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Inside Kenyan bank where walk-in customers are not allowed

For a long time, Kenyans have had a fondness for over the counter services. But this trend is now changing as the country entrenches its position as a leading global powerhouse in digital finance.

Take Victoria Commercial Bank (VCB),  a Kenyan bank that has taken a unique approach to banking. The bank does not accept walk-in customers, but instead, does the courting after conducting strenuous due diligence.

The bank has been able to maintain a 13-year 100 percent loan performance period, which is an impressive feat in the banking industry.

Victoria Commercial Bank (VCB) was established in 1987 as Victoria Finance Company. The bank’s roots lie in the city of Kisumu, where a group of churches came together to set up a financial institution to assist small businesses in their community.

The institution was granted a license, but they could only come up with Sh. 1.5 million of the required Sh. 7.5 million in initial share capital. Mr. Kanji D. Pattni, a good friend of the initiators and father to Yogesh Pattni, offered his son Sh. 1.5 million as seed capital to invest in the venture.

Operations at Victoria Finance started on October 15, 1987, in downtown Nairobi in a building aptly named Victor House. They started with a staff of three, and the board of directors brought in a managing director. In 1993, the bank was rebranded as Victoria Commercial Bank (VCB) after significant challenges with the previous business model.

Mr. Yogesh Pattni took over as the CEO in 1993, and the bank had to rethink its business model after experiencing significant problems with the managing director who had been lending out cash that could not be recouped. The bank had to spend years “cleaning up their books,” and Mr. Pattni had to take drastic steps to turn around the business’s fortunes.

Before, Victoria Finance worked with small traders who would bring in money but then take it out soon after – an in-and-out situation. They decided to diversify and look at clients in the manufacturing sector as well as SMEs. Mr. Pattni wanted value addition as one of the pillars of the new operation, and the bank became the first in the country to offer asset-based finance.

As a bank, VCB could also offer letters of credit, guarantees and even trade in foreign exchange, which was previously restrictive as a financial institution.

In effecting the changes, Mr. Pattni pitched the bank’s new model as “not here to take your money but to add value.” The hiring of professionals from the sector brought in more business as word spread. After the massive cleanup effort, VCB enjoyed a 13-year 100 percent loan performance period! Development Financial Institution carried out a year-and-a-half of audits and certified that this was indeed true.

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VCB operates on a small client base with a clean operation that enables them to meet their clients’ needs and requirements fast. Mr. Pattni explained that the bank does not accept walk-in customers. They do the courting after conducting strenuous due diligence.

This may sound strange, but it is not an entirely new concept in Kenya’s banking industry. Some banks in the country, including VCB, operate as boutique banks, catering to a select few clients. They are not open to the public and cannot be accessed by walk-in customers.

VCB’s strategy has paid off, and the bank has become one of the country’s most successful niche banks. It has continued to grow steadily and has been recognized with numerous industry awards, including the 2019 Best Commercial Bank in Kenya by Global Banking and Finance Review.

VCB’s ownership structure is also unique in the Kenyan banking industry. The bank is owned by a diverse group of shareholders, including a significant number of foreign investors. The bank’s largest shareholder is Victoria Commercial Bank Holdings, which is owned by Mr. Yogesh Pattni and his family.

The bank’s ownership structure has given it the flexibility to pursue its business strategy without undue pressure from external shareholders. As a result, the bank has been able to take calculated risks and pursue innovative business models that have enabled it to stay ahead of its competitors

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