of global venture capitalists that play in Africa. They’re flying from New York, Hong Kong and London. It would be easier to have people in Nairobi to look at investment opportunities.
    
    Finally, perhaps with more funds in the trail of the others, asset managers. Because you have a number of global insurance companies like Alliance, AXA, Prudential, and all of them have offices in Nairobi. Some of them have started taking small bites from local insurance companies. Insurance companies naturally mobilize and accumulate large pools of capital. That could have the big bang effect that we are looking for, and I see asset management growing as an assets class.

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  • The COVID-19 pandemic has had a tremendous impact on the global economy.
    How would you describe the experience for I&M Bank through this turbulent time?

    First of all, the financial sector plays a key role in any economic change, particularly when you’re dealing with the kind of economic shock that comes with a pandemic. Thankfully, we got a lot of support from the Central Bank of Kenya in terms of particular measures to help our clients who are dealing with distress. The debt classification relief provided helped banks support clients without having to carry additional capital burden. Some of the additional measures we came up with also helped in containing the spread of the virus though physical containment. For example, one of the areas that the banking sector focused on was to move to non-cash ways of transacting, and that meant encouraging our customers to make use of our alternate banking channels rather than our branch counters.
    
    As part of our medium-term strategy, called iMara, we had already initiated a drive towards digitization, and this made it relatively easy for us to shift transaction traffic away from the branch network to alternate banking channels. We pushed this through incentives like giving an additional 25-basis-points cost advantage if customers used Internet or mobile-banking channels to open deposits or make transactions rather than going to a branch counter.
    
    Hence, a combination of debt-relief measures and encouragement to drive [proper] transaction behavior, coupled with promotional incentives, helped us make our customers feel protected and safe to continue and increase their banking with us, and also to attract new customers.
    
    Of course, a lot of the measures taken by banks to allow customers to conserve cash during the crisis meant that they had disposable income. They could say, “Let me add to my stored cash,” which is why if you look at the results for banks in 2020, you will see a growth in the deposit base despite it being a year of crisis.
    
    So yes, indeed, the shift that was brought by the pandemic was partly an acceleration of the ongoing initiatives that we had at the bank, but also part of the innovations that were coming in as new ways of connecting with clients.

  • In just a few years, through purchases and partnerships I&M Group has evolved from a local bank to a regional bank. Today the group has a presence in Tanzania, Rwanda, Mauritius and recently, with the acquisition of Orient Bank, in neighboring Uganda.
    What is the philosophy behind your strategy of expansion?

    Our expansion is definitely driven by a strategic plan. We’ve always been a bank renowned for our relationships with clients, and those relationships naturally extend to where our customers do business. So when our Kenyan outbound clients find themselves in Tanzania or Uganda, which are obviously naturally big trading partners for Kenya, they want to get the same level of service that they have been receiving in their home market. Hence, this has been a key driver.
    
    At the same time, we appreciate there are a lot of other opportunities in different markets to which we can bring our particular brand of banking. We are known for being an innovative bank and we like to engage with likeminded innovative partners to speed up our penetration of financial markets in countries where we are not yet present.
    
    For example, we have very strong partnerships with Development Finance Institutions going back more than 20 years. This means that we can help them achieve their agenda for developing markets by jointly acquiring a bank, as we’ve done with prior acquisitions.
    
    So our strategy is clearly driven by our trade links as a country, but also by opportunities that we see in each of those markets.

  • You have been working as a bank executive across the region.
    Now, as CEO of I&M Bank, how would you qualify the comparative advantages of your bank at both local and regional levels?

    As a homegrown bank, I&M has been very intimately involved in the development of the country for the last 45 years. Which is why we have grown so rapidly, particularly in the last two decades, to coincide with the period of the opening up of the country as well.
    
    The approach that we have, always, is very relationship-focused, as we understand our customers’ needs intimately and that allows us to be a lot more responsive. When we started out, we were predominantly a corporate bank, which to this day still makes up about three quarters of our loan books, and this gives us the ability to move quickly when we want to make decisions for our customers.
    
    Corporate customers want a bank that understands that opportunities need to be seized quickly, and therefore they need their bank to be a quick decision maker on the credit side. They need a bank that, obviously, has a capital base to support them as they grow. In our case we can support lending transactions up to a hundred million dollars for a single entity. This gives them the comfort of knowing that as their needs grow, their bank will be able to support them.
    
    The fact that we are homegrown, we’re in the Kenyan market, we’re dealing with Kenya corporates, we understand them, we are making decisions locally, means that we are a lot nimbler in our decision making. Whereas having worked in other organizations, I know that decision making is often slowed by limited local approval powers. You may have to consult other colleagues located elsewhere, and that lengthens the decision-making process for a client.

  • What role is I&M playing Kenya’s drive to become a FinTech global hub, and how is this drive is changing the financial and business landscape of the country?

    We put a lot of focus on digitization as part of our strategy. We appreciate that technology in banking has always been very rapidly adopted because ultimately you’re trying to make it easy for your clients to do business with you. You realize that you’re dealing with significant amounts of data about your customer and about the environment in which you’re operating. You need to be able to manage all those sources of data effectively to make good decisions and to really help your customers grow in their business. At the heart of our strategy, we appreciate that data has to be well structured for us to be able to use it for our decision-making, and to give us insights on our customers so that we can truly be customer-centric.
    
    Everybody talks about being customer-centric, but that means really interrogating data, analyzing data to get insights about your customers and using those insights to improve your offering for them.
    
    For example, if we’re talking about sales, we want to be able to say to our clients, “We think that this is a solution that actually suits you because by analyzing our data we know that all customers that have a profile similar to yours tend to use this next product.” As another example, we can start spotting patterns of weakness in a customer’s books, and we can then intervene early and correct the path which they are on rather than wait for the time when things have fully manifested into non-performance. We’re able to use early watch-signaling through analytics to tell our customers that there are new opportunities to actually strengthen their business.
    
    We can also extend this to another very interesting area, which is what we call digital orchestration. We can create linkages between our clients and other partners on digital platforms that allow somebody who’s looking for a solution to find it in one place. If, for example, you are looking for a house, we can certainly give you the mortgage, right? But perhaps you don’t really know where to look for that home. Then, if we put you on a platform where we can show you a partner who is a realtor, it can show you different options on houses and that help you narrow down your choices a lot faster. If you then need insurance on that home, we’ll show you a partner who can provide that, and of course we’ll work on a financial solution that links many things all one in place, helping you make a very well-orchestrated decision on a marketplace. Like I said, we call it the digital orchestration model and it’s something that has a lot of applications for ecosystems that our customers tend to need.

  • What can you tell us about your in-house innovation hub iCube?

    iCube is what we call our digital factory, and what it helps us do is to develop the digital solutions for key customers’ journeys that we need to offer to be truly customer-centric.
    
    For example, we talked earlier about the customer onboarding solution that was done entirely by the digital factory. What they did was use agile methodology to develop the solution through which clients get onboarded via the web and from their mobile devices, by just simply uploading the key details that we ask for. The solution provides the links needed for verification of bio data, e.g. with the national ID database. Now we will be able to do things like facial recognition with our partner. It makes a very painful part of onboarding relatively easier, doing it straight from the comfort of your home. This is something that can even be leveraged within the branches, so that when a client walks into the branch and wants to open an account, we do the work through that digital platform to shorten the whole customer journey.
    
    We are about to launch a new corporate web application that has also been built by the digital factory. The process that they go through gets very interesting, because too often we tend to just simply go and get something off the shelf from a vendor and then try to customize it. But the agile approach used by iCube for developing this web application is pretty much like how a software house would do it, complete with bringing in different functions or teams that are going to be needed to inform the solution and including customer feedback in the process.
    
