Bank Lending to small businesses

Bank Lending to Small Businesses must understand the Nature of the product

Understanding of the nature of the product of the business is very important. Whether the business is dealing in perishable  goods(food stuff, flowers etc) or un-perishable products. How long the business takes to convert the stock of the product to cash. If the products they deal in have substitutes and are they essential products or what would be termed as luxury products. The products could have a substitute, for example, if the business is dealing in footwear is there other alternatives to the same which can serve their customer.

 Bank lending to Small businesses must understand the Market for the product

Understanding the market for the product is very crucial. Consider if the market is local or they deal with the international market. Does the market consist of a certain age group or is it for the mass population. Products dealing in fashion outfits generally target a certain population. Other factors of the market to be taken into consideration will be if the market is expanding or is it shrinking, as the population grows demand for food products increase hence the market increases. The issue of how easy competitors can enter this market is very crucial with a better product at a subsidized price.

 Bank lending to Small businesses must have background information on the owner

The background information of the entrepreneur running the business is very key. Consider if he or she is a person of integrity because this will determine whether they will keep their word to their customers, which then results to loyalty from their customers. The length of experience he or she has should also be put into consideration, the longer the experience the more certain the success of the business and vice versa. If the business has a Board of Management – what are their composition. does it have a marketer, a financial expert, a human resource individual. These will be able to add value to the business other than a business where the spouses are the Board members just to meet a legal requirement. Take into consideration the business continuity in a case where the founder of the business dies.

The professional lender therefore must not only be able to read and understand complex business accounts and analyze ratios. Bank lending to small businesses must therefore employ competent resources to get it right.

Types of debit cards

Proprietary debit cards

what are debit cards

Debit cards given by a bank to access just that banks accounts and are known as proprietary card. The cards are sometimes also called ATM cards since they are used just at the banks ATMs. Is the bank has merchants or outlets where they have connected their systems, then these ATM cards can be used to access those merchants. In some instances the banks come together and form a common network of ATMs especially. After membership, the proprietary cards from various banks can be used in these common outlets. Charges are agreed amongst the members.

Co-branded debit cards

When a bank works with another company and they come up with a card that would suit both the institutions members and customers, these are known as co-branded or affiliate cards. The cards may be proprietary or they may be association debit cards. Co-branding is usually done with hotels, clubs, malls and airlines. Both institutions work together to give their customers more convenience and to grow their customer base. Both institutions gain from the partnership.

Association debit cards

Banks may sign up with associations like mastercard and visa to give out their branded cards. The association debit cards are widely used globally. The networks for associations are very well networked and use modern and sophisticated technology to ensure cards so branded are acceptable and create convenience for the financial institutions and their customers. There are stringent rules and regulations for those financial institutions wanting to join associations. Joining fees, annual fees and transactions are some of the charges levied by members. The associations have rules not just for joining, but after joining there are rules of engagement between the associations and other members.

Prepaid debit cards

The prepaid debit cards are used by financial institutions to collect funds before the funds are used. Unlike many other cards, the prepaid cards are paid for before the money is used. There are many kinds of prepaid cards like: gift cards, travel cards, store cards, and payroll cards. The prepaid cards are used as a way to control funds and help in financial management.

The choice of which debit cards financial institution or potential cardholder should get depends on which card is most convenient for them.

Credit and Debit Cards associations

Both MasterCard and VISA are in the process of opening Regional Offices in Kenya for Credit and debit cards.  Is this move by both organizations a sign of commitment to the region after years of neglect, or a response to the threat of their business model posed by mobile commerce? Mobile banking has taken over the day to day transactions of both individuals and corporations in Kenya.

The Kenyan market is unique in the payment space as mobile has leap frogged over all other money transfer and banking channels. Poor communications networks and infrastructure, coupled with the non availability of simple acceptance devices has been the cards’ down fall in many countries especially in Africa. The Automated Teller Machines and Point of Sale are expensive leading Mobile transactions taking over and to fill that void.

Many transactions in Kenya happen on a meal by meal basis with the corner shop and the informal sector have helped mobile commerce to outpace cards. The volume and value of transactions the mobile environment handles daily cannot be equaled by any other payment channel.

credit and debit cards’ have suffered declining competitive edge

The decision of whether this is a good thing for the banking industry depends on where one stands? Maybe not if you are a banker, while the consumers have a totally different view.  The flow of fees earned in the mobile space is also different to the card model. Corner shops prefer the mobile model as they earn revenue instead of lose it in the card model due to commissions paid out for card usage.

