Sumac Chairman: Where it all began for this amazing bank

Sumac Chairman: Where it all began for this amazing bank

They say every institution has a history. Some have a more remarkable one than others, and that is why we sought to understand the history behind Sumac Microfinance Bank, and why it has experienced a meteoric rise in 20 years since 2001. Sumac Microfinance Bank Chairman John Kibatha Njoroge didn’t hold back anything as he took us back memory lane to where it all began.

Long before the name “Sumac” came to life, the world was rapidly hurtling towards to turn of the millennium, and there was plenty of talk about an impending apocalypse that would bring an end to the world economy as we knew it. There was talk of the crash of the computer systems in the world by the turn of the year 2000. It was so tense that some people thought the actual end of the world had come.

With the apocalyptic talk and tension, there came numerous consequences to the nations of the world as companies began to experience unprecedented depression in their capital; and the balance sheets began to rapidly go south. In the end, many people were retrenched as the expected apocalypse failed to materialize.

With it, many business fortunes were wiped away. Many people were laid off, and given a “golden handshake” to proceed into earlier retirement.

The meetings began in earnest

Mr. Kibatha Njoroge was in the thick of it at the time. The advent of a new digital era meant that institutions quickly embraced new ways of doing business, thereby cutting down on their staff numbers drastically. A few friends who were well acquainted with Mr. Kibatha lost their jobs too and ended up in private practice as lawyers, businessmen and professionals of the kind that would handle the emerging way of doing business, as it were the case.

It was during one of the evenings that an idea was mooted, as drinks flowed and the evening breeze soothed, that it was time to try something that would secure the future they had almost lost in the turn of the millennium. Seated at that table were four men from different sectors of the economy. Mr. Kibatha had called them up and they had obliged to meet to discuss a way forward.

One meeting turned into two, and before long, they were meeting regularly at a joint on Kiambu Road as they brainstormed on what to do. “At the time, we were all short of funds, and the cost of living was gradually ticking upwards,” Mr. Kibatha says. “Yet we had a lot of time on our hands to try something that would help address the conundrum that was awaiting us ahead. It was then decided that we should form a ‘chama’ that would help us identify the right way to invest.”

How the name “Sumac” was coined

The name “Sumac” then was birthed after deliberations on what the chama would be called. How the team ended up on such a unique name is not anybody’s guess. It was a carefully thought out name that means “a budding flower”,  which can either be bitter or sweet – to signify the very nature of the environment they were operating in as individuals. Life had become literally unpredictable, so the name “Sumac” would fit in the bill very well, but with the hope that as a flower, it would eventually bear fruits for all of them.

At the onset, there were only four of them holding forte. Sumac as a chama was informal and unregistered at the start. But later, they registered it in 2001 as Sumac Holdings and continued with contributions as new members joined in to bolster their numbers.

“Our initial contribution was Ksh10,000 per individual every month,” Mr. Kibatha says. “We sustained this momentum for three years till 2003.”

It was at this juncture that Mr. Kibatha suggested, after careful thought, that it would be great to begin a credit facility so that members could finally do something with the money they had been saving. Sumac Holdings turned quickly into Sumac Credit, and the entity was registered right away. They began to lend among themselves without any security, seeing that their number had sharply risen to 14.

Engagement of the Central Bank of Kenya

Sumac Credit Ltd grew for years until 2008 when they decided it would be great to finally register with the Central Bank of Kenya, and to be regulated as a Microfinance institution – and to also explore the possibilities of beginning to take deposits from members outside of their circle. At the time, a Microfinance Act had been enacted by the CBK in 2006, and it had become operational in 2008. It was therefore only prudent that they complied. An experienced consultant was hired right away, who took them through the entire process of understanding what it would take to transform the entity, and with his help, enabled Sumac to finally get a license from the Central Bank of Kenya to become a Deposit-taking microfinance institution.

Sumac DTM Ltd was then born in 2012 upon the assumption of the license. “Some of our members didn’t believe we could get a license because it seemed as though we didn’t have the enormous financial muscle to achieve this goal,” Mr. Kibatha recalls. “But we were determined that it was possible, and in the end, we got it.”

That was the great turning point for Sumac DTM Ltd. Further regulation by CBK in 2015 meant that Sumac needed to become a microfinance bank. So the name once again changed from Sumac DTM Ltd to Sumac Microfinance Bank Ltd in 2015, with a new CEO taking over at the same time.

A staggering development over time

“In spite of initial skepticism from some of our key members, I drove this agenda and ensured we arrived at this important juncture for the institution,” Mr. Kibatha says. “We had a loan book of Ksh289 million 2015, and by 2019, we had raised that to a staggering Ksh1.4 billion. If we hadn’t continued on that course, perhaps we wouldn’t be here today.”

The deposits also grew from about ksh100 million in 2015 to Ksh700 million in five years. “This has indeed been our story, and I’m proud of our achievement so far.”

But a growing venture of this nature has had its fair share of challenges, and Mr. Kibatha isn’t afraid to delve into them.

“The growth has been good. It has been fairly moderate, and perhaps we would have been miles ahead of our current predicament. But due to factors such as stiff competition from various market players including the big banks, and the obvious emergence of new technology, our growth has been steady but not as rapid as we would have wanted,” Mr. Kibatha says. “The Central Bank of Kenya also wanted financial penetration across the entire economic stratosphere, which meant that big banks dipped their hands into our market as well, and hence the stiff competition which stopped us from progressing quicker. The anticipated growth was perhaps slowed down by the intervention of the CBK to liberalize the financial markets greatly.”