    If you look at a typical mobile banking app, you're going to have a login screen. The design of the login screen is going to impact your customer’s experience, so we want to test that with the clients. iCube will go and do the consumer research to get that feedback incorporated in the solution. What kinds of things do you want to see in mobile solutions? We look at all the things that would go into what we call a “minimum viable product” and build all of that through an iterative process using agile methodology and then launch that minimum viable product. It’s a full product, ready to go, but after that, as clients continue to use it, they will be saying, “Oh can we do this? Can we add that feature?” So you keep on updating, just like you see with other software products.
    
    That's the kind of thing that the digital factory does, and we intend to use them for all the different digital initiatives that we have, whether we are talking about trade finance, other payment solutions and so on.

  • How do you see this drive evolving in the next 3 to 5 years?

    Interestingly, while we are perhaps one of the banks at the forefront of digitization, all banks recognize that they have to do it. If you consider the whole landscape of digitization, it will cover everything from connectivity to how you engage with your clients to what platforms you engage them on. Is it mobile devices over the web, and how? Is it your physical network? So you have to think about how technology is transforming that space and then see how you as an organization actually interact with that technology to connect better with your clients.
    
    You also have to think about automation. As banks, we tend to be very rigid because regulation sometimes forces us to do certain mandatory things, and we embed that in a lot of our processes. Sometimes things will change in the environment that call for a process change, but you find that you're still asking for documents, asking for steps in the process that are not actually necessary. Then you need to rethink your processes from the ground up and say, “if I were building it today, how would it actually look?” So, process revisiting, and then saying, “Out of that, what can actually be automated?”
    
    Automation is a critical part of the digitization landscape. We will be streamlining the process, then automating it and then incorporating things like software robotics to use software robots to help speed up the process.
    
    The other area that we've been looking at is the innovation space, and here is where the whole concept of Silicon Savannah really comes into its own. One of the things that we realize is that we can't build everything ourselves, so partnerships are critical. We don't see FinTechs as competitors, we see them as partners. We will reach out and work with relevant FinTechs to help build the solutions because we recognize that they have been just as rigorous as we are in developing their solutions; then, rather than build what they already have, we might as well just incorporate their solution into our customer offering. The leveraging of such strategic partnerships informs the innovation side, and we don't have to build everything, as we can just have them work with us.
    
    The last thing I see on the digitalization side, where we recognize and value data, is in informing decision making. How do we strengthen the use of data analytics in our decision making, in everything from where we locate a new branch or relocate an old branch or position a new service like a cash-accepting machine or ATM, or how do we decide on our risk metrics for a client? Or, if you want to get early watch signals to tell us that our client is at risk, how can we use data to tell us that? Decision making is a key part of any digital strategy.
    
    Therefore, how will all this shape the next few years? The interesting thing is that because the speed at which data is being created and the rate at which technology is changing are exponential, you can get much better and cheaper storage. As computing power is also increasing very rapidly, it simply means that you're going to get more and more streams of data coming towards you. This in turn means that if you do not increase your strengths in managing data as an organization, you're going to fall behind, and that's when disruption comes into it. Because if somebody else, without your legacy issues, is going to simply focus on particular aspects, it can disrupt, for example, the payments space, and you find suddenly that you're playing catch up in an area where you dominate. So you have to look at how or what approach you must take with the digitization to make sure that you stay competitive in this new dispensation. It is only going to get tougher going forward.

Valued by BMI Research at US$635 million by the end of 2020, Kenya’s ICT market leads in East Africa, making the country a regional hub. The fourth industrial revolution, new disruptive technologies, and a young, tech-savvy population have propelled Kenya to the forefront of the sub-Saharan innovation landscape.

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  • Back in 2014, you co-founded Twiga Foods as a digital B2B platform to build fair and reliable markets for agricultural producers, food manufacturers, and retailers.
    How was the idea of setting up the company brought about?

    The idea was set to address the problem of the fragmentation of the retail industry in Africa. For comparison purposes, in the US or Europe the top 10 retailers account for maybe 50% of the market. That allows for a fairly consolidated ecosystem that builds a lot of supply chain efficiency. In contrast to that, 90% of the retail industry in sub-Saharan Africa consists of informal and small independent retailers. That level of fragmentation creates a very informal and inefficient supply chain. This translates to the consumers in Africa paying more for food and other goods than consumers in most developed markets, both in absolute and relative terms to their income. What we are building is a technology-enabled platform that allows the seamless flow of data across different parts of the supply chain, creating an integrated ecosystem, which unlocks transformational efficiency in planning and executing in this fragmented environment. 

  • How was the technology involved organized?

    Technology plays a critical role in helping us serve over 100,000 customers on our platform, with 10,000 active customers every day. Orchestrating this complex supply chain involves leveraging capabilities like machine learning in delivering close to 600 metric tons of product every day and keeping the promise of delivering every order on time and in full. On the other hand, our retailers access our services on a mobile app, integrated into our cloud-based system. In a nutshell, we set out to build a predictable and efficient technology-enabled supply chain in an informal environment that is plagued with infrastructure deficiencies.

  • Could you describe Twiga’s process when approaching producers and vendors, with little if any knowledge of technology?

    We are witnessing a very significant shift from a technology perspective on the African continent. Telecommunication companies are facing an imminent disruption from digital services like WhatsApp that are eroding voice and text revenues. This has led to an aggressive push to update infrastructure from 2G, 3G to 4G+, within a very short span of time. This has pushed a significant number of consumers to access internet services through the mobile phone in a very short span of time, some of them for the very first time. Complementing this trend is the increasing number of affordable smartphones, which is driving the rapid adoption of mobile-led internet access. Just to give you some idea, 12 months ago maybe less than 10% percent of our revenue came through our mobile app, compared to 70% percent today. That's in the span of 12 months. Applications like M-PESA in Kenya have also exposed consumers on how to access mobile digital services, through various formats including an app. This makes it easier to build on this foundation as you develop new digital products. We are really excited of these new macro developments because it creates significant opportunity for mobile-led technology applications in Africa. 

  • You have solid experience as a top manager for The Coca-Cola Company in Africa.
    How does this experience currently help you in running Twiga Foods and its plans to expand through Africa?

    I worked in Coca-Cola for 21 years. For 6 of those years, I was CEO for the business in East Africa and for 3 years I was President for West and Central Africa. These roles gave me the opportunity to directly manage 40 countries across sub-Saharan Africa, which gave me a front-row seat in witnessing the challenges of distributing products where you have a highly informal retail industry. The experience in resolving a myriad of challenges in distributing beverages gave me a clear understanding of the challenges we needed to overcome in modernizing the food supply chain. This has allowed us to use technology and build the most extensive and lowest cost distribution network in Kenya, which is the template we will roll out to other African markets, adapted to local realities.
    
    Our Africa expansion plans are anchored on 4 strategic hubs. The East African hub, which will include Kenya, Uganda, Tanzania, and Ethiopia. The West African hub anchored on Côte d'Ivoire and covering Ghana, Burkina Faso, and Senegal. The Central African hub anchored on DRC and covering Angola and Congo. Nigeria will be a standalone opportunity due to its size. These hubs will cover a significant part of household spend within Sub-Saharan Africa. 

  • What started as a platform dealing with agriculture fresh produce has now evolved to a sort of “Agro-Amazon”.
    Was this evolution embedded in the original idea?

    Like any opportunity, perspective in the initial phase is usually narrow, and as the Company matures, there is a natural progression to look at the opportunity more broadly. We started out by selling bananas, but, every day we visited our customers, they asked us for more products and that is how we started expanding our portfolio to what it is today. Our vision is to become the one-stop shop for informal retail in the markets we operate. It was the same thing with Amazon, they started with books and it made perfect sense, but, as they identified other needs within their customer base, their portfolio expanded to meet those needs over time.

  • You are adapting to the opportunities that you're finding. What about the challenges?
    How easy is it for you to find the right talent to actually develop these solutions and to be able to enhance the solution that you initially developed?

