Founder of microlending firm, Jijenge Credit on the cusp of building a bank

By Steve UMIDHA

Credit-only microfinance institution, Jijenge Credit limited is weighing a potential capital increase, along with the ambitious idea of building a bank to address the increasingly severe credit needs facing Kenyan businesses.

In a recent interview, the firm’s founder and the Chief executive officer Peter Macharia said, “after nearly ten years of lending to my customers, we are on our way to what we believe could see us build a bank to meet the rising loan demand.”

Jijenge – a Swahili word that means ‘build yourself’ is a credit company whose flagship product is credit financing to individuals and small businesses. It was brought to life in 2014 with the sole intention of meeting the financial needs of Micro, Small and Medium Enterprises (MSMEs).

MSMEs are defined as any enterprise that has between one and 99 employees with an annual turnover of less than Sh50 million. A micro enterprise has less than 10 employees, a small enterprise has 10 to 49 employees while a medium enterprise employs between 50 and 99 employees.

Prior to starting Jijenge Credit – which formally turns 10 next year, Macharia had worked with a number of lending institutions, commercial banks, initially starting off as a bank clerk at just 20 years of age, climbing up the ladder to serve in key departments including sales, marketing, credit, finance and operations. He called it a day nine and a half years ago – a decision he says has been worth it.

He is now on the cusp of potentially building a bank, after successfully steering Jijenge to the brand it is today, boasting of four physical branches with sales agents spread across the 47 Counties.

“After nearly ten years of existence, you are always inspired to offer more, to move higher, and a conversation around starting a bank is one that myself and other directors are seriously considering,” confirmed Macharia.

The goal, according to him, is to accelerate efforts to meet financial inclusion targets, increase the lender’s capacity to fight poverty, and boost support to middle-income earners — including doing countrywide projects, in what would be a huge shift for the financial institution.

He is however under no pressure to move quickly with his ambitious plan.

“Presently we have a loan portfolio of between Sh500 Million and Sh1 Billion, but we feel we can offer more based on our assessment of the market in which we operate,” offers Macharia, also an economist with nearly 30 years of experience.

Adding that, “I would credit our growth to top notch customer service and trust. This has given us the ambition to expand our territory,” attributing his success to discipline, resilience, consistency and knowledge in the industry.

His plans comes even as the latest data by CBK shows that the stock of bad loans in the banking sector has increased for the third straight month to hit a record Sh540.8 billion in March and extended their share in the total loan book to a 10-month high, taking the shine off the sector’s growing profits.

The gross non-performing loans (NPLs) ratio — the proportion of loans for which no interest or principal has been received for at least three months— hit 14.6 percent in April from 14 percent in February, pointing to a further rise in the stock of bad loans.

According to the Central Bank of Kenya (CBK) all banks were in 2012 required to build their core capital to Sh1 billion which is an increase from Sh250 million previously.

The mounting defaults have prompted top banks such as Equity, KCB, Co-operative Bank of Kenya, Stanbic Bank and I&M Bank to set aside more money for loan loss provisioning despite the sector’s pre-tax profits rising by 13.6 percent to Sh65.1 billion.

The rising interest rate environment is expected to pile more pressure on the sector’s NPL book with customers expected to face difficulties in repaying loans at steeper rates.

Kenya Bankers Association (KBA) said in a recent note that slowed economic growth and elevated inflation were likely to hurt the NPLs ratio further.

The firm’s greatest specialty is mobile lending, which is efficient and effective , tapping into the demand for microfinance products among MSMEs who are the company’s main clientele.

It essentially targets clients who are unable to access financial services from banks and those seeking loan approval over a short period of time within one hour.

Further, it specializes in Title Deed Loans, Check-off loans, School emergency loans, import duty finance, LPO financing, bid bonds as well as asset financing among others. The company has tracking technicians and valuers who assess an applicant’s assets before a loan is issued.

Jijenge was one of the first 10 applicants that made it to the CBK’s initial list of compliant players following calls by the regulator on heightened oversight of Digital Credit Providers (DCPs) in the country.

But as of March 2023, data by the Central bank shows that of the close to 700 microfinance institutions and digital lenders that had applied for licenses, only 32 have received CBK’s nod to continue lending.

The regulator came up with the regulations for digital lenders following an outcry of predatory lending as well as concerns of money laundering.