| Nairobi Business Monthly December

S v c c i n t F o c u s
BY AAMERA JIWAJI
I
n 2003, Bruce Madete named the dream
cottages that he wanted to build on the 2.5
acres of his land in Gisambai, Western Kenya,
Sosa cottages, from the Luhya word to rest or
relax.
The concept: a boutique hotel of seven cottag-
es with peaked roofs, emulating the local African
hut design but made from modern materials,
was not an easy sell to financial institutions.
Mr Madete approached more than 10 main-
stream banks and was turned away because
“they couldn’t visualise the cash projections
for such a project, and the hospitality industry
was considered volatile”.
TOURISM
How to make an
application
Submit an application form
(available at www.ktdc.co.ke),
with:
1. an application letter
2. a business plan
3. details on the total project cost, and
4. documentary evidence of the security
you will offer.
Services that KTDC offers:
1. Short term loans
2. Long term loans
3. Business advisory
KTDC encourages the
country to invest in
the wonders in our
own backyard
KTDC h
Domestic tourism:
The final frontier for
local entrepreneurs
| Nairobi Business Monthly December
Determined to make the dream a reality, he
followed a self-financing route and pooled the
family savings, sold property and mortgaged
their Nairobi home. Some months later, he was
introduced to the Kenya Tourism Development
Corporation (KTDC), the only development
financial Institution in the tourism sector in
Kenya.
Mr Madete outlined his business plan to KTDC
and shared photos of the completed cottages
and his plans for expansion. They agreed to a
site visit and three months later approved a ten
year loan to Mr Madete that gave him 60% of
the value of the hotel at a 9% interest rate. This
at a time when commercial banks had turned
him away for being an unsafe investment risk.
Sosa Cottages
in Gisambai,
Western Kenya
December Nairobi Business Monthly |
In 2007, phase 1 of Mr Madete’s dream was
completed with seven cottages. And despite
the 2008 post-election clashes, Sosa Cottages
received an overwhelming response from the
market. Riding on this success, Mr Madete
secured a second loan from KTDC in 2010 for
phase 2 of the project. It allowed him to signifi-
cantly increase the number of rooms available
to 28 in total. This year, Sosa Cottages embarked
on phase 3 and will, this month, complete its
conference facility allowing it to tap into the
country’s vibrant conference tourism. The full
roll-out of phase 3 will involve construction of
a health club (gym and swimming pool), and
Madete has approached KTDC for a supplemen-
tary loan of Sh26 million.
Sosa cottages is one of the KTDC’s success
stories. Others include a community project
in Ijara where 15 eco-friendly rooms have been
constructed alongside a conservancy for wild
animals including the endangered herola; and
the 30 room Hotel Levantes in Teso district, close
to the Tororo Hills and the Kakapel Rock Art Site,
just 5 kilometres from the Malaba border. The
Corporation has also initiated construction of
a convention center at Haller Park, Mombasa
and a Marina in Shimoni.
As an institution that specialises in the coun-
try’s hospitality industry, KTDC plays a key role
in developing rural areas. “KTDC are not desk
lenders,” said Mr Madete. “They are open and
honest about the repayment of their loans,” and
as stakeholders who have an interest in ensuring
the success of the project, “they make follow up
visits three to four times a year.”
Support for a project begins with appraisal
of the business plan, and continues with assis-
tance in setting up an organisation structure
and operating systems after development has
been completed.
“You can have a good site but bad running
can bring down a good hotel,” said Abraham
Muthogo, Head of Credit at KTDC.
Mandated with providing affordable and
accessible financial and advisory services and
products to the tourism industry as per the KTDC
Act of 1965, the financial institution is tasked
with providing affordable development funding
and advisory services for long-term investment
in Kenya’s tourism industry. It believes that the
whole country has something to offer, and since
“the demand for tourism is much higher than we
can handle,” Mr Muthogo encourages Kenyans
to invest in areas that are not typically popular.
“In 1969 when we funded the construction
of the Hilton and the Intercontinental, no one
was interested in investing in Nairobi, but look
at it now. The same applies to Lamu: Sunsail
Hotel was a KTDC project and now supply on
the island has outstripped demand,” he said.
Western Kenya, where Sosa cottages is
located, is just one of the areas where KTDC
is encouraging growth of bed capacity so that
visitors are not obligated to attend a conference
at one venue and search for accommodation
elsewhere. With the newly renovated airport in
Kisumu and the ongoing construction of several
feeder roads and by-passes at an estimated cost
of Sh5.7 billion, demand for beds in Kisumu is
on the rise.
Other key areas that KTDC is interested in
developing include Garissa in North Eastern
province, Lokichogio, Eldoret, Kitale, Nandi
Hills, Nanyuki, Kajiado in Rift Valley, Kogello,
Kakamega, Amagoro, Vihiga and Sori in West-
ern, Migori, Kisii and Homa Boy in Nyanza,
Kipini, Ukunda, Mtwapa at the Coast, Embu
and Isiolo and Athi River in Eastern province.
The promulgation of the new Constitution
and allocation of funds to the counties is also
expected to enhance KTDC’s efforts to open up
the country to greater investment and develop-
ment.
“It doesn’t matter how small or how big your
idea is,” Mr Muthogo said. “Various concepts fit
various locations; it is based on the market you
want to tap into” underlying the potential that
every country in the region offers.
KTDC’s loan facilities offer up to Sh50 million,
based on the security that the individual can
offer, and the application process involves
the submission of an application form with
a business plan. KTDC offers a five-year short
term loan and a 10-year long term loan at a
9% reducing balance interest rate, which is
extremely competitive compared to prevail-
ing rates offered by commercial banks, which
remainm above 20%.
Mr Madete, bolstered by the success of Sosa
Cottages encourages Kenyans with land in the
rural areas to enter the hospitality industry.
“The cities are oversaturated,” he said “and
the potential out there is completely untapped.”
He cautions however that any investment
is a long-term project, “not like buying maize
today and selling it tomorrow.”
December Nairobi Business Monthly |
This year, Sosa Cottages
embarked upon phase
3 and will, this month,
complete its conference
facility allowing it to tap
into the country’s vibrant
conference tourism.

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