Leading wholesaler devices solutions to ensure the business continuity and recovery of its customers as they undergo turbulence due to the deadly coronavirus
By George Gichuki
Micro Enterprise Support Programme Trust (MESPT) is a major wholesale lender that was established in 2002. It offers loans to financial intermediaries – savings and credit co-operative societies (Saccos), microfinance institutions as well as microfinance banks. In April this year, following the onset of Covid 19 pandemic, MESPT conducted a stress test on all its customers in order to identify the possible challenges they anticipate and the potential actions necessary to mitigate the adverse effects brought about by the enforcement of various guidelines and protocols. The test had a special focus on the impact on the customers’ cash flow and how the same could be addressed. “From this test, we established that our customers’ business models and financial projections had been disrupted by the pandemic and they needed our support in order to continue delivering effective service,” says Mr. Eliud Wachira, the credit and business development manager, MESPT.
The Covid-19 pandemic is an unprecedented threat. Spreading globally like wildfire, mankind isfacing day to day devastation. The World Health Organization(WHO) has therefore comeup with some guidelines and protocols on how to manage itsspread which the government of Kenya (through the Ministry of Health) is championing relentlessly. These guidelines and protocols (like keeping social distance) have led to the reorganization of workplaces in both the private and public sectors. It is no longer business as usual.
Besides embracing these changes, MESPT as an organization has also come up with some mechanisms tosupport its clients in businessresumption, recovery and continuity. The microfinance sector is a critical part of MESPT’s business. “In response to the Central Bank of Kenya and the national government’s appeal after the pandemic hit the country, we developed guidelines to facilitate provision of moratoriums and rescheduling of loan facilities,” says Mr. Wachira. However, qualifying clients must apply and have compelling justification. This has since been effected and concluded.
MESPT, through the Danish International Agency (Danida) Funded Green Growth and Employment Programme has set aside technical support fund. The fund is aimed at supporting clients in enhancing collections and exploring digital solutionsfor business resumption, recovery and continuity. “ Through our stress test and market survey tools, we found out that giving the applicants some relief in their loan repayment schedules was not enough during this challenging period and hence we have put in place a technical support fund,” Mr. Wachira observes.
Based on a survey conducted on the microfinance institutions benefiting from MESPT’s loans, it was established that they were in need of boosting their digital solutions in order to enhance their relationship with customers, besides complying with the Covid-19 protocols and guidelines.
Cash transactions are being discouraged as a way of checking the spread of the deadly coronavirus and hence the need for businesses to go digital. “Digitization in service delivery and product development is the new frontier for microfinance banks and institutions and that is why we focused on technical support in that critical area,” says Mr. Wachira.
Together with other wholesale lenders operating in Kenya, MESPT hasparticipated in joint online forums to exchange views on market dynamics and how to support their customers during this difficult period. “The sector has benefited from cash flow tools developed by our peers in wholesale lending as well as access to emergency funding.It is therefore very encouraging thatwholesale lenders are pulling in the same direction to address the challenges emanating from the Covid-19 pandemic,” observes Mr. Wachira.
MESPT has a corporate social responsibility (CSR) programmefocusing on giving scholarships to needy high school students in Kenya. During this challenging period, theorganization has supported members of nine families under this programme with food and other consumables.
A ray of hope
The greatest challenge that iscurrently facing themicrofinance sectorin Kenya is low liquidity levels that have been occasioned by a decline in revenue due to the Covid-19 pandemic. Nevertheless afterthe recent relaxation on the cessation of movement in the country, there is a ray of hope among the business community. “Weare nowlooking to a surge in demand for credit as business activities increase,” says Mr. Wachira. However, the surging numbers of Covid 19 positive cases may reverse this projection. This notwithstanding, MESPT is considering relaxation of some performance indicators and covenants in response to the current business environment.
As the microfinance sector strives to put its best foot forward during thisturbulent phase, businesscontinuity remains the major point of focus. The pandemic will see the emergence of newways of conducting business in the sector especially within the next two years. “Relationshipmanagement will be a keyarea in our business as we endeavour to grow together with our customers,” Mr. Wachira avers. According to him, financiers and borrowers more than ever need eachother in order to develop solutions that are mutually beneficial and can deliver sustainable progress.