In an insightful interview with Ochieng Oloo, CEO of Think Business, KCB Group’s CEO Paul Russo shared the bank’s commitment to sustainable banking and its vision for the future. The discussion revealed KCB’s innovative approaches to green finance, operational eco-friendliness, and performance in the face of economic challenges.
Sustainability at the Core of KCB’s Operations
For KCB Group, sustainability is not just a buzzword but a fundamental principle that guides every aspect of their business. Mr. Russo emphasized that sustainability at KCB means looking beyond normal operations and recognizing the bank’s responsibility to the communities and environment in which it operates.
“Our purpose-driven culture is evident through our environmental commitments and partnerships that foster resilient communities,” Russo stated, highlighting the bank’s holistic approach to sustainable development.
KCB’s commitment to sustainability is reflected in its alignment with the United Nations Sustainable Development Goals (SDGs). The bank has adopted 14 SDGs and corresponding Key Performance Indicators, ensuring tangible progress towards its sustainability targets.
Green Banking Initiatives
Green Lending Handbook
KCB has developed a green lending handbook, which serves as a crucial tool for the bank to provide knowledge on green financing. This handbook equips staff with information on:
- Climate change and its impacts
- Opportunities in green financing
- Strategies to capitalize on these opportunities
The handbook plays a vital role in actualizing KCB’s vision of a low-carbon and climate-resilient economy.
Sustainability Reporting
KCB has been producing annual sustainability reports since 2013, marking 11 years of consistent reporting on its progress in embedding Environmental, Social, and Governance (ESG) principles into its operations.
Eco-Friendly Operations
KCB has implemented various eco-friendly measures to enhance operational excellence:
- Shift to e-statements and online forms
- Digitization of data capture for personal and joint accounts
- Implementation of robotic process automation
These initiatives have led to significant reductions in paper usage and improved operational efficiencies. Mr. Russo noted, “Over 40 customer journeys were automated, which eliminated paper movement and improved TAT (Turn Around Time).”
Carbon Footprint Monitoring
KCB closely monitors its resource consumption, focusing on Scope 1 and Scope 2 emissions. In 2023, the Group’s total carbon footprint was 11,510,506 kgCO2 eq, an increase from 10,617,906 kgCO2 eq in 2022. However, the carbon footprint intensity per staff member decreased by 11.14% to 1,104.97 kgCO2 eq.
Green Financing and Sustainable Projects
KCB has set ambitious targets for green financing as part of its 2023-2026 strategy, “Transforming Today Together.” The bank aims to increase its green financing to 25% of the total loan book by 2025.
Renewable Energy Projects
KCB supports various renewable energy projects, including:
- Solar energy initiatives
- LPG program in collaboration with KCB Foundation to provide schools with clean cooking energy solutions
- E-mobility projects, particularly the transition to electric boda-bodas
Sustainable Farming
Through the KCB Foundation’s Mifugo ni Mali program, the bank partners with county governments to support agricultural development and economic growth.
Green Banking Products
KCB is in the process of developing and issuing renewable energy products to offer facilities that support green energy initiatives.
Performance and Growth in 2023
Despite challenging economic conditions, KCB Group demonstrated resilience in its 2023 performance. Mr. Russo described the year as one of strong organic growth across most business lines.
Key Financial Highlights
- Net profit of Ksh 37.5 billion for the full year ending December 31, 2023
- 27.2% growth in revenues driven by strong funded and non-funded lines
- Total assets crossed the Ksh 2 trillion mark, growing by 40% to Ksh 2.17 trillion
- Customer deposits increased by 48.9% to Ksh 1.70 trillion
- Customer loans grew by 28.7% to Ksh 1.2 trillion
Growth Drivers
Mr. Russo attributed the growth to several factors:
1. Increased net interest income (23.9% growth)
2. Growth in non-funded income (33.9% increase)
3. Expansion of digital banking and alternative channels
4. Entry into new markets
5. Growth in trade finance business
“Our growth was supported by our deliberate efforts to continue to innovate and form more transformative partnerships to offer superior customer value propositions and drive customer obsession across all our touchpoints,” Russo explained.
Digital Transformation
KCB’s focus on digital innovation yielded impressive results:
- 5 million new customers onboarded in 2023
- Over 1 billion customer transactions processed, with 99% conducted on digital platforms
- 44% increase in transactions across non-branch channels
- 31% increase in the total value of digital transactions, reaching Ksh 6.4 trillion
- 77% growth in mobile loan disbursements, totaling Ksh 337 billion
Asset Quality and Loan Portfolio
While KCB experienced growth in various areas, asset quality remained a challenge in 2023. The non-performing loan (NPL) ratio stood at 17.3%, primarily driven by top corporate names and the impact of foreign currency translation on the non-performing book.
Mr. Russo noted, “Whereas our plans to resolve these non-performing loans remain robust, they were slowed by legal hurdles as well as a tough macroeconomic environment.”
Despite these challenges, the retail segment, which accounts for a third of KCB’s loan book, grew by 15% in 2023, crossing Ksh 400 billion with a single-digit NPL ratio.
Looking Ahead to 2024
KCB Group remains optimistic about the prospects in its markets for 2024. The bank’s new 2024-2026 strategy, “Transforming Today Together,” focuses on four key strategic thrusts:
- Delivering customer-centered value propositions
- Leveraging Group capabilities for efficient scale
- Taking digital leadership
- Optimizing data and analytics
Mr. Russo emphasized, “We will leverage our technology, people, and partnerships, coupled with intentionally building relationships with our customers, to power growth.”
Macroeconomic Environment
KCB Group acknowledges the persistent macro-economic imbalances globally and locally. However, Mr. Russo highlighted several positive factors:
- Strong GDP growth
- Slowing inflation
- Currency appreciation
- Increased tourist arrivals
- Narrowing twin deficits
- Strong diaspora remittances
Challenges remain, including high interest rates and uncertainties surrounding domestic revenue mobilization and support from multilateral development institutions.
Despite these challenges, Mr. Russo remains confident in KCB’s position: “Amid these challenges, the Group continues to occupy a vantage point both as an enabler and a beneficiary of economic growth.”
KCB Group’s commitment to sustainable banking, coupled with its strong performance and forward-looking strategy, positions the bank as a leader in the region’s financial sector. As Paul Russo and his team continue to navigate the complex economic landscape, their focus on innovation, customer-centricity, and sustainable practices promises to drive growth and create value for all stakeholders in the years to come.
(For the full interview, visit www.thinkbusinessafrica.com)
