It is not easy to walk in any financial institution and walk out with a loan based on ‘integrity and character’. In a world where financial institutions are becoming extremely cautious when it comes to lending, one institution is building a reputation of discarding orthodox financial principles in a quest to empower entrepreneurs.
Sumac Deposit Taking Microfinance (Sumac DTM) is disrupting the status quo in the financial services by offering service in a unique mondus operandi. “We know that majority of our clients do not have collateral. This is not a reason to lock them out and that is why we look for personal integrity,” says Kibatha Njoroge, Sumac DTM Chairman.
Since it transformed to a DTM last year having been operating as Sumac Credit since 2004, Sumac DTM has been on a mission to empower entrepreneurs who have not been able to unleash their full potential due to intimidation by commercial banks. With various studies showing that entrepreneurs particularly Small and Medium Enterprises (SMEs) fail or remain stagnant due to financial constraints, Sumac DTM is determined to offer them the much need financial support. “We have done researches and found out that the common man is intimidated by commercial banks,” explains Mr. Njoroge, adding that, the net effect has been thousands of individuals with great ideas or with need for loans being locked out of the mainstream financial sector.
This is a situation that Sumac DTM is determined to change. Established in 2004 by a group of fourteen partners who came together as a chama, the institution has grown over the years from a small financial institution offering credit to one of the fastest growing DTMs. The growth has been exponential. When it started as Sumac Credit, it was with seed capital of Kshs500,000 only. Within a few years, it was able to mobilize the Kshs60 million share capital required by the Central Bank of Kenya to be licensed as a deposit taking microfinance. Though Sumac DTM is among the latest entrant in the market, the balance sheet and the loan book are expanding fast enough. Today, with a client base of 10,000, Sumac DTM targets to increase the number of clients to 50,000 by the end of the year and to four million over the next five years. Plans are also underway to increase the number of branches to be close to its clients.
This growth plan, which is part of a five year strategic plan, is on course to being accomplished. Already Sumac DTM is proving to be the preferred financial partner of many with products that are tailor-made for individuals and businesses. Unlike other financial institutions, Sumac DTM has structured its products to respond to the financial needs of clients. With a policy of not tying lending entirely to collateral but rather to integrity, character and a demonstration of the ability and willingness to repay, the number customers is growing fast. “We want to be big and change the lives of Kenyans,” states Mr. Njoroge, adding that Sumac DTM wants to focus mainly on entrepreneurs who drive the economy and cut across all the sectors of the economy. “We see huge opportunities in entrepreneurs and we want to exploit this niche,” says Mr. Njoroge, a former Chief Finance Officer at Central Glass Industries Ltd, a subsidiary of East Africa Breweries Limited.
In its growth strategy, Sumac DTM is laying the groundwork to ensure it serves its existing customers better and to ensure it is well prepared for future growth. In effect, the firm is seeking to increase its working capital, intends to roll out an aggressive marketing campaign to increase visibility and also plans to ride on technology. According to Mr. Njoroge, Sumac DTM is in negotiations with both local and foreign investors to raise at least Kshs 500 million to boost its working capital and finance the expansion programme. As part of the search for a strategic investor, Sumac DTM is embracing corporate governance and is willing to open its books to potentials investors. “We understand the need to improve governance and embrace disclosure to attract investors. We are willing to do this because we want to build an institution that will outlive us,” he explains.
In terms of technology, Sumac DTM is already embracing systems to serve customers effectively and efficiently. Recently, Sumac DTM entered into a partnership with national payments switch provider Kenswitch to allow its customers access their money and transact other businesses from any of the Kenswitch payment points in Kenya and across the region. “The partnership with Kenswitch is a very important value and selling preposition for us,” notes Mr Njoroge, adding that Sumac DTM is in the process of activating M-Pesa to enable customers operate their accounts from the comfort of their phones.
According to Mr. Njoroge, while other financial institutions are still clinging to traditional ways of doing business, Sumac DTM is determined to demystify lending in the country. The firm wants to be a pioneer in non-collateral lending in order to offer majority of Kenyans locked out by commercial banks and other microfinance institutions financial freedom. “I want to send a message that people with integrity can walk in Sumac DTM and get loans,” he says. He adds that Sumac DTM is particularly interested in attracting the youth by making financial products easily accessible. While Sumac DTM model is already proving efficient and attractive, the level of default remain extremely low at less than three per cent. This, according to Mr. Njoroge, proves that the ordinary Kenyan appreciates the role Sumac DTM is playing in bestowing people with easily accessible financial services.
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