    Sourcing and retaining talent is a strategic advantage in the fast-paced world we have today. The competition for talent has become a significant challenge in Africa. A few things have helped us:
    
    a. Building a reputation for being a great place to work in the market.
    
    b. Measuring employee engagement, benchmark yourself to global norms, determine pain points and establish initiatives to solve them.
    
    c. Rewarding the team for value creation in the business through an ESOP.
    
    This is critical in ensuring that you build an engaging and entrepreneurial culture.

  • Twiga Investors come from various directions, from well-known investment banks like Goldman Sachs to multilateral agencies like IFC or KFW. I understand Twiga and IFC are proposing a collaboration with Tier 1 banks in Kenya on investment of up to US$30 million to irrigated medium-scale contract farms to complement Twiga’s seasonal smallholder farmer supply base.
    How may this collaboration expand in the common goal to empower small farmers?

    Our business model seeks to address food security in urban cities across Africa. The domestic-focused agricultural industry is plagued with low productivity, high post-harvest losses, and high levels of informality that engage in dated methods of production. This leads to the high cost of food, both in relative and absolute terms. To illustrate this point, a ton of tomatoes in California costs $100, while a ton costs $410 in Nairobi, Kenya. One of the wealthiest states in the US is paying 25% of what the lesser financially endowed residents of Nairobi are paying.
    This is also evident in the fact that consumers in the US are spending about 7% of their disposable income on food, while the consumer in Nairobi is spending circa 50%. The main driver of this has been the fragmentation of the retail industry, which leads to poor market access, consequently discouraging commercial investment to solve the problem of expensive food.
    At Twiga, we are building a solution to addressing food security in Africa, anchored on:
    
    a. Aggregation of demand using technology, creating predictable models of daily consumption in cities.
    
    b. Leveraging the consumption data to establish a Globally competitive, well-capitalized, and modern food production eco-system.
    
    c. Investing in the supply chain to manage post-harvest losses to well below 5%.
    
    The partnership with IFC is to help empower medium-sized farms to build this world-class production eco-system.

  • Would you say that that has been the reason why you've been so successful in sourcing the funding for where you are today?

    When I reflect on the journey, it has not been an easy one, but, a couple of things have helped:
    
    a. We are solving the big problem of food security in Africa and this presents a significant upside for all stakeholders.
    
    b. Over the years, we have built a credible team that has executed against the bold vision and delivered on commitments.
    
    c. We have built a world-class governance structure that gives a lot of investors peace of mind.
    
    This has also been anchored on being consistent with our communication and storytelling over the years on who we are and what we stand for.

  • Twiga Foods Ltd, was selected among hundreds of candidates as one of the World Economic Forum’s “Technology Pioneers” last year. Quoting yourself “We want to be a one-stop-shop for informal retail through technology in Africa”.
    How do you plan to expand into other African countries?

    The population in Africa is concentrated in a handful of cities, in key countries, fueled by population growth driven by the high rate of urbanization, which at circa 4% is the highest in the world. Taking this into account, our Africa expansion plans are anchored on the 4 strategic hubs I mentioned earlier, East Africa, West Africa, Central Africa, and Nigeria. These hubs will cover a significant part of household spend and population within Sub-Saharan Africa.

  • For that expansion again you're going to need some funding. Is there any plan to list yourself in the Nairobi stock exchange or anywhere else?

    Yes, we are definitely looking at the opportunity to a public listing within the next 5 years, driven by the need for a significant amount of capital to scale the business and solve the challenge of food security across most of the African continent. As we build a sustainable and profitable business that also has a significant social impact, it’s critical to find ways to raise capital efficiently in the long term. We remain open-minded about potential IPO jurisdictions, but, we have set our sights on London, New York, and the NASDAQ or a possible tie-up with a global strategic player.

  "I would say that for us as Twiga, we're building the operating system for informal retail across Africa. We plan to impact millions of people by making access to food more affordable and playing a critical role in addressing the elusive challenge of food security."

  Mr. Peter Njonjo

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  • Founded in 2015, Sendy has become a leading logistic company in East Africa and is about to jump into West Africa.
    What was your mission when the company was conceived?

    Our intention and mission here at Sendy is to make it easy for businesses to trade. When the cost of logistics is up to 60% of the value of products on the shelves, logistics becomes a barrier to trade. If you're buying a product at US$1 and then you're spending US$0.60 to move it, that makes no sense. So this is actually what prompted us to start Sendy.
    
    We started looking at past experiences with the whole market, and one of the things that really struck us was looking at the logistic market in Kenya and also across the continent. It was very fragmented. You have logistic providers hovering between 1 to 5 vehicles. How do you actually aggregate that? By bringing them on one platform, building efficiencies and trust as well using technology to actually help businesses to trade with ease and reduce cost. That was the intention.

  • After the successful financing round that took place right before the pandemic, Sendy was able to raise enough capital to expand beyond East Africa.
    To what extent has the COVID-19 pandemic altered these plans?

    The pandemic presented us with two kinds of extremes. The first extreme is the opportunity, although I don't like calling it opportunity. How do you help these businesses trade online? How do you help them accelerate that by the end of the year?
    
    We took a bet in 2015, and of course that had been growing slowly year after year. I mean, still growing double digits, sometimes triple digits, but when the pandemic hit, the growth skyrocketed. It means the things we’d created four years ago have come full cycle. That challenged us to really step up and scale to support these businesses. That's the one extreme.
    
    The other extreme is the challenge. We had a plan to expand. In 2020, as we all know, no one wanted to travel, no government wanted to receive you. We planned to expand in a couple of countries in 2020 and that was not possible due to the travel restrictions. The other thing that we faced is we had borders closed, and that meant that the whole supply chain was also affected. The cost of logistics went up, and we were kind of realizing that we can’t really influence that. Because once a global supply chain collapses, you just trickle down.

  • The company has got the support of Toyota and Atlantica Ventures, a Nigerian venture capital company.
    How will the participation of these two companies contribute to the short- and long-term goals of Sendy?

    I'm working together with them to finance, for example, vehicles to drivers, help in terms of maintenance, help in terms of safety training. In the short term, that actually makes sense for us.
    
    In the long term, if you’re moving goods from point A to point B, you still need the trucks. How do you work together with them to provide efficient mobility solutions so as to continue bringing down that cost?
    
    Working together with Toyota to aggregate the demand, and working together to create those mobility solutions that help us accelerate and adapt to the quarter is super important to us. Atlantica Ventures of course is initially j getting the investment for us to be able to grow.
    
    So, having that expertise helped us launch new products like we did during the pandemic that skyrocketed, having the business continue to trade. With those two partners I think we are well-positioned to scale up across the continent.

  • How would you assess the impact of using the Sendy app in terms of cost-saving and efficiency?

    The market was super inefficient in terms of economy of scale. When you use technology, you aggregate a fragmented market and the first thing that immediately happens is people start enjoying the economies of scale. Using data, using performance metrics we’re able to kind of look remotely at what the most efficient vehicles actually moved, predict what's going to happen across the week and how we help them plan those routes as well. That combined both economies of scale and the performance metrics on the data, and of course using technology to do that helps us reduce these costs. We've reduced up to 40% of their logistics cost.

  • How would you define Kenya’s entrepreneurial environment when it comes to innovation?

    I would say very vibrant. Having been in the ecosystem for the last 11 years or so, it's really growing. We see big tech companies like Google, Microsoft setting up development centers here, so, that means there is talent. There’s engineering-product talent and strategic human talent in this market. I think that as you catalyze the whole growth of the ecosystem, you are challenging the new entrepreneurs as well. You talked about penetration, and we see that of course having that information available to everyone, having fast Internet as well, creates a great opportunity for us entrepreneurs to be able to solve these challenges across the continent.

  • How would you define working at Sendy?

    I would say exciting because we're creating solutions. You actually see the impact of what we do on a day-to-day basis. You’ll find a retailer saying, “You know, my margins have improved because you have improved the logistics of the supplier side and been able to push more rebates or margins on my side.”
    
