The winning strategy of Caritas Microfinance Bank
By Amos Wachira
Caritas microfinance bank entered the market at the worst of times. A banking crisis was unfolding, small and mid tier banks were collapsing, and most customers were fleeing to large commercial banks. Indeed, the odds were stacked against small banks, and a new entrant like Caritas bank had a slim chance of performing well.
George Maina, the founding chief executive of Caritas microfinance bank says the biggest challenge was to convince customers to bank with the new microlender. Despite the challenges, the church based bank opened its doors to its first customers in 2015. It was the 12th to be licenced by the Central Bank of Kenya.
With the first branch at Cardinal Otunga plaza, Caritas Microfinance Bank’s go-to-market strategy was to introduce a range of innovative products and services that are anchored on technology.
Dedication and excellent customer service helped the bank to keep its doors open.
Three years later, their strategy has paid off.
From the formative days when the founding CEO was the only member of staff, the staff complement has grown close to 100 people. Other than this, it has performed exemplary well in all key performance indicators.
Maina says that the branch network has grown from one to six branches, spread across Nairobi and Kiambu counties. These are Cardinal Otunga Plaza, Cardinal Otunga Annex, Kawangware, Donholm, Thika and Karuri branches.
“The bank’s assets grew from Kes100mn at inception to Kes1.3bn at the end of 2018,” shares Mr. Maina. Other than this, says the chief executive, the bank’s deposits moved from zero to over Kes1bn while its loan book grew from zero to Kes800mn in outstanding loans. Furthermore, Caritas microfinance bank was named the fifth largest (in terms of market share) by the Central Bank of Kenya
Looking at these milestones, it’s easy to see why the lender was recently feted as the fastest growing microfinance bank at the Think Business 2018 Banking Awards.
This award was followed by three others, bringing the number of awards that the bank bagged in 2018 to four. The other three are; Best microfinance in the use of digital solutions and Best in e-services won during the 2nd Fina ncial Inclusion Awards, and Runners up; best in financial reporting for microfinance banks bagged at the Financial Reporting (FiRe) awards ceremony in Nairobi.
“These awards affirm to our concerted efforts to continuously improve the customer journey,” says the CEO.
He explains the secret behind the bank’s impressive performance. “We are fortunate enough to have a dedicated staff and a supportive board of directors,” he says. The bank also leveraged technology from the beginning, a move that has borne fruits.
“80% of our transactions are completed through mobile banking and other alternative delivery channels like internet and agency banking. Technology has helped us to attract and reach more customers,” he says.
Maina also attributes the growth to the implementation of the law capping interest rates. This saw Small and Medium Enterprises (SMEs) borrowing from Microfinance Banks as a credit crunch sank in. As commercial banks avoided small businesses, Caritas microfinance bank welcomed them with open arms, significantly growing its customer base.
When it comes to financial inclusion, microfinance banks play a significant role as they reach out to the unbanked and the underbanked population that has been ignored by mainstrean banks. Caritas microfinance bank’s mandate is to reach the unbanked and the underbanked, currently constituting 25% of the population. The bank provides innovative financial products and services tailored to meet the needs of all customers.
Its diverse range of savings and loan products targets individuals, businesses, groups, churches and learning institutions.
Although the bank is owned by the Catholic archdiocese of Nairobi, it caters for all customers regardless of their religious background. “We reach out to all customers, not just the Catholic faithful,” he says.
The bank is deeply rooted in the Catholic church and traces its roots to the first Catholic sponsored Self Help group in Kiriko Parish, Gatundu. The self-help group was formed in 1983 to encourage members to be self-reliant. Seeing the success of the group, other parishes adopted a similar concept. Maina says that as the number of groups rose, there was need for a microfinance bank that could cater for the needs of such groups, and this inspired the creation of Caritas microfinance bank. With this heritage, the microlender is positioning itself as the church microfinance bank. Its product offering includes savings and credit services tailored for churches and their clergy, a market segment that has been ignored by financial institutions for long.
There’s no denying that the banking sector is increasingly embracing technology to impact its customers. The convergence of technology and banking industries promotes alternative delivery channels like agency and internet banking.
To enable its customers have a nationwide access to their accounts, the bank has partnered with the Cooperative Bank of Kenya for ATM and point-of-sale (POS) services. Customers can withdraw cash at any Visa branded ATM or buy goods or services at any Visa branded outlet. Agency banking is another alternative channel that the bank is using to increase its footprint.
“We envision having 200 agency outlets by the year 2020,” says the chief executive, adding that in two years, the bank plans to be a top three bank in terms of market share.
As the bank embarks on its next phase of growth, it plans to pitch tent in other regions in the country, including Nyeri, Embu and Kakamega. It intends to expand its branch network to 12 branches by 2020, in line with its strategic plan.
In the meantime, Mr. Maina says that the microlender will continue to positively impact its customers by providing products and services that meet their needs.