How Tuk-tuk ride inspired Egyptian bank's foray into Kenya

For Hisham Ezz Al Arab, the award-winning banker and chief executive officer of Egypt’s largest lender, Commercial International Bank (CIB), inspiration and significant decisions could, sometimes, emanate from the most unlikely places or circumstances.

Not from high-end boardrooms or exclusive five-star hotels, but from the back of a rattling tuk-tuk and an honest conversation with its rider.

That ordinary ride, in 2018, through Nairobi’s busy streets, which saw him mingle with the city’s populace along downtown streets and eateries all the way to little Mogadishu (Eastleigh), where he bought a jacket, finally ignited an extraordinary decision to open a CIB branch in Nairobi.

It is this decision that saw CIB acquire Mayfair Bank, formerly owned by politician Peter Kenneth, at a total transaction value estimated at $40 million (about Sh5.18 billion).

“Before we made the investment there, I went with one of our colleagues, and we decided to explore the streets of Nairobi. We went to the local restaurants, met and talked to the ordinary Kenyans,” says Hisham.

Back in Egypt, Hisham, who in March this year was honoured with a Lifetime Achievement Award by the New York-based Global Finance for his transformative leadership in banking, convinced the CIB board that Kenya must be the next destination to open a branch as part of the bank’s continental expansion strategy.

“I came back and told my colleagues, listen guys, you will love it there,” that was his declaration to the board.

“We wanted to have a feel about the people, and the rider, a funny boy, told us to forget about pie and soup and instead, he casually took us around eating avocado and tomato dishes on the streets of Nairobi,’’ explained Hisham during a media briefing in Cairo, last week, as part of celebrations marking CIB’s 50th anniversary.

Regulatory environment

Hisham said Kenya is of strategic importance as the launching pad and gateway to CIB’s expansion into the rest of the continent, citing the country’s dynamic regulatory environment and an educated workforce.

“Naturally, with the size of the population, and the level of education and shared English language as well, that made it much easier for us to settle on Nairobi.” The Kenyan branch is the first one outside Egypt, although the lender, which is listed on the Egyptian, London and New York Stock markets, has a representative office in the Ethiopian capital Addis Ababa.

He expressed confidence that, despite the high presence of banks in Kenya, currently standing at 45, the lender will significantly increase its footprint in Kenya through value-added services with a special focus on cash flow lending as opposed to asset-based lending.

Cashflow loans are suitable for firms that do not own significant assets, such as service-based entities or those with greater margins.

It allows firms to seek loans based on projected future cash flows backed by the recipient’s past financial performance.

He said it is an innovative approach aimed at meeting the financial needs of different types of businesses, especially those with promising cash flows but lack adequate assets to use as collateral to secure loans.

Hisham added that CIB was introducing a transformative credit culture in the Kenyan banking sector in which there will be less reliance on physical assets as collateral for loans, which he believes will benefit the country’s SMEs sector. He expressed that the move will spur economic growth and promote financial inclusion.

“We want to create a new legacy by moving to cash flow lending because one of CIB’s key values is not just good performance and making profits, but what kind of legacy to leave behind in the market or the community,” explained Hisham.

He expressed optimism that the approach, supported by Kenya’s vibrant financial, technological and digital infrastructure, will move CIB into a tier-two bank within five years and thereafter join tier one. “Our goal is to become a tier-two bank within five years, with ambitions to elevate to tier one as we seek new opportunities to deliver value to our stakeholders through prudent risk management and a commitment to sound governance.”

He said as part of its growth strategy in Kenya, CIB will adopt a hybrid model of combining physical branches with digital platforms.

“As these digital alliances multiply and strengthen, the role of physical branches, and even ATMs will diminish, although CIB recognises the value of visible, physical presences in the communities where it works,” explained Hisham.

He expressed confidence that CIB will replicate its success as the leader in Egypt’s banking sector in the Kenyan market and beyond.

“Our story is one of resilience, strength and transformation, which mirrors the values that are deeply rooted in Egypt’s own history of civilisation that stood the test of time.”