Unless the two giants in the card space rethink their model and come back with pricing and rules and policies that suit the local market, the future of Credit and debit cards looks bleak. Credit and debit Cards will become prerogative for the middle to high income people that travel and for tourists.

decision time for credit and debit cards’ business

The big guns need to urgently relook their Africa Strategy to ensure a brighter future. We wait to see how the payment industry will change and if the card associations realize that one size does not normally fit all. Credit and debit cards issuers and acquirers must customize the products to suit their corporate needs.

credit and debit cards

What are Prepaid cards in Kenya

Prepaid Cards in Kenya

Prepaid card is a debit card that is loaded with funds before the funds are required. The money is not debited from your bank account but from the funds that are held in the card account that has been made available by you.

After the financial crisis in the world, in 2008 and years following, the prepaid cards are being used more as a way to manage personal finances. Many previous credit card holders had their credit scores and ratings affected when they were unable or missed to pay for their credit cards or loans. Though these former credit card holders have repaid their loans, their scores are still low. The prepaid cards are able to assist many people who cannot meet the required scores to get other cards and are able to access the convenience of plastic money.

Prepaid cards in kenya as a personal financial management tool

Many people have a problem trying to live within their means. Prepaid cards in Kenya are being used as a way for managing financial challenges. The prepaid card holder loads the card with the amount they require for the month and this is all the money they will use. The card is reloaded monthly and so the cardholder cannot spend what they have not preloaded or planned to use.

The card issued determines the minimum and maximum amounts that cardholders can load to their prepaid cards at any one time. The cardholder determines what they will require for the month an they load this amount. The prepaid card will allow the holder to access the same outlets that they would if they had a credit card or a debit card.

The prepaid cards are used more and more by many people throughout the world. Cardholders can plan for an activity and save for the expense that is required. When the savings are reached, the cardholder can purchase a prepaid card for the amount saved. This is especially good for holidays and leisure activities that can be planned for without using monies put aside for other necessary expenses.

Though prepaid cards have been in use in the western world, they are still new in the Kenyan market. The cards will assist Kenyans plan their expenses better and manage their finances especially in this hard economic times. Prepaid cards in Kenya should be a card that all Kenyan should use to manage their finances.

We will look at the various card enhancements that a card company can use to competitively stay ahead of other companies. When deciding which card company to apply to for a card, it would be good to look out for the card enhancements.

Card Enhancements

• Card Enhancements -Credit card protection

This is very important as the card will be paid in case you die or in case you are retrenched or incapacitated. Your family will not have to pay for your debts because the amount of your credit limit had been insured. The insurance may be free with the card or the cardholder may be required to pay a minimal amount.

• Card Enhancements – Discounts/rebates

Cards companies work with various outlets and service providers to get their cardholders discounts or rebates. The card companies may refund the customer by crediting their card companies with a stated amount if they spend the required amount for the campaign. These discounts and rebates are very popular and customers are very happy to spend as much as they can to get free or discounted prizes.

• Card Enhancements – Emergency services

The card companies also may provide emergency services to the cardholder. Emergency services may include emergency cash advance facilitation where a card is lost when the cardholder is travelling. The cardholder may also get a card replacement when their card is lost when they are in another country. Cardholders may also get free advice on where to seek medical services as they travel.

• Card Enhancements – Financial services

The cardholders may be able to access financial services in or outside their countries as a bonus to having that particular card. The services may be free or at discounted prises. These are important especially for those who are new to use of cards and have little financial exposure. It prevents cardholders from going into debt.

• Card Enhancements – Insurance

Whether it is lost card, medical or travel insurance, it is important to find out which insurance if any is provided by your card company to cardholders. Some of the insurance is free and others require that the cardholder pays for it. The travel insurance is a favourite especially where the cardholder travels a lot. In case the cardholder gets sick or loses their luggage, they are refunded by the insurance company.

• Card Enhancements – Travel services

Additional to the insurance the cardholder may get consirge services, pick up and drop off services at hotels and airports. The cardcomapny may be working with certain airlines making the services more accessible.

• Card Enhancements – VIP services

Services for ‘very important persons’ are mainly given to high net work cardholders and are usually not availed to all the cardholders. The services are geared to ensure that the experience of the cardholder is the best that there is. The cardholder may be availed a personal assistant, airport lounges and office services when they travel

• Card Enhancements – Rewards

Many card companies participate in the rewards and loyalty services. These are seen as a way to ensure that they reward their loyal customers and make the customers feel valued. These rewards are for all cardholders. Card companies usually work together with the betting and licensing board.

The above card enhancements are a way to ensure cardholders are rewarded and retain the cards they have or to get new customers. As you decide which card to get, always consider the card enhancements that the card company will make available to you and compare them to your needs.