State’s SME financier in aggressive investment drive

By Metro Reporter
Sixty years is not a short time in any business! In fact independent Kenya is only 50 years. But for Industrial & Commercial  Development Corporation (ICDC), the fully state owned Corporation charged with the responsibility of nurturing Kenya’s dreams of economic well being, 60 years has been an exciting journey of supporting small and medium enterprises  through the tough start up period, the expansion stage and growing them into big corporations with operations spanning the East African region.


As Kenya marks its Golden Jubilee of 50 years as an independent nation, ICDC is entering its 60th year in business at a time when the country is looking up to it to trigger an industrial revolution that will move Kenya to a newly industrialized middle income country  in the next 17 years. The corporation is already moving with renewed gusto to play its role in the Kenyan dream. ICDC Executive Director Peter Kimurwa says that in the last two years, using a variety of products and services, the Corporation has financed entrepreneurs for working capital, business expansion, factory construction, purchase of machinery and other productive assets, while at the same time, intervening in cases where businesses are in financial distress. “In the past one year, we achieved the investment targets set.  The value of financing for businesses across the various sectors of the economy was Ksh1.5 billion. This was through medium to long-term debt and Equity participation. With a growing demand for high performance from our clients, ICDC is expected to continue ramping up its performance.   We are now able to measure the speed with which we consider and decide on client requests. We are making steady progress on improvement to turnaround times so as to keep the promises made to our clients,” explains Kimurwa.
New growth path
“As you are aware, Vision 2030 acts as Kenya’s development blueprint to achievement of middle income economy status. The financial services sector, where we play, has been identified as one of the critical drivers towards achievements of the vision 2030.  The great news today is that ICDC can do far more than before”, says Kimurwa. “We have aligned our business model with Vision 2030 in order to ensure our operations are geared towards catalyzing economic growth and creation of sustainable wealth for Kenyans. The Corporation has diversified its products and services portfolio with its main sectors of focus being Manufacturing and Agro-processing, Financial services and Education. The last 12 months has seen the Corporation make significant investments in Kenyan businesses and financial institutions that have direct linkages to the SME sector. Some of the recent investments include extending a Ksh500 million credit facility to Consolidated Bank of Kenya for onward lending to small businesses as well as a Ksh40 million credit facility to AAR Credit Services Limited. AAR Credit Services Limited, a subsidiary of the AAR Group is a microfinance institution that supports Kenyans to access health insurance as well as supporting health workers through provision of personal and development loans.  In the green and renewable energy sector, Lean Energy Solutions Ltd benefited from a facility of Kshs 16 million.  This is a local industry based in Muhoroni, Kisumu County that is turning waste into wealth through production of briquettes from sugarcane bagasse and has helped create employment.  In the Manufacturing and Agro processing sector, the Corporation has taken an equity stake in Organic Growers and Packers Limited to set up a fruit processing plant in Malindi and has also advanced the company credit facilities worth Kshs 130 million.
Besides, the Corporation has set its sights on other major projects across the country’s forty seven counties. One of the investments the Corporation is proud to champion is the proposed SME Industrial Park in Eldoret County because it provides us with an opportunity to play a significant role in creation of one of Vision 2030’s flagship projects. The industrial park is expected to play host to a myriad of Small and Medium Sized Enterprises (SMEs) in the Manufacturing and Agro-processing sector. The park has the potential to enhance business operations in the East African region by facilitating manufacture of goods and value addition to primary agricultural products for the local and export markets.
ICDC has also contributed towards enhancing developers’ access to finance.   Some of the upcoming projects include the Corporation’s own development of 36 apartments in Nyali, Mombasa County at an estimated cost of Kshs 280 million and development of 148 townhouses in Kiambu County in partnership with a private developer and two other financial services providers.  
Industrial revolution
In its efforts to have a bigger say in Kenya’s economic development agenda, ICDC is able to look back on a rich and proud track record of being a pace setter in the country’s industrial revolution. In the 1960’s when Kenya’s economic growth was higher than the Asian Tigers, Korea, Malaysia and Singapore, ICDC, as an institution that was at the foundation of this nation, was the engine of that growth, investing in diverse sectors of the economy. In fact, a number of the enduring success stories in corporate Kenya’s history can be traced to the support obtained from ICDC in the 60’s and the 70’s. Some of the success stories include Centum Investment Company Limited, General Motors East Africa, AON Insurance Brokers, Yana Tyres, Uchumi Supermarkets,  Kenya Wine Agencies, Eveready Batteries East Africa and a chain of bottling companies running the Coca Cola franchises and which are spread across the country.  A number of companies have been listed on the Nairobi Securities Exchange through Initial Public Offers (IPO) allowing ICDC to cede substantial shareholding to the public, allowing Kenyans to own these companies in fulfillment of part of its mandate which is to create wealth for Kenyans.
