Lending to SMEs push up Gulf Bank's Q1 profits by 83%

The bank posted Sh1.04 billion as profit after tax in the financial year ended December 2023.

In Summary
  • The bank reported a net profit of Sh555 million  in the previous financial year.
  • The bank’s balance sheet size grew by 10 per cent to Sh42.1 billion.
Gulf African Bank MD and CEO Anuj Mediratta.
Gulf African Bank MD and CEO Anuj Mediratta.

Improved cash flow positions in customers’ businesses pushed up Gulf African Bank's earnings for the first three months of the year by 83per cent.

The bank's result for the quarter ended March 31 is attributed to the adoption of effective digital innovations that eased transactions. 

The lender rolled out a product that enables first-time SME borrowers to access up to Sh1 million in loans, with repeat borrowers being able to access more.

“Our unsecured hybrid solution provides working capital for MSMEs with flexible collateral requirements like chattels,” said Anuj Mediratta, managing director and CEO of Gulf African Bank.

With the business model of serving customers through brick-and-mortar commercial branches having become prohibitive due to the associated high costs, Mediratta says the bank has also invested heavily in technology, to reach the huge but underserved SME market.

“This is a large market that has been served traditionally by digital lenders and a few banks. Cell phones and digital technologies have become key in financial inclusion for micro-entrepreneurs in the informal and formal economy,” said Mediratta.

Financial institutions have had to deploy alternative channels such as online banking, mobile banking, payment cards, ATMs, and POS, to keep pace with telecommunication firms.

“Consumer culture is heavily dependent on a bank’s ability to analyze customer trends and shape product offerings in kind.''

The bank also signed a credit risk guarantee scheme with the African Guarantee Fund, to enable SMEs that qualify for credit on all fronts but lack suitable or adequate collateral to access trade finance facilities.

“The scheme is essentially aimed at poverty reduction through job and wealth creation focusing on the rural micro-enterprise operators with a view of extending financial inclusion to them,” posed Mediratta.

The bank posted a net profit of Sh1.04 billion in 2023, an 83 per cent growth from Sh555 million recorded in the previous financial year. 

During the period under review, customer deposits increased by nine percent to Sh34.1 billion on enhanced economic activity, while customer financing recorded a 10 percent growth to Sh24.3 billion.

The bank’s balance sheet size grew by 10 per cent to Sh42.1 billion.

The firms’ top management also attributed the institution’s strong growth to investment in women, having rolled out a product that enables them to access up to Sh3 million with flexible security requirements to stock their businesses.

The bank also does training for women entrepreneurs, to help them improve their bookkeeping and boost their financial literacy and financial management skills.

“Besides lending, which itself feeds into our goal of improving financial inclusion, we also continuously improve their financial literacy, which has continuously paid off,” stated Mediratta.

At least 20 per cent of procurement opportunities in the bank are set aside for women.

Even so, the bank's leader insists that while Islamic banking is growing in the rest of the world Kenyan businesses are yet to fully harness the power of Islamic banking.

"There still is a large unbanked population which continues to be harnessed by Islamic banking albeit not at the steady rate they had envisioned due to a mix of other factors. We are not yet there but we are on the right track."

The foundation has invested more than Sh170 million which has enabled poor but bright students to access quality education.

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