3 Ways I&M Bank Is Bridging the Gap for Unbanked SMEs in Kenya

In Kenya, the backbone of the economy isn’t massive corporations, but a vibrant network of small and medium-sized enterprises (SMEs).

These businesses, with workforces ranging from a handful to 99 employees, contribute a whopping 90% of the national workforce and play a critical role in poverty reduction and economic growth. 

There’s just one hitch: a staggering number of these SMEs – a figure estimated at 7.4 million – operate informally, lacking access to formal financial services. 

This is an issue that I&M Bank Kenya’s Regional Chief Executive Officer, Christopher Kihara Maina has acknowledged. This exclusion cripples their ability to grow, scale operations, and create sustainable jobs. 

I&M Bank Kenya recognizes the challenges faced by these unbanked SMEs and is actively working to dismantle these hurdles.

Their approach is multifaceted, combining innovative technology, strategic partnerships, and a commitment to physical accessibility.

1. Democratizing Finance through Mobile Technology

I&M Bank Kenya recognizes the time constraints of busy entrepreneurs and the geographical limitations of remote businesses. Their solution? I&M On-The-Go (OTG), a user-friendly mobile banking platform designed to bring convenience directly to fingertips.

OTG eliminates the need for frequent branch visits. Account balance checks, mobile money and local/international payments, and service requests can all be handled efficiently through the app. 

But the benefits go beyond convenience. OTG transcends geographical barriers. Unbanked SMEs, even in remote areas, can now participate in the formal financial system. 

By leveraging digital tools, unbanked SMEs can build a credit history, opening doors to future loan opportunities and propelling them towards a more secure financial future.

Furthermore, features like mobile money integration and digital record-keeping streamline operations for SMEs. This translates into improved cash flow management and data-driven decision-making.

The I&M Bank paybill (542 542) can further enable SMES have a better control over their finances, optimizing resource allocation and ultimately fueling business growth.

2. Strategic Collaborations: Expanding Reach and Support

I&M Bank recognizes the critical role that small and medium-sized enterprises (SMEs) play in Kenya’s economic landscape. I&M Bank understands that collaboration is a powerful tool for financial inclusion.

They actively seek partnerships with organizations that share their vision of empowering small businesses.

A key partnership with the International Finance Corporation (IFC) and FMO, the Dutch entrepreneurial development bank, secured a $50 million loan for I&M Bank. This funding specifically targets SMEs in various sectors, including trade, manufacturing, and construction. 

Importantly, the loan aims to provide capital for unbanked businesses, many of whom struggle to access traditional financing due to a lack of credit history or collateral.

This expanded lending capacity allows I&M Bank to reach a wider range of SMEs and fuel their growth.

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FMO’s $15 million NASIRA portfolio guarantee directly supports I&M Bank’s iMara strategy. This risk-sharing facility is designed to encourage lending to underserved entrepreneur segments, including unbanked businesses. 

By mitigating the risks associated with lending to unbanked SMEs, the NASIRA program paves the way for I&M Bank to extend financial services to this critical segment.

I&M Bank partnership with Crown Paints PLC highlights this commitment. By offering stock financing solutions, I&M Bank provides credit facilities to authorized dealers and customers of Crown Paints, even if they are unbanked. 

This initiative not only promotes business growth but also eases access to working capital, a crucial factor for unbanked SMEs often operating with limited resources.

3. Branch Expansion: Building Trust and Accessibility

I&M Bank’s iMara strategy tackles the challenge of financial exclusion for unbanked SMEs in Kenya through a two-pronged approach: expanding physical accessibility and promoting digital adoption.

The iMara strategy goes beyond simply opening new I&M Bank branches. I&M Bank strategically locates them in areas with high concentrations of unbanked SMEs.

This eliminates geographical barriers and provides convenient access to essential services like account opening, cash management, and loan applications. 

The physical branches provide a platform for personalized support. Customer service representatives can offer financial literacy workshops and loan application guidance.

This face-to-face interaction builds trust with unbanked SMEs who may be unfamiliar with formal banking systems. 

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Staff can address concerns directly, answer questions clearly, and guide these businesses through integrating financial services into their operations.

The iMara strategy aims to eliminate bank-to-Mpesa transaction fees, a major hurdle for mobile-reliant businesses.

This not only reduces operating costs for unbanked SMEs but also incentivizes them to embrace digital financial tools offered by I&M Bank. 

Seamless integration with mobile money platforms like Mpesa allows for a smooth transition into the formal financial system. This encourages unbanked SMEs to leverage the efficiency and security of digital transactions.

By combining physical accessibility with user-friendly mobile technology and a focus on reducing digital transaction costs, I&M Bank’s iMara strategy provides a multifaceted approach to financial inclusion for unbanked SMEs in Kenya.