Challenges

The key challenges identified as part of the assessment were as follows
 Conventional lending methodology, which focuses on a) collateral, b) account turnover, and c) audited financial statements.
 Credit staff that doesn’t dedicate enough time to serving loan customers and doesn’t have a 360-degree view of the MSME customer.
 Limited training offerings for MSME customers on key business topics such as managing business finances and sales and marking.

Primary target

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Description of Innovation

The objective(s) of Women’s World Banking’s engagement with KCB Bank, Kenya, was to assess and improve the performance of its Micro Small & Medium Enterprise (MSME) credit unit in order to serve its MSME customers better and in particular women-owned MSMEs with access to credit and business training. The assessment for KCB was done on the parameters of providing access to a) finance, b) knowledge, and c) networks to their MSME customers.

A multipronged solution was co-created along with KCB to address identified business challenges and customer needs. The proposition included four primary components viz:
a. The development of a relationship management model enabled KCB to foster relationships with business customers, especially women.
b. Implementation of a new cash flow-based credit assessment methodology to support lending to women-led MSMEs.
c. Demonstration that non-financial business support services are integral to serving business customers and,
d. Cultivation of a strategic gender focus.
The above four components relied on a clear identification of a challenge, and the corresponding solution required for KCB. A multipronged solution was co-created with components viz; a relationship management model, new cash flow-based credit assessment, non-financial business support services & strategic gender focus.

Results

From the perspective of KCB the intervention led to:
a. The maintenance of KCBs MSME portfolio especially in branches utilizing the new cash flow-based lending methodology. Branch managers from pilot branches reported higher rates of loan approvals, prompting other branches to request to be trained on the new methodology.
b. The maintenance of the Portfolio Quality. The Net profit loss (NPL) was 1.5 percent, indicating that the methodology has continued to enable KCB branch staff to identify borrowers with strong repayment capacity while also expanding access.
c. An increased lending for women from 20% (in 2017) to over 50%(in 2019) of the total KCBs MSME portfolio. This increase is primarily attributed to the cash flow-based lending which increased data on businesses and the gender sensitization of the branch staff.
d. A growth in businesses receiving intervention. Overall, businesses with a loan size of KSH 6 Mn and above had an annualized average growth rate of 10 percent