In the end, it has called for more innovation and creativity. The potential is there, and with an enabling environment, it would be easier to exploit this potential in the market.

Optimism about Sumac’s chances ahead

“Goodwill is still lacking in the African markets. We need to open up the business space more and to stop importing everything from other countries, some of which might not suit our market models. Technology is good, but we must assess what best suits our very unique situation here in Kenya.”

Mr. Kibatha is optimistic about Sumac’s chances, and is hopeful the bank will become the most ideal financial partner for all businesses and entrepreneurs in the country. He hopes this will then enable Kenyans to have a great impact in society by creating value for all and sundry in whatever level of business engagement there is.

Challenges aside, Mr. Kibatha is appreciative of the fact that Sumac was recognized in 2018 and 2019 as a formidable player in the banking industry.

“We are thankful too, that we have since been recognized in financial circles for our growth. In 2018, Sumac was recognized as the 2nd Fastest Growing Microfinance Bank in Kenya, by the Think Business Banking Awards. It was the first time we were conferred such an accolade as a bank. In 2019, the same Awards recognized Sumac as the Best Microfinance Bank in Livestock and Agriculture Financing. The Automotive industry also conferred upon Sumac an Award in the same year, where we emerged the Most Promising Microfinance Bank in Automotive Finance. This goes a long way to enumerate our strength in the market. We can only grow stronger from here on-wards.”

Critical advice for aspiring entrepreneurs

He has strong advice for entrepreneurs who may want to try their hand in any particular venture, just like he did in the company of his colleagues in 2001.

“It is important for you to study the business environment first before you commit to any venture. Be sure you know what you are entering into is something sustainable and has returns,” he says. “Additionally, there’s nothing you can achieve on your own. You need to collaborate with other people in order to succeed in life. There are a lot of opportunities for all. With accountability and proper governance, you should be able to succeed. And it is important that you keep doing the right thing. Otherwise, you’d fail miserably.”

If entrepreneurs can understand the basic business codes of practice, it becomes easier to envision success in the future. The basic principle is always that profits are a result of the removal of costs from generated revenue. If one can adhere to these variables and focus on the bottom line, it would be easier to succeed as a businessperson.

“And every challenge has a solution, often. In spite of the business environment, we need to be realistic and original. Sometimes following a tested path has more benefits than trying something that has no prior feasibility whatsoever,” Mr. Kibatha says. “For sure, not everyone is business savvy. Not everyone can use money to make money. If business is not your thing, it’s better not to try it and fail miserably in the end. Stay in employment if you will be more successful there. Be a realistic individual who can make informed judgments on whether to do business or pursue a career in employment.”

A man of great principles

The chairman is not only a successful businessman, but is also a man of great principles. He’s very passionate about the business and knows the vision, and where he wants it to go. Coupled with that, he is a very flexible and an accommodating leader who has ensured he brings together different people with divergent views and opinions on the direction a business should go. Yet he’s been able to ensure they read from the same script as they push the agenda of growing Sumac Microfinance Bank. That to him, is something he is very grateful and fortunate indeed to have achieved.

“I’m also very keen on being informed thoroughly before making a judgment on what to do. I’m constantly updated with information concerning the business, and that way I can stay abreast with the trends that may affect how we do business. I also love listening to other people’s ideas and opinions a lot, because I believe everyone has some value to offer. In this way, I’m able to inspire those that come my way to be better and more progressive in their quests in life,” he says.

Support from family and friends

Mr. Kibatha owes his success to the support he has been accorded by his dear wife. He’s also thankful for his mother’s constant prayers and support, and also gives gratitude indeed that he was mentored at a very tender age by his father who was an astute businessman. And from that mentorship, entrepreneurship began to flow in his veins.

“It is from my immediate family that I get a lot of inspiration and stability, and I’m thankful for their constant support and help through and through. The tranquility of the home I live in is something I cherish greatly, because out of that peace, I’m able to thrive out here,” he says passionately.

His list of mentors is mind-boggling. They include Peter Munga of Equity Bank, the Late Hon. Njenga Karume, Samuel Kibathi and Waithaka Kiarie.

Where does he see Sumac in the future?

Well, he believes the bank will become a great financial institution with the stability to serve clients from all walks of life effectively. “Our greatest challenge is always the capital. If we can be a fully sustainable venture which is able to balance books all the time, and to create a proper co-existence between liquidity and solvency, then the future is truly bright.”

In the end, he can only hope Sumac will keep growing and become sustainably profitable and strong in terms of capitalization. But he craves an ideal environment where there’s level playing field for all market stakeholders in the banking sector, and a stable economy to boot.

The continuing challenges emerging from the Global Coronavirus pandemic means that the economy will be hurt in the short term, but he believes eventually businesses will come back roaring, and Sumac will still pick up and keep growing.

“It is a very uncertain situation, but we are hopeful we will beat this global challenge and emerge stronger and better for the future,” he says.

At the end of the interview, he has only one advice to give: “Have faith in yourself. What you can conceive, you can achieve. Do everything with a passion and commitment, whether its work, business or the growth of family. Ensure that in the end, you are truly fulfilled as a person.”