{"id":395422,"date":"2011-04-25T00:00:00","date_gmt":"2011-04-25T00:00:00","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/04\/25\/smes-deserve-banks%e2%80%99-financing-says-troost\/"},"modified":"2011-04-25T00:00:00","modified_gmt":"2011-04-25T00:00:00","slug":"smes-deserve-banks-financing-says-troost","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/04\/25\/smes-deserve-banks-financing-says-troost\/","title":{"rendered":"SMEs deserve banks\u2019 financing, says Troost"},"content":{"rendered":"
\n

Despite porous infrastructure, some foreign investors still find in Nigeria a settlement of good business activities, whose profit makes it worthwhile to stay. This is because there is huge market for any legitimate business. Stanbic IBTC Bank Plc is a foreign bank but has established itself and seems to be overcoming the multifarious challenges, which is making the bank now to look local. The bank\u2019s Executive Director for Personal and Business Banking Jacques told BUKKY OLAJIDE the extent by which the financial institution has gone in retail banking and other issues. Excerpts.<\/strong><\/p>\n

STANBIC IBTC Bank has plunged fully into retail banking. Can you elaborate on the business strategy driving this quest?<\/p>\n

The starting point is that we see ourselves as a universal bank. A universal bank wants to bank all segments, not only the top end, but the total market. This is a process because there is still a lot of work to be done in the upper segments. If you look at salary earners, there is a lot we can do there in terms of new products we can launch, and lots of money that can be extracted into the banking system from the upper segment.<\/p>\n

There are 24 banks in Nigeria and these banks want to grow their market share and profit base. But if you look at the market in South Africa and some of the other markets, at one stage you need to start moving down the pyramid if you want to grow your business.<\/p>\n

In the next few years, more and more of the banks are going to start playing in some of the lower segments of the pyramid. For us at this stage, we are playing in the profitable top segments while also doing some learning in the lower segments, so that one day when we need to start playing there, we would have attained the learning to help us find our feet quickly in the market. Some of the stuff we are doing is around E.susu, which has huge potential.<\/p>\n

In spite of your investment in the retail segment of the market, Stanbic IBTC Bank is still seen as being high up there, serving corporate and investment banking clients. As the man driving the retail segment, when do you think Personal and Business Banking will be at par with Corporate and Investment Banking in terms of income generation for Stanbic IBTC?<\/p>\n

If you look at 2009, the retail segment accounted for 22 per cent of the bank\u2019s total contribution. But if you look at 2010, that is one year later, we were up to 31 per cent. If you look at that current growth, and the fact that the corporate business will continue to grow as well, it becomes very difficult to say that we will be at par with corporate and investment banking in the next five or 10 years.<\/p>\n

But, at one stage, we will be at par. If you look at the more established business in other parts of the continent where we are, in certain financial years, the corporate banking portion will be bigger than the retail banking business, and at other times the retail banking business portion will be bigger or at par. I think the endgame for the bank will be for us to be more or less at par.<\/p>\n

It was widely reported last year that Stanbic IBTC Bank would open 100 new branches across the country. Was that target met? How many branches of the bank are you hoping to have by the end of 2011?<\/p>\n

In 2010, we were planning to do 100 branches, but we reviewed the plan. Initially, the biggest challenge was to open the branches but it is becoming business as usual. The challenge is no longer to open the branches because we now know that we can open 100 branches a year, if we want to.<\/p>\n

The challenge is staffing the branches and to bring them up to productivity. The biggest challenge is the training bit, so we slowed down at a stage last year when we realised that we were running out of capacity from a people point of view.<\/p>\n

We did not open 100 branches last year but we opened 80. The benchmark is to open 60 branches this year but we might slow down depending on how quickly we can generate the income to sustain the branches and how quickly we can staff the branches. I do not want to put a number to it but we have a budget for 60 branches. The number of branches that is enough for a sbank depends on the market share it wants to achieve. At this stage, if we are to achieve our projected market share, we will need about 300 to 350 branches.<\/p>\n

In terms of customer base, we understand Stanbic IBTC Bank has grown significantly across different market segments. What is your target for the next 18 months and what plans have you put in place to achieve those targets?<\/p>\n

The SME segment is an important segment and many of our new branches are surrounded by SMEs. SMEs are a huge segment and we have just started tapping into that segment. During the course of this year, we are going to do lots of work in that segment. If you look at agriculture in this country, it is big with government investing huge amounts into this sector.<\/p>\n