    So it's very fulfilling as well to see our work have a direct impact on the communities that we live in. The reward is there: You see a small driver making income and buying the next vehicle; you see it. We actually created those tools that bridge the gap between someone spotting an opportunity and actually earning a living from it.

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  • Telkom was established in April 1999. Since 2016 it has been 60% owned by Helios Investment Partners, a private firm based in London with investments throughout Africa. The other 40% is in the hands of the government of Kenya.
    What did the entry of Helios, as its main shareholder, mean for Telkom Kenya?

    A shot in the arm with respect to Telkom’s growth strategy, as well as renewed confidence from global investor circles. The ripple effect was evident, the entry of fresh talent that began to turn the tide on a legacy culture and work ethic, with a renewed focus on the customer and their ever-dynamic needs.

  • Telkom competes with two main operators in Kenya’s communications scene.
    How would you assess the stance of Telkom and its competitive advantages?

    Telkom is focused on being an agile player in the market. This is to say that we commit to quickly adapting to changes in the market, customer demands and technological advancement; our strategy is not cast in stone – we evolve as the market evolves, more recently trying to anticipate the market in an increasingly virtual world. Access to the Internet is a very important part of our long-term strategy, and with data now becoming a basic need, the provision of a stable service has to be the focus of any technology company.

  • Two years ago, there were talks of a merger between Telkom and Airtel, which did not end up happening.
    Do you think that Kenya’s telecom operators need to increase their size to compete in a pan-African landscape?

    Indeed, they do. Economies of scale are a major advantage for multinationals or large operations, allowing for more cost-effective supply chain arrangements and market distribution networks. Thus, in order to be able to compete at a pan-African level, enhancing the scale of operations would be a definite plus.

  • Telkom Kenya plans to invest in a new submarine fiber-optic cable system. By the end of 2021, the new cable system aims to connect Kenya with Asia and Europe.
    What is the strategy behind these investments?

    Telkom’s investments in submarine cables now has the business operating and maintaining two of the region’s main cable landing stations, which host all cables terminating into Kenya. Strategic interest in this delivery infrastructure is growing, due to the sharp increase in the demand for Internet services. Guided by the nature of services needed in the market today – cloud computing, streaming, connected devices – and also taking into account the end-users’ demand for seamless service provision with minimal latency, service providers now have to ensure that they make high-speed Internet accessible to more people, and that it works quickly and smoothly. Therefore, investing in submarine cables is a strategic imperative for Telkom Kenya.

  • Companies like Telkom are always at the vanguard when it comes to generating a network of SMEs to supply services and products.
    How is Telkom supporting this?

    Technological advancement is a key economic driver; it helps to power businesses, thereby improving their efficiency. Telkom’s long-term target is to become a technology company of the future, putting strategic investment into the development of its human capital, its infrastructure, systems, and processes for it to become future-fit. This will enable us to provide competitive and innovative products and solutions that will help SMEs and companies generally to improve their productivity and consequently drive economic output.

  • As an entrepreneur with a long experience in corporate positions, and as a former head of Kenya Vision 2030, how would you assess Kenya’s entrepreneurial culture?

    Kenya has a dynamic and relatively (continentally) educated population. Furthermore, more than most other African countries, Kenya has a post-colonial history of free markets and a robust private sector. There has, accordingly, been engendered a pretty strong entrepreneurial culture with Kenyans – young and old – branching off to start their own businesses and innovative initiatives. As the fourth industrial revolution set in, young Kenyans – aided by an enabling policy environment – joined the global startup movement resulting in several incubators of continental note such as the iHub. Therefore, it is safe to say that Kenyans are amongst the most entrepreneurial people on the African continent.

  • Foreign Direct Investment has been key for Kenya’s amazing growth path in the last 10 years.
    What would be your recommendation for opportunities in this decade to foreign investors currently eyeing Kenya?

    Technology and agribusiness are fantastic investment sectors; the country’s technology sector is growing, with the government’s key development pillars remaining heavily reliant on ICTs. Therefore, various actors in the tech ecosystem will be welcome to help power the country’s long-term national goals. A robust agribusiness environment gives a nation comfort with respect to food security – a basic need, globally. Kenya has the ability to grow sufficient food quantities for local consumption and for export. Further investment in this sector is needed to be able to effectively drive this.

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  • From consumer goods to solar systems, smart phones to cash:
    Was it your initial business plan to provide so many different services to the low-income population?

    What we’ve accomplished today is very much where we expected it to be when we started at the very beginning. It's true that M-KOPA is widely understood as a company that provides energy and the form of solar power to now over one million homes. Solar followed the core business idea which we now refer to as “connected asset financing.”
    
    What we mean by that is we identified, about a decade ago, the opportunity to provide life-enhancing products to low-income customers who otherwise struggle to afford them, and we make those products accessible and affordable on what is now widely known as a pay-as-you-go basis. So I get the product and instead of spending $200 in one go, I can spend $0.50 a day for a year and purchase the product progressively over that time period.
    
    That was the real idea, the whole financing that was enabled because of technology; specifically in Kenya, the advent of M-PESA and mobile payment. We’ve connected it with the Internet of Things to make connected asset financing work.
    
    Another important thing in M-KOPA’s history is that the team that founded the company all worked at M-PESA before. I worked at M-PESA fifteen years ago and was part of the team creating the rails of a cashless society. That was what inspired us to think ahead about what would come next, and M-KOPA was the result.
    
    The original idea for the business was always to offer a connected asset financing proposition. It then happened that solar was the right sort of first-product category for us 10 years ago, and continues to be an important product category, especially in Kenya. But now that we are in the financing of other assets as well, like smartphones, we're seeing the full expression of the original business idea come to life.

  • What has it been like to find the human capital with the right set of skills in Kenya and Ghana?

    There is so much skill and talent in all the markets where we operate. I think in a COVID-era, where the world is virtual, talent is very available because there are so many ways in which to work with people.
    
    The challenge is often in the speed of growth. We have grown very fast in certain periods, and it's harder to keep the culture and the values when you're growing so fast. I think it’s more challenging to keep the pace and do it well, and I don't think we've got all the answers as a company. But we're very committed to trying to grow a great human organization by maintaining our values, and we intend to commit to training and engagement. I must say that our best couple years have been since last year despite COVID. It was a challenge for so many companies to go fully remote, to change the way they work together without travel and understand the different stresses folks are having whilst working from home, such as looking after children who can't go to school, and at the same time, looking out for people's health and safety.
    
    Being a human-centric organization, which I really believe we are, it played well. It became a real strength of the company, as engagement scores increased during COVID, even though people could not physically be together.

  • Your founding team is made up of non- Kenyans.
    How would you define what you encountered when you arrived in Kenya in terms of the entrepreneurial spirit and the technology development?

    I think Kenya has a standing entrepreneurial ecosystem; a lot of that is enabled by or has been enabled in the last 10-15 years by M-PESA. You've got arguably the world's leading country for going cashless and the rails of that have been fundamental to so many companies being able to innovate and build on top like we have. What has been going on in Kenya for the last 15 years, partly because of M-PESA, partly because there's quite strong Internet connectivity, is getting better all the time.
    
    Kenya has great engineering talents and an entrepreneurial population. Taking those things together, you're going to get a lot of great innovation in the ecosystem. It's been very exciting to see what's happening, and I think a lot of what is growing in Kenya today is expanding and impacting other markets. I mean, there are also a lot of impressive innovation ecosystems in other parts of Africa. Lagos is home to some great innovations and companies doing really cool things. But Kenya has certainly been a very inspiring place where to build a company and spend several decades of life.
    
    I must say that part of the reason I wanted to move to Kenya from Canada to start the business was the feeling that in Canada the entrepreneurial speed wasn't there; there are some reasons for that, but from a telecom perspective, Kenya has moved much faster into the mobile era and much faster into the cashless era than my home country.
    
