Standard Bank believes that the right capital and capacity interventions now will set East Africa on a sustainable path to prosperity, including the very real possibility of becoming middle-income economies within a generation.
In line with the Group’s purpose of driving Africa’s growth, the emergence, proliferation, and expansion of small and medium businesses in East Africa holds the key to the kind of broad-based economic inclusion on which long term prosperity, stability and security is built.
Standard Bank estimates that there are approximately 10 million small and medium enterprises and other commercial businesses spread across East Africa. These businesses contribute significantly to the economies in which they operate, driving GDP growth and providing significant employment opportunities.
While these businesses present a great opportunity for Standard bank to add more business clients, an even greater opportunity is presented by partnering with – and growing – existing clients.
As such, Standard Bank’s Business and Commercial Clients (BCC) division is deliberately focused on building a capital and capability ecosystem supporting small traders, agribusinesses, emerging manufacturers, and entrepreneurs to grow into formal enterprises – or even become national corporates or cross-border multinationals.
Helping existing clients and their broader business ecosystems progress up the enterprise growth continuum requires that both Standard Bank and its clients do things differently. Carrying on with business as usual will not achieve the kind of multifactor growth necessary to put East Africa on a higher performing and much more inclusive growth trajectory.
Connecting with clients differently
While building client-centric business models is necessary, Standard Bank has also learned that, in Africa, clients live amongst family and communities. As a result, business and private lives are not compartmentalised. Finding ways to show up differently – and much more relevantly – in clients’ broader lives as well as across their value chains is critical. As such, understanding client businesses deeply whilst also participating actively in local chambers of commerce and community forums, or getting involved in community development or school and university networks, is important.
By understanding the networks that businesses operate in, Standard Bank can leverage its best of breed solutions and platforms to build capacity amongst local client teams while also unlocking growth across their broader ecosystems.
Most East African economies, for instance, are net importers. As such, while facilitating cross-border trade Stand Bank is also able to identify opportunities for the development of local manufacturing. By supporting the growth of the right manufacturing businesses able to supply existing value chains, Standard Bank enables local economic growth while also diversifying the regional economy and enhancing job creation.
By way of illustration, Standard Bank recently assisted a Kenyan manufacturer produce paper locally, replacing expensive international inputs with domestically sourced wastepaper and sugar cane by-products. As a result, many more local exporters now have branded boxes made to order at home, at a fraction of the cost of imported products. This has made local export business more competitive globally while also increasing jobs, expertise, diversification, and growth at home. Similarly, by understanding another client’s manufacturing process, Standard Banks’s Kenyan team assisted the client adapt ethanol (produced as a by-product of sugar refining) into sanitiser during the COVID-19 pandemic.
Deploying digital to remove friction
BCC’s digital capability is providing not only a deeper understanding of clients, but also an ability to remove friction more effectively. Examples include:
· Unayo, a platform-based payment service that any trader, entrepreneur, or business can use even if they don’t have a formal bank account. All they need is a phone.
· In Kenya, Standard Bank developed a home-grown FMCG business support platform enabling distributors to order product, pay suppliers and track orders in real time.
· In Zambia, Standard Bank’s launch of a platform solution linked to key suppliers, enables small traders to access stock loans daily. This means they never need to leave their store to place orders or travel to the bank to get loans or manage daily cash. Everything happens digitally.
Expanded view of growth finance
Growth finance is much more than just a loan. For some businesses, for example, finance is needed to buy stock. Others need to connect to reliable international suppliers of quality goods. Still others require a local manufacturing solution.
Understanding how to apply growth finance differently relies on an intimate understanding of business needs and potential. While this dials up the significance of feet on the ground and intimate local relationships, technology is also transforming how Standard Bank can view, understand, and extend growth finance to a swathe of new and different East African businesses.
Using airtime sales data or GPS location, for example, Standard Bank can today see and track smaller businesses’ activities, transactions growth or stock movements. This digital intelligence provides a sufficiently reliable view on which to advance growth finance on terms that support differential re-payment structures aligned to individual businesses’ varying cash, stock, or sales positions.
Digitally informed payment structures have also significantly improved Standard Bank’s repayment profiles in East Africa. The ability to extend growth finance to small, emerging, and larger businesses that don’t report data in traditional formats has dramatically expanded the profile of businesses across East Africa that Standard Bank can support with growth finance and other solutions.
Helping small business clients correctly track and gather financial information, secure loans, meet international bank-approved dealers or suppliers, negotiate forex quotas or letters of credit, complete cross-border paperwork, or finance vehicles – all under the guidance of seasoned business banking professionals – can catapult a survivalist operation onto a multifactor growth track.
The aim over the next decade is for Standard Bank to point to a stable of new transregional businesses operating across and out of East Africa that have been berthed as small local businesses and successfully supported up the enterprise development ladder by BCC’s relationship-driven insights, advanced digital value chain optimisation and expanded growth finance capabilities.
The socioeconomic impact of these deliberate interventions designed to support East Africa’s small and medium businesses grow will set the region on a much higher – and significantly more inclusive – growth trajectory.