Good signs
So far, the results indicate that ICDC is steadily regaining its place as a strong contributor to the development of Kenya’s economy. In the last financial year the Corporation registered impressive results.  A profit before tax of Kshs 303 million compared to Kshs 238 million in the previous year.   New investments totaled Kshs 903 million up from Kshs 560 million in the previous year.    The increase in new investments demonstrates ICDC’s ability to deliver on its mandate to facilitate the economic growth of Kenya through provision of flexible financial solutions to entrepreneurs for sustainable business growth and profitability, and creation of jobs. In the Government of Kenya’s Performance Contract rating system, the Corporation made a significant improvement, achieving a rating of “ Very Good” compared to “Good” in the year 2010/2011.  The Corporation was ranked position 41 out of 178 State Corporations’ and was placed in position no. 1among State Corporations’ in the financial services sector category.    The marked improvement in performance was as a result of processes and systems re-engineering to enhance efficiency and clear strategic focus and direction provided by the ICDC Board of Directors and implemented very ably by the Corporation’s Management team and staff. As a mark of quality assurance, ICDC is ISO 9001:2008 certified, and its investment activities are guided by the Prudential Standards and Guidelines framework, used by the Africa Association of Development Finance Institutions (AADFI) as a benchmarking tool for its members.
New growth path
In the era of heightened customer demands the Corporation has developed a new business model and Strategic Plan which is customer focused and enhances market impact by focusing on sectors and customer segments with the highest attractiveness and developmental value in line with its mandate.  The Corporation has put its house in order and is on its way to achieving its Vision ‘To be Africa’s World Class DFI focusing on industrial growth and development in Kenya, having a significant impact on creating jobs and raising household incomes for a profit’. "ICDC has recently established a state of the art customer service center to enhance the quality of interaction between it and its customers.  The customer service center will provide instant service to existing and prospective clients on the products and services offered by the Corporation.   In addition the Corporation is in the process of implementing a Customer Relationship Management system (CRM), as a tool for monitoring quality of service to clients on an ongoing basis.  “We believe that the CRM system will drive our business to a new level of success. We will be able to proactively identify the needs of our clients and thus serve them better,” Kimurwa says.  With a fully developed products and services suite that includes debt, equity, trade finance guarantees and technical advisory services, ICDC will provide creative and flexible financial solutions to entrepreneurs. In supporting enterprise through joint ventures and strategic partnerships in which the Corporation takes up an equity stake upto a maximum shareholding of 35%, enterprises are able to enter into new business lines or restructure operations.  Businesses that require finance for working capital, business expansion or assets acquisition are eligible for a wide variety of debt products which are tailored suitably for each market segment. These include corporate loans, wholesale loans, asset finance facilities and guarantees. Technical Advisory services are offered on consultancy basis to ICDC clients in the areas of Business Plan development, Feasibility Studies, Corporate Secretarial Services and Internal Audit services.  
High growth innovative SMEs
“Our target customers are existing businesses that are 2-5 years old, medium sized corporate companies whose turnover is below Ksh500 million, distressed enterprises, international investors wishing to invest in Kenya, entrepreneurs with sound technical expertise as well as some financing and professional background and large corporates with turnover of over Ksh500 million. ICDC seeks to specialize and focus on several carefully chosen sectors of the economy. The Corporation believes it can maximise its developmental impact by catering to key sectors and segments of the economy that are not adequately catered to by the mainstream financial services players. In doing so, ICDC will build unrivalled knowledge and expertise in these sectors, and align its systems and processes to ensure it is a compelling source of funding and technical support services to these sectors and customer segments.  Our key sectors of focus are Manufacturing, Agro-processing, Education and Financial services and in our secondary sectors of focus, we will give priority go to Wholesale and Retail trade, Healthcare, Real estate, Energy, Entertainment, Tourism, Transport and Mining. “A major barrier to rapid development of the SMEs sector is shortage of both debt and equity financing. As a Development Finance Institution, ICDC will continue to address identified gaps in the market such as provision of long term finance to entrepreneurs who mostly rely on short term finance that has adversely affected the growth of their businesses to the detriment of the country’s economy. We shall aggressively continue to  address key financial challenges that hinder the growth of SMEs in Kenya’s in order to boost the productivity and competitiveness of enterprises and create job for  Kenyans,” says Kimurwa.