    If you are an entrepreneurial person and an innovative person by nature like I am, Kenya is a much more exciting place to be than maybe where I grew up.

  • After 10 years since inception, you have been recognized as one of the most innovative companies in Africa.
    How do you see M-KOPA in the midterm?

    Continuing to focus on innovation and product development and continuing to focus on customers’ needs are key to success; those things remain paramount in our business strategy. We are already working on additional products. They'll be on solar and on smartphones, on what else can we finance to customers.
    
    The next frontier that we’re already piloting in Kenya right now is electric motorbikes, what we call “M-KOPA Mobility.” That's an area of big R&D focus for us right now, and we think will be a very huge opportunity both to have a great environmental impact and ultimately enable our customers to access life-changing products that help them with economic activity and transport in a meaningful way that is otherwise out of reach.
    
    I think there are many other markets, like Ghana, that we could succeed in, and we will continue to expand our footprint but with that heavy dose of humility. I think by tying all those things together, we are just becoming a very large company. We have 1,400 employees as of today plus 7,500 direct sales agents; growing from a 10,000-person organization to 20,000 then 30,000 requires that continued focus on culture and training and keeping the team very clear on what our strategy is, what our business plan is and what their role is in delivering that. It’s a key part of growing a successful business.

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  • The government plan to fast-track Kenya’s economy within the Vision 2030 framework, known as the Big Four Transformational Agenda, has manufacturing as the first pillar.
    What were the main achievements of the sector in the pre-pandemic scenario?

    The goal of the manufacturing sector prioritized under Kenya’s Big Four Transformational Agenda is to increase contribution to the GDP to 15% by 2022, create an additional million jobs, increase the level of foreign direct investments, and improve the ease-of-doing-business ranking.
    
    To grow the manufacturing sector, there is a need for the increased purchase of locally produced goods and services by both the public and the private sectors. In keeping up with the "Buy Kenya, Build Kenya" campaign, the ministry continues to prioritize necessary support and incentives to enhance local industry competitiveness.

  • What has been the impact of the pandemic in the evolution of the plan?

    A survey undertaken by the Kenya Association of Manufacturers and KPMG of about 180 industries in the EAC found that about 40% of workforce has been reduced, with most manufactures working to reduce cost, retain jobs and improve cash flows; 91% of non-essential goods manufacturers have seen a significant fall in demand compared to 74% of essential goods manufacturers.
    
    However, the current pandemic has hastened several trends, including local sourcing and innovation as manufacturers change their lines to produce critical and essential items to be used in the fight against COVID-19.
    
    The ministry has been encouraged by our local manufacturers, who have responded well to the crisis with innovative solutions, to build capacity for the local production of critical supplies such as ventilators, PPEs, thermometer guns and HDU beds among others.
    
    The juakali sector, comprised of informal traders and artisans who work at the roadside and market centers, has a key role in the manufacturing pillar of the Big-4 Agenda. Provision of common user facilities and equipment to the sector by the Micro and Small Enterprises Authority is helping to boost production, quality and efficiency in the juakali sector amidst the current challenges brought about by COVID-19.
    
    A nanotechnology and semiconductor manufacturing facility opened in April 2021 reiterates the importance of Public-Private Partnerships (PPP) in advancing the manufacturing pillar of the Big-4 Agenda. The company, which is the only one of its kind in Africa, produces integrated circuits, sensors, and related nanotechnology products for the world market.

  • What new opportunities and advantages does Kenya offer foreign investors to fulfill its ambition of becoming a manufacturing hub?

    The Kenyan government has transformed the manufacturing sector in a number of ways, including through transport infrastructure upgrades that encompass the building of modern railway systems, major highway and bypass road construction, and upgrades to our international and regional airports and airfields.
    
    The ministry and the Kenya Revenue Authority have been receiving and processing applications for the manufacture for raw materials and intermediate inputs, in order to benefit from reduced rates of import declaration fee and Railway Development Levy. Once in production, the ministry will propose positive taxation regimes for the locally manufactured products to compete with other similar imports.
    
    The structure of taxation – in terms of both income and value-added tax (VAT), as well as excise duties – is also a key factor in attracting FDI. Because of this, in recent years Kenya has signed double-taxation treaties with various countries, including Canada, Denmark, France, Germany, India, Iran, Mauritius, Norway, Sweden, the UK, Zambia and South Africa. Most of these agreements offer preferential tax rates and allow individuals to set off withholding tax against their tax liability in the participating nations.
    
    The EAC as an economic bloc has also created double-taxation treaties with partner countries such as Kuwait, Iran, Mauritius and the UAE, which are pending ratification.
    
    In our quest to become a regional manufacturing hub, priorities have been set to expand and modernize the industrial sector, with the development of special economic zones, industrial parks and clusters, and niche products. There is a wide range of direct and joint-investment opportunities in this sector, including agro-processing, garments, the assembly of automotive components and electronics, plastics, paper, chemicals, pharmaceuticals, metals, and engineering products for domestic and export markets.
    
    Furthermore, Kenya has a vibrant investment climate characterized by stable monetary and fiscal conditions and a legal environment that makes no distinctions between foreign and domestic investment.
    
    Kenya also has a strong telecommunications infrastructure, a robust financial sector, and it is the major trade and investment gateway for much of East Africa, with a well-educated population and a growing urban middle class.

  • Dubbed the Silicon Savannah, Kenya acts as an entrepreneurship incubator and developer, showing the ability of the nation to produce high added-value products and services.
    How does that impact innovation in the economy as a whole?

    Nairobi is regarded as “the mother of mobile money” and a mecca of innovation and diversity. The city has more than 200 tech-focused startups, and offices of tech giants Google, IBM, Intel and Microsoft. According to a report by tech-investment platform Partech on Africa’s tech startup sector, Kenya is outperformed only by Nigeria when it comes to equity funding from tech venture-capital firms.
    
    Kenya’s government is at the forefront of technology development. Investors are being lured to Nairobi and are heeding the call positively, so the city has positioned itself as an investor-friendly hub.
    
    In addition, the government has always demonstrated its willingness to support industry innovation, for instance, through initiatives like The Kenya Industry and Entrepreneurship Project (KIEP) implemented by the ministry with support from the World Bank Group.
    
    Between 2019 and 2024, KIEP aims to increase innovation and productivity in select private-sector firms in Kenya by strengthening the private sector (including startups, SMEs, incubators, accelerators, technology boot-camp providers, etc.) through financial grants and technical assistance.
    
    And Kenya is a particularly popular destination for agricultural technology, with a whopping 79% of total equity funding throughout Africa for this vertical-flowing into the country, as well as off-grid tech through which Kenya receives almost 40% of the continent’s total funding. We are home to startups using artificial intelligence to support precision-farming methods, which involve deep analysis of satellite-imagery data to project rainfall and drought patterns, thus helping farmers plan more accurately for the future.
    
    And thanks to the undersea fiber-optic cable, Kenya is now characterized as a truly connected landscape, with one of the fastest mobile-communication speeds in the world. Mobile networks are thus leveraging this strong demand to offer Kenyans a variety of services that they can access through their phones for significant convenience. In turn, this has helped to boost financial inclusion throughout the country, which is stimulating further growth of Kenya’s already dynamic FinTech scene.

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  • The winds of innovation keep blowing across several sectors of the Kenyan economy.
    What importance has research and development (R&D) had in the growth of a family company like yours?

    R&D was a passion for Dr. Kirubi, my late father. He used to talk to our R&D manager on a weekly basis. So yes, with COVID we acted on the opportunity in a very timely manner. We had a great impact on the community, hospitals, governments, schools in donating sanitizers when the country didn't have any. It was very rewarding for us that we were able to support our country and our people without having to import sanitizers from India or from China. But then again, all the other markets had a shortage of sanitizers, so it's not like we would have been able to go and get them from outside the market. We also entered into the area of disinfectants and antibacterial home-cleaning products. That became our hygiene package, which we now sell to institutions. We just completely started a new business line altogether.
    
