How shortage of bride price led to creation of Sh400m business

Speed Capital MD Daniel Githua during the interview at his office in Nairobi last week. PHOTO | DIANA NGILA 

By John Gachiri

In Summary

• The firm’s managers plan to raise up to Sh2 billion in the next three years.

When Daniel Githua took a friend to a bride price ceremony in August 2009, the tough negotiations that ensued would set him on a path to forming a company that is today worth Sh400 million.

Despite hard bargaining over the bride price, the groom’s entourage fell short of Sh120,000. The funding gap gave Mr Githua the idea of bailing out his friend and at the same time making a profit.

“I quickly raised money from a few friends who were there and loaned it to my friend on condition that he pays back with some interest in a few weeks,” he nostalgically remembers.

Further analysis revealed that there was an opportunity for emergency lending and he decided to try his luck in the area. This sowed the seed for Speed Capital, a company that was registered in September 2009 using Sh120,000 as capital.

Together with Ben Ireri, a friend from his days at Starehe Boys Centre, the two began loaning small sums of money mostly to friends and associates. By the end of the year they had issued Sh5 million worth of loans. The company was a side-hustle since Mr Githua was working as an auditor at Industrial Promotion Services.

The company grew rapidly between 2010 and 2011 so the two partners began putting in place structures needed to support the business.

Kenyans in the diaspora

In April 2010, they hired their first branch manager, Miriam Mutinda, a banker who came from World Vision’s microfinance arm.

“We put in place proper processes and hired eight employees, mostly loan officers,” said Mr Githua. In the same year, Speed Capital raised Sh15 million from a group of investors, including Kenyans in the diaspora.

The first branch was opened in Murang’a, a decision driven in part by Mr Githua’s knowledge of the town as a result of having grown up there. But the office was closed down a year later due to low business.

The firm later set up offices in Kitengela and Naivasha. To make administration easier the company decided to halt branch expansion and concentrate in Nairobi and satellite towns. The next branches were opened in Ongata Rongai, Embakasi, Thika and Gikomba market in Nairobi.

In 2012, Mr Githua, who was now working at Tuskys Supermarket as a senior auditor, decided to stop moonlighting and concentrate on running Speed Capital on a full time basis.

The decision came with a personal price for Mr Githua; he had to take a salary cut until the business grew to a point where it could afford to pay him better – which was realised six months later.

Today, Speed Capital’s workforce has increased to 90 with more branches in the pipeline. The firm’s managers also plan to raise up to Sh2 billion in the next three years.

Strong governance

The board has also grown to include Gilbert Kibicho, founder of Top100 SME Virgin Tours, and Jesse Mwangi, director of consumer, trade and marketing at Habanera Limited, a Nigerian company.

In addition to implementing strong corporate governance, Speed Capital’s growth has also been as a result of using a different approach to lending, said Mr Githua.

Unlike most lenders who make their decisions primarily based on bank statements and books of accounts, Speed Capital looks at the business model and processes.

Many small businesses do not keep proper books and it is easy to present a good cash flow statement by simply making deposits and withdrawals, which in reality may not be coming from the business but are intentionally done to show a good financial position.

Looking at how the business runs, the industry it operates in and average margins, among other factors, gives a better profile of the borrower than books and bank statements. As a result, this reduces the risk of defaulting, Mr Githua said.

The micro-lender also does not give out consumption loans and prefers businesses managed by owners.

Speed Capital is set to open more branches but Mr Githua was non-committal on whether he will still be steering the company five or 10 years from now, instead saying that merit determines who will head it.

When not running the business, he enjoys mentoring college students, young professionals and eating mbuzi choma with his childhood friends from Murang’a or top honchos in Nairobi.

jgachiri@ke.nationmedia.com