Over the past months, the AFC team moved forward on the first digitisation project for SME lending in East Africa. The local market leader in Rwanda, Bank of Kigali, embarked on a path to digitise the SME lending process, using an online-based knowledge management platform and the technical assistance for the configuration, customisation, and implementation provided by AFC and sponsored by the European Investment Bank.
Providing financial services to SMEs is among the most interesting and challenging business areas for financial institutions in East Africa as well as in the rest of the world. Financial services for SME clients require specific understanding of the way those companies conduct business and of the entrepreneur’s personality, strengths and weaknesses.
These types of financial services largely consist of relationship banking. It can take several years to build an understanding of the client and the business potential. A good SME relationship manager in a financial institution has gained the trust of the entrepreneur and of the management of the company and fully understands the business of the client and the personality of the people involved.
Successful financial institutions in the SME space build up this understanding and knowledge through a strong focus on client interaction. SMEs value both, solid and modern financial services as well as a trustful relationship with their financial institution. SME entrepreneurs prefer to rely on a financial institution as a long-term business partner, based on trust and understanding.
Financial institutions in East Africa have embraced this challenge and are ready to proceed on the path of digitisation. The AFC team actively supports this strategy through the implementation of a digitised knowledge management platform, developed by our consultants.
Providing ways to capitalise on the knowledge collected from client relationships is the driving factor for the development of a comprehensive, fully customisable and intuitively accessible digitisation platform for SME business, placed at the core of the lending process. It provides support for front-end activities, as well as supporting areas such as operations and risk management, and collects information from every interaction with a client. This includes the first contact, loan application, approval, monitoring and collection. The platform also covers the management of collateral, documents, impact measurement and a CRM component.
At the inception of the extension phase of the EIB East African TA Programme, the team of AFC met with Bank of Kigali to discuss priorities for the support. It was quickly agreed that digitisation forms the core of the SME strategy of Bank of Kigali and the institution was prepared to pilot the digitisation platform in collaboration with AFC. A project team consisting of several staff members in the Credit Management Department of the institution was assembled quickly. The consultant worked with the team on understanding the existing workflows and procedures and replicating them on the platform. This also included the structuring of rating tools, questionnaires, checklists, reports and print-outs.
The configuration of the application included both, on-site work and off-site support from a team of software specialists. The functionality and the user interface were closely coordinated with the team at Bank of Kigali to ensure rapid acceptance. In parallel, the IT team of the institution worked on the installation and technical support.
Once implemented, Bank of Kigali will be in the position to:
- conduct lending in a largely paper-free, digitised way. This also separates the process of document collection from the actual approval and will significantly speed up the process. Furthermore, the amount of paper to be handled for each transaction is reduced to the bare minimum.
- communicate and collaborate in the lending process across departments, branches and teams for a better use of proprietary knowledge within the institution.
- build and capture knowledge in the SME-lending process through digitisation and the use of contextual intelligence.
- improve portfolio monitoring through active, forward-looking limit steering.
In the long run, additions to the application are planned, such as the integration of a client-facing front end, through which borrowers will be able to submit information directly.
So far the project with Bank of Kigali has been a great success. It demonstrates possible synergies between technical assistance and innovative products, for the benefit of EIB’s partner institutions. Not only will the institution be furnished with a digitisation platform, but it will also learn how to improve processes, strengthen risk management and transition to a proactive portfolio management.