    We rolled out 12 new products in the middle of a global pandemic. The other thing is that of course every country saw that we have to become more sustainable. In Africa that's one of the key learnings, and we've discussed it many times in the Kenya Association of Manufacturers. We can’t be relying on India and China for the raw materials if there are no ships coming in from India because India is in lockdown. What are you then going to do, right?
    
    Our R&D department looked at alternative sourcing of raw materials. I'm very passionate about sustainability, and it really is a huge item in our growth strategy. We looked at sourcing as many raw materials locally as we could. Of course, there are some that you can’t find and you have to get from India, China and from the US. However, when you look at cost reduction, it's much cheaper to be able to source from Africa, from Kenya. When you look at the impact that has on our economy, i.e., job creation, enhancing and growing SMSs that supply you with the raw materials, it is just something that we strive to do every day. Through our R&D, with our personal care and haircare products we've gone into natural oils very heavily. Natural oils are a big trend across the world. Africa's very rich in these natural oils; whether it's coconut, avocado, argan or jojoba oil, whether it's shea butter, cocoa butter or mango butter, they’re all coming from Africa. What used to happen before 2019 was that we were buying avocado oil from Europe. Which meant that the oil would be ten times the price. It actually originated in Kenya, but because you're now buying it from Europe, the finances just don't make any sense.
    
    Now we're partnering up with the farms, and we tell them: “These are the quantities of avocado we require, let’s get the oil and we pay you directly.” It has made us more cost-efficient, it enabled us to start programs with the farmers. We go back in and we educate them, we support them buying technology for pressing the oil, and we provide a sustainable market for them.
    
    R&D for us is really a core function within the organization; it is one of our starting points. Our main starting point is marketing, identifying the consumer and then after going to R&D and asking how we take advantage of this opportunity. How do we create an impact in our economy and the economy that we operate in? At the end of the day, that's what HACO is about.

  • What would you say are the opportunities to be found in the manufacturing sector in Kenya, but also which are the speed bumps still ahead?

    I will start with the speed bumps. The cost of power in Kenya is very high. When you compare our cost of power to countries like Egypt, it’s not competitive. That's why you will have a lot of multinationals moving their manufacturing units to Egypt and just having small satellite offices in places like Kenya. It's a discussion that we continue to have with the government, but I think it's just the way the structure of providing power in this country is defined. There’s still a lot of work to be done, but that is a very big speed bump.
    
    We have said that we can’t sit here and cry every day that the power is expensive. We have sunshine pretty much twelve months of the year. How do we use that? So we're moving into solar and actually setting up our solar plant now. Our whole plastic-container manufacturing plant is going to be solar-based. We can then use that money to reduce the retail price for our products because we're aiming at the bottom of the pyramid, and a product should be as affordable as possible.
    
    Another speed bump is changes in the Kenyan tax regime. The government is quite financially strained. They are increasing the taxes across the board, and not just for the manufacturing sector. That makes it very difficult for somebody who's in business to be able to plan for five years and define the strategy. You will define your strategy today, in 2021, but tomorrow you'll get hit by a new tax and it will completely change your financials. You have to go back and review your structure and come up with new strategies, and therefore it does create some form of instability. That is a continuous discussion with the government and with KAM.
    
    Another speed bump is logistics across East Africa and Africa. As we try to put into place the Africa Continental Free Trade Agreement, the issue of logistics will have to be looked at by each country. They will have to open the trade barriers because they still do exist, and they do make you think twice about whether you want to start exporting products to Zambia, for instance. There we have seen challenges, and I think more support is required from the government or it's a chicken-and-egg situation. If you overtax us, our businesses are constrained and then we cannot create more employment. Those discussions and conversations have to go on. The government has to continue to support and buy from local suppliers. And we have seen the government still procuring from the West or from Asia. The government is the biggest buyer in this country. If they don't support local businesses by procuring from local businesses, then it just makes it that much tougher for us to survive.

  • And where do you see the opportunities?

    To me the biggest opportunity is that Africa has a population of 1.3 billion people, 16% of the world's population, and it is completely underserved in many areas. We need to create more employment in Africa. And the way to do that is to create more manufacturing companies. We need to set up manufacturing companies in the DRC, in Egypt, in Nigeria, in Ghana, Zambia and Malawi. Because that's how you will create employment, and that is Africa's biggest problem. I think as Africans we are scared of going to explore neighboring countries. The anglophones are afraid of the francophones because of language barrier and vice versa. Francophones are afraid to come to anglophones because they might feel more connected to France or French-speaking markets in the West. All in all, as Africans we need to look more at Africa and not be afraid of one another, and realize that we are very rich in natural resources. We need to source our raw materials from the continent because when we go and buy them from China, they are actually initiated in Africa.

  • What do you look for when a partner comes to you?

    That’s an interesting one. They come to us because we know the market. We are already established in the market. I look for companies that are committed to the African consumer. By commitment I mean people who want to come and manufacture high-quality products and sell them at affordable prices. I look for people who want to actually come and be our partners to help us grow our current existing business, because we have quite a good business. Not somebody who's simply interested in my infrastructure to achieve their own goals.

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  • The Kenya Association of Manufacturers (KAM) has accompanied the evolution of the country’s manufacturing sector since 1959.
    Which moments would you highlight in these 62 years of existence?

    For me KAM has been for over six decades and remains a strong voice for collaboration, dialogue and partnership with the government and other players who are interested in industry and the manufacturing sector in Kenya.
    
    The most memorable moment, as far as I am concerned, was two years ago when we were celebrating our 60th-year anniversary. We were able to take stock and look back at how we had grown over time into a sustainable and formidable organization that remains relevant in terms of representational members.
    
    That was the opportunity to show that 60 years later we can be a strong institution that determines, that drives and influences the policy and advocacy space, and not just in Kenya but in the East African region and African continent.
    
    Another memorable moment was in 2014, when we opened KAM House. We have a building in Nairobi that His Excellency the President came to inaugurate. That also demonstrates the seriousness with which the sector regards the organization, to the level that it’s been able to invest in it and provide it with a form of grounding financial stability.

  • Manufacturing is one of the main priorities for Kenya’s development, one of the four driving economic pillars of the current administration.
    What would you consider the main competitive advantages of Kenya in this sector?

    As you mention, manufacturing has been identified as a priority over the years, and within Vision 2030, which is the government's development plan. The ambition is to see the sector contribute to job creation in the country, growing at 10% every year, so that eventually we’re contributing about 15% of the GDP of the country.
    
    In terms of competitive advantage, I think first of all there is our location, which gives us an opportunity to undertake a lot of agricultural activities and then provide the resources that can be utilized for the sector. We are also privileged to have a port that's quite developed for this region. The port gives us access to raw material, to imports, value addition and the ability to also utilize it to export the goods that we manufacture.
    
    Another competitive advantage is, of course, the fact that a customs union and the common market in the East African Community moves the population from the 55 million people in Kenya to nearly 180 million in the region as a market.
    
    The other one is, of course, our educated workforce and population in the context of the region. Also, we are an aviation hub in the EAC, which makes it easy for business to come in and go out.

  • Regarding exports, the strategy seems to be the identification of global market niches where Kenyan products may compete.
    How is this policy evolving?

    We have the National Export Development and Promotion Strategy (KEPSA) that was laid out about three years ago. It delves into sectors. For manufacturing, it’s going to look at the products that have competitive or comparative advantages and then consider how we can get them to work better in the strategic markets.
    
    One of the keys to the African market is the fact that we are in the African Continental Free Trade Area and our manufacturing goods can do well within the countries in the continent. And we’ve also prioritized, through chain agreements, the US market. There is an opportunity for us to export a number of products other than just tea, textile or apparels to the United States. If you look at the separate agreements with the EU and the UK, they also offer access to key markets where we have a competitive advantage in certain products like tea and some other manufacturing products.
    
