Banking and finance professionals must accurately identify customers' needs to offer suitable products that enhance client satisfaction and institutional profitability. Understanding the nature of bank products and the specific industries customers operate in is fundamental. This chapter explores how bank products are classified and how to identify the customer's business sector, enabling tailored financial solutions that align with Kenya’s diverse economic landscape.
Identifying bank products involves distinguishing between those that generate direct funding to the bank and those that do not. In Kenya's competitive financial sector, recognizing these categories helps banking professionals recommend the right product mix for different customer profiles, ensuring compliance with regulatory requirements while optimizing revenue streams.
Funded bank products are financial services through which the bank provides funds to customers, typically generating interest income. These products are essential for banks as they form a significant portion of their asset base and contribute directly to profitability.
Funded products involve the bank advancing money or credit to clients, creating a liability on the bank’s balance sheet that earns interest income over time. They generally require credit assessment and collateral evaluation to manage risk effectively.
These funded products require robust risk management frameworks, especially in sectors like agriculture or SMEs where cash flow volatility is common.
Banks must conduct thorough credit appraisals to mitigate risks of default. For example, at a county government office, loan officers assess repayment capacity before approving a term loan for office infrastructure. Compliance with the Banking Act and Prudential Guidelines by the Central Bank of Kenya ensures the bank maintains adequate capital buffers against funded exposures.
Non-funded products do not involve direct cash disbursement by the bank but provide contingent liabilities or fee-based services. These products diversify bank income through commissions and fees rather than interest.
Non-funded products include guarantees, letters of credit, and advisory services. They support customers by facilitating transactions or providing risk mitigation without immediate cash outflows from the bank.
These products enhance customer relationships by providing value-added services that support business operations without increasing the bank’s credit risk exposure.
Non-funded products generate fee income, which is less risky but requires strong operational controls to prevent fraud. For example, a SACCO might use bank guarantees to secure tenders, relying on the bank’s credibility without immediate cash movement.
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Create a free accountThis chapter focused on the process of identifying customers' needs within bank product marketing. It began by distinguishing between funded and non-funded bank products, explaining how each serves different financial functions for clients. The discussion then moved to the importance of understanding the customer's business industry, which helps tailor products to specific sector demands and challenges. Establishing the customer's social status was emphasized as a key factor influencing product suitability and marketing approach. The chapter concluded with identifying the customer's product gap, highlighting the need to recognize unmet financial needs to offer relevant solutions. Together, these elements form a comprehensive approach to accurately assessing and meeting customer requirements in banking.