    I think it's not just about the niche markets; it’s a broader policy to study competitive challenges in the manufacturing sector that we need to address so as to unlock our ability to export. Therefore, KEPSA also mentions some of the constraints that are limiting our exports and proposes a strategy for us to improve.

  • Multinationals have played a key role in developing Kenya’s industrial sector while the local private sector has been catching up.
    What would you suggest as main opportunities for FDI in the manufacturing sector?

    You're right that FDI continues to contribute to the manufacturing sector. A number of our members have a multinational focus that brings them together to address unique issues. What we’ve seen from the statistics is a decline between 2019-2020 in terms of FDI, and that becomes a concern because as you say multinationals are stimulating the local manufacturing sector.
    
    They also bring global practices standards and know-how, so a big opportunity for technology to transform. In the work with multinationals, one of the biggest challenges is to identify the issue around the stability and predictability of policies because when you're coming to invest, you’re doing that based on certain policies and laws that exist in the country. And you do it for a long time, as manufacturing is an intense sector. Therefore, one of the biggest issues becomes how to ensure that we provide predictability and policy stability, so that when you invest the VAT does not change the following year.
    
    UNIDO’s competitive industrial performance index of 2020 ranks Kenya 115 out of 152 countries in the list. If you look at the region, some of our key competitors like Egypt and South Africa will be number 64 and 52 respectively. That is the area the multinationals are telling us to look at, and we continue to work on that: our competitiveness and our cost of doing business. Specifically, some countries offer industrial parks and all the infrastructure, and it’s something for us to keep developing.

  • The creation of Industrial parks is in fact having an impact on Kenya’s manufacturing sector.
    How do you see them growing and contributing in the post pandemic scenario?

    Land is a major factor of production, at least for manufacturing and other business. You do put your feet on the ground for factories, machinery and other things. And in Kenya, historically, the elephant in the room that needs to be addressed is land tenure. What we’re pushing at the government level is to use land for industrial purposes, and the industrial parks have been set up.
    
    Take the energy park of KenGen at Olkaria-Naivasha. The main thing is the ability to link the businesses for industrial symbiosis so that what one company wastes another uses. This can be critical to provide affordable resources. KenGen would be able to provide power, and then you can target investors for whom power is a large component to locate there. Those who need to be close to the port for quick production and export can put their factory near raw materials. Also, we can develop ports relevant to raw materials close to the source. The industrial parks in the country have been planned that way so far.

  • The empowerment of women entrepreneurs has been an outstanding program launched by the KMA.
    What progress has been made so far in this respect?

    Out of the manufacturing employees in Kenya, less than 17% are women. That's a concern. We started a program called Women in Manufacturing in collaboration with the International Center for Research on Women.
    
    To get more women interested in the manufacturing sector, we must create a workplace that is friendly to them. A lot of the time certain sectors remain male-dominant because of the kind of workplace they offer. So, what can we do from our policy and collaborating with our members to make a more welcoming workplace? And also, what can we do to not just have women at the shops but you also in management, women on boards? Eventually, that translates into better policies at the organizational level.
    
    What we have also identified is that within the manufacturing sector women are in specific sectors. How do we get them into male-dominated sectors? How do we move them from just being small businesses to becoming medium and large and multinational businesses?
    
    Basically, what the program is trying to do is to identify what issues women will face. We work to understand what the numbers and challenges are and what recommendations we can communicate to the government. Since last year, after we launched the report, we've been meeting the government to see what we can do, but at organizational levels in our programs we’re providing opportunities for mentorship for more businesses to grow within the sector. We’re also providing opportunities for financial linkages, business advisory services, linking the work of our Women in Manufacturing program with other work we do. So we have programs for the members, they’re able to identify where to engage in business, identify where they're struggling, and then you get them mentors or experts to support their businesses. That’s what we’re trying to do to accelerate the speed in the diversity of employees in the sector.

  • What would you highlight as the main challenges and opportunities for this transformation of manufacturing into one of the main pillars of the economy?

    I’ve got to say one of our competitive advantages is of course the technology. We’re an ICT hub in the region, and I think the government's commitment towards ICT has been quite clear. We see the interplay between the work we do as a manufacturing sector and the relevance of ICT. An example is e-commerce. So the ability of ICT to provide platforms for selling goods for the manufacturing sector, Fintech, and the paying platforms is crucial.
    
    There’s a lot of opportunities to upgrade production within manufacturing using technology. We’ve seen it happening already in the production of hardware. A lot of our companies, especially the multinationals, use the technology that drives up their efficiency and their ability to become a big hub. Sixty percent of what they produce and export to the region happens because technology has made them very cost competitive.

  • From the exports of products in bulk to the transition to Kenyan brands, recognizable at shelves in supermarkets all over the world:
    What role is KMA playing in this regard?

    We have been primarily exporting products through our agricultural output. For example, tea. We’re globally known for it, and we’re the second largest exporter of tea, but only 3% of that is value-added within the country. That is one of the things we are trying to change, firstly by having policies that make the value addition affordable and cost competitive. The issue of cost of production is one of the main reasons companies choose to value-add elsewhere. We work on increasing the awareness in the sector about opportunities and on government incentives that can accelerate some of this value addition in the country, so we have more agro-processing happening here.
    
    The other issue is finding markets. Because traditionally, if you’re not known for certain products, one of the ways to brand yourself is by finding a market or attracting a large multinational. So we also look at how to attract FDI in the sector.

  • The government has retaken the negotiations with the current US administration for the conclusion of a bilateral Free Trade Agreement.
    In your opinion, what do both countries have to gain from it?

    The US is one of those markets that has been quite crucial in growing some of our sectors like the apparel sector. Over the years, the US has continued to be a strategic trading partner. Nearly 85% of our exports there have been from the textile or apparel sector. The US continues to be an important market for the size of the population, the ability to spend and it being a source of investments.
    
    A good number of multinationals in the country is also from the US. It’s a good opportunity for us to have an agreement that promotes both trade and investment so that we see the companies investing here and enabling us to create more jobs, helping us benchmark from global best practices and technologies.

  • Training and upgrading the local workforce is a key endeavor for the association.
    How do you work with the academic institutions to achieve this?

    Yes, we do participate and try to upscale and improve the quality of the local workforce. We’ve done it in a partnership with Germany’s GIZ. First of all, we started to identify what’s the need of the industry in terms of technical skills. We do an analysis, and then we’re able to work backwards with a technical institution and academia to say: These are some of the actual needs of industries, so you need to lean on this area, which is more relevant.
    
    We also work to identify some gaps in the curricula through our Skills Advisory Committees. We provide technical graduates with opportunities for internships and make sure they come out with actual skills. Then we also train the trainers. So the trainers of the college-level technical institutes have actual practical industry skills, not just theoretical knowledge.
    
    Lastly, we provide a list on the job website of graduates who have attended these programs so employers are able to find someone who has not only gone through the technical institute but also had practical experience at industry level.

  • Is specialization part of the road map for Kenya’s manufacturing sector in the mid-term?

    I think what COVID demonstrated is that we must have local production within the country for strategic goods especially. Last year we did see the sector quickly jump into production of goods that weren’t traditionally made within the country. This has pointed out the need for policies to enable us to expand into manufacturing areas of strategic importance.
    
    Some development partners look at strategic sectors like manufacturing, agro-processing, where we have a competitive advantage, and need us to build these local industries. So in the future I think we’re going to see a lot more manufacturing companies in Africa. We are going to see more trade between African countries. Once we finalize the discussions around actual implementation and trade, I think that will drive our ability to manufacture locally.
    
    Manufacturing is also going to become the sector that enables us to employ within the continent and grow the technology, ICT, and financial sectors. I see a bright future.

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  • Bidco Africa has recently launched Planet Tangawizi, a new ginger soda in the Kenyan market which showcases your philosophy of growth even during the pandemic.
    How does this new product fit in the long-term strategy of the company to become an African leader in the Fast Moving Consumer Goods (FMCG) industry by 2030?

    It fits into our strategy because our belief is that, COVID or no COVID, the consumer is still going to consume. The question is, who will they buy from and what will they consume and where did that product come from? And I think the value addition to products in Africa or Kenya is important.
    
    We actually make sure that we do local manufacturing and local value addition. That's a crucial question. Even if you're sitting at home and in isolation, you still need food, clothing, shelter. Your demand for FMCGs is not going to go down. It's just that people are going to consume differently, and therefore now need variety, and that's where we come in. We work in manufacturing and innovation and make sure we give consumers a better alternative all the time.
    
    In Africa there are a lot of unmet needs, and our goal is to be in FMCG products across the region. We'd like to be in 70% of the categories that you build into your household monthly basket. So we're looking at many more items that we can produce locally. A lot of things have been coming in from various countries. We export our coffee and then we import primate coffee or Nescafe or whatever. Why are we doing that? Our tea goes to London and becomes Lipton's Tea. People in Algeria say, I buy from London, but it’s Kenyan tea.
    
    I think there's a huge amount of value addition that can be done here, and we want to be at the forefront of that in Africa.

  • What are the principles behind Bidco’s innovation drive, and how will it help to sustain your expansion plans?

    It all comes back to our philosophy, our vision and values. Bidco means happy, healthy living. We're enhancing happy, healthy living across the region in Africa, and that's what's important to us.
    
    From that comes an innovation and new ways of doing things. Using digital, using real-time online information, looking at what the needs are. And ultimately, addressing customers' needs real time online.
    
    Our whole philosophy is built upon a startup and a founder's mentality. We want all our people to have that mentality. We need to behave as if we're starting again, starting again, starting again. Ultimately, what does the consumer need? Their needs keep changing. We need to keep changing ourselves and innovating. We can turn everything upside down, we can change things quickly.
    
    Right now we have SAP real-time online switch to Ghana. Now we have a lot more FinTech coming through where we will link systems, and the consumer can buy directly from us. B2B business retailers can buy directly from us. And we will make sure the logistics in the delivery happens. We’re in a business where we buy raw materials, process it, value-add and sell finished products.
    
    So one philosophy is the full value chain, end to end. From the soil to the frying pan or liquid oil; right from the farming, backward integration, forward integration, and being there with branded products too.

  • BIDCORO Africa is a partnership between Bidco Africa and CORO A/S based in Denmark to develop products in the food and beverage area.
    When searching for partners to expand its reach, what does Bidco look for?

    What we look for in a partner is first of all alignment in vision. Where is the vision? What is the goal? We’re very clear: We're long-term players. We need to have the same mentality to build and develop into better things. We're not looking for private equity which comes in for a harvest in three or five years, makes 25% and leaves. No. Our goal is to build bigger. Therefore, partners need to have one thing: vision for the long-term.
    
    Believe me, Africa is a serious opportunity; it can become bigger. Let's face it, if you talk about the figures, the GDP may not be as big as Manhattan when looking at the whole of Africa. But there are people here, there are needs here, and there are developmental needs. There’s an impact and growth, and that's long term.
    
    We have a partnership going on for twenty-five years in Uganda. We have a whole plantation for palm oil in a good joint venture with Wilmar, and we work together so that we can build and become much bigger. Ultimately, the most important thing is its patient capital. Looking at growth is looking at a longer-term picture; and yes, by 2030 we can all monetize. We can go to the London Stock Exchange or New York Stock Exchange. And we can all modernize and make it bigger and much more viable for Africa.

  • Bidco Africa and the Jomo Kenyatta University of Agriculture and Technology (JKUAT) have entered into a partnership agreement that will see the two organizations collaborate on strategic fronts including agricultural research, innovation, technology transfer, entrepreneurship and the general improvement of agriculture and food security in the country.
    What does this partnership mean for Bidco?

    Their students lack exposure to industry. They don't have a linkage to what actually happens on the ground. And the industry might say: “I can’t get the type of people that I want. I don't get the technical skills available in Africa because of x,y,z.” Then we're always having people from outside the country because they have better universities.
    
    We need to get our people exposed to that linkage, and that's where two approaches come. One is working on inspiring them to do research, but the bigger goal would be that we get the lecturers to be aligned and have New Age thinking. That's a big missing point in Africa. A lot of them don't like to be disrupted because they’re in their comfort zone. We would try to push them and say, “You can be making a difference.” To them disruption means destruction, and that's wrong; it’s not the same thing.
    
    In the talent pool there's enough people, but we're trying to inculcate those values and learning. And you know what? COVID has been a big booster for online stuff. People now have screens in front of them; that's the only way education is delivered, as long as the device has access to the internet. The internet now is a tool through which you can get access to whatever you want to know. The encyclopedia is gone, now it's online. And therefore this pool of digital stuff we call Silicon Savannah can transform things very quickly.

  • Bidco has won several prestigious business awards, and we would like to highlight The Best African Company in the Green Economy.
    When did this policy start to be implemented, and what will be the next steps?

    This is one of our basic core values: environment. You don't harm the environment — recycle, reuse and don’t waste resources. That's one thing that really comes from core values.
    
    Secondly, all our processes have zero wastage. Nothing is wasted away. Everything is utilized from end to end. Even in our farms and plantations, everything is utilized. In our processing in our factories, every single thing is converted to finished product. When it comes to energy, we converted about 10 years ago from hydrocarbons to biomass, and we converted all our steam boilers and everything else to biomass. We could collect agro-waste, whether it was straw, grass, macadamia, nuts, but all byproducts were being thrown away. We said: “Hey, we can use all that stuff, convert that to steam and from steam we convert that to power and energy.” We've been doing that.
    
    We worked on water, we worked on renewables, and now we've done solar. Apart from that, waste management is a constant thing that we do.
    
    Kaizen is one of our inbuilt values. We call it kaizen (continuous improvement) in Japanese. That philosophy goes across the board. Overall, it’s just reducing anything that's not value-adding.

  • Inclusive practices in agricultural production is at the core of Bidco’s relationship with suppliers.
    How does sustainability fit in your growth strategy?

    I come back to the same philosophy of the full value chain. It means going right back to the soil.
    
    Now, we could have said, “Let's do it ourselves” when we look at the whole sunflower, soybean, oil seeds area and we process those products. But this takes us back to where we want a lot of smallholder farmers to start farming. The problem with them was they didn't know what to plant.
    
    Now we give them offtake contracts to produce so they can plant in different seasons. We guarantee the price to them upfront before they plant, and therefore we guarantee the market, and that they will get cash on delivery.
    
    We made a demonstration farm, and we showed them how to do it. One of the best practices is by doing it and showing them the economics of it, and staying there until you make a profit.
    
    All that comes into our food value chain and encourages more farmers and more agriculture production. Today we have between 10,000 to 30,000 farmers, depending on which season they're planting. We can do it for many other items, so we want to expand. Now we're looking at a program where we can get another 10,000 women-only onboard.

  • In an interview you gave in 2019, you said, “The way Africa is growing and the way we are growing here is going to be leapfrogging. We will not go through the same old slow-paced incremental growth, but we will grow exponentially.”
    How is BIDCO prepared to achieve this exponential growth?

    We have a big game plan to grow exponentially in the next 5 to 10 years, which includes us opening our philosophy to a lot of others.
    
    The philosophy we were talking about is not short-term, it's not just screwing the customers, screwing the suppliers. It's trying to give them empowerment, make them economically viable and still have a business at the end. With that we have much more impact. We would look for patient capital, for people who want development done, and really enhance the services by doing it digitally. We can actually do healthtech, edtech; we can do so much more.
    
    We have to solve problems for our own people first. And that opportunity is massive in East Africa or Africa, and we really can make a difference. I'm calling it being MAD, making a difference.