We have started to build on this segment and we are planning to bring in more expertise in the agriculture field to grow this business as well.\u00a0 The same with Sharia Banking, CBN has just started licensing banks to do the non-interest segment.<\/p>\n

Therefore, as we start launching more products into these segments, we are going to need more and more branches in areas where we did not have them before. Banks do not always have the right types of SME products.<\/p>\n

Launching more products and segments clearly indicates the need for more branches to be able to serve the customer in a much wider segment than we are able to at this stage. This is an ongoing process. In the longer term, we will start getting involved in many more of the segments as we grow the branch network.<\/p>\n

Another look at the branches you have opened recently reveals that most of them are located in major cities, state capitals specifically. Does that suggest that rural and semi-urban areas do not feature in your plans? After all, a large percentage of Nigerians live in rural areas.<\/p>\n

One thing the new branches are showing us from a cost point of view is that to make a branch profitable, one of the inputs is the cost of building a branch. If you can reduce this cost, you can open branches in places where they previously would not have been profitable. I think with the model we played around with last year, we now know that we can build branches at much lower cost than the original branches but at the same quality.<\/p>\n

Let us take any area where there is a lot of agricultural activity or Sharia activity like the Northern states, clearly we would not have had a customer base there. However, if we are able to launch a non-interest product we would immediately have customers that were not around before, which we were not focusing on. The same applies to agriculture and the SMEs.<\/p>\n

The starting point for branch expansion programmes will always be the economic hubs of the country. In our case, we did the same. On top of that we also said we must have representation in all the states. The starting point last year was to make sure we have a branch in all the states, not only for the retail franchise, but for the total bank, pension business and the corporate business.<\/p>\n

Let me use a large mobile phone company as an example, the multinational company themselves may never do business in one of the small branches upcountry but but their clients will if we do not have those branches, the corporate and investment banking arm may find it difficult selling our services to such a company that has got a big customer need through-out the country.<\/p>\n

The game plan is to start planting branches where it is most profitable. But if we call ourselves a universal bank that wants to bank all segments of customers, we must reach the potential customer base outside the bigger cities, we want to be their bankers as well.<\/p>\n

Yours is not the only bank on an aggressive branch expansion drive. A few others are also in the fray. It was thought that the introduction of less expensive channels such as Internet and electronic banking would reduce the need for branches but this is not happening. It goes to reinforce the primacy of branches in customer acquisition and retention. What is your view on this?<\/p>\n

Some years ago, in more developed economies, when they started launching Internet banking they started saying we do not need physical footprint anymore, and lots of banks actually reduced their footprint. But few years later, they started building this footprint again.<\/p>\n

It is clear that a lot of customers want to see and visit the branch because different customers have different needs. If you come down to the Nigerian market, it is largely a cash based society. You can have all the very up-market modern segments and channels such as Internet banking, telephone banking and mobile banking, but somewhere in this whole network cash must enter, so you must have cash-in, cash-out abilities.<\/p>\n

Therefore, you must have some kind of physical presence to get the cash into the banking system. You can use the ATMs in a way and that can be used to a point.\u00a0 If we are going to be relevant in this market, if we are going to increase market share, we will have to grow physical footprint, in combination with a lot of other channels. We cannot stop growing physical footprints, or try to replace it with something else. That is the reason why we believe we must continue to build the physical network as well.<\/p>\n

Your rapid network expansion programme definitely requires huge investments in technology to deliver on your retail portfolio. About how much have you invested in technological innovations in the last one-year? Has this resulted in the adoption of new platforms for your operations and a reduction in transaction costs?<\/p>\n

The ATM network is a good example. If you look at the number of transactions we do on our ATM network, it is taking a lot of costs off us with people not having to visit the branches. In December of 2010, we paid about N3.6 billion from the ATM network that month. If you look at N3.6bn and the average cash withdrawn by customers, we would have needed many more branches, many more staff if people who wanted to collect that came to the branches in December.<\/p>\n

For instance, Internet banking aids third party payments such as Dstv. You do not have to come to the branch to do that. All the investment in electronics is taking a lot of cost out without any doubt. We will continue to invest in technology and we are able to continue to build smaller branches because all our customers do not have to come to the branches.<\/p>\n

By focusing on organic growth through branch expansion, one is left to guess that the much-speculated acquisition of another bank is off the table. Is that the situation?<\/p>\n

To state that we will never look at another bank will be wrong. Opportunities arise all the time. I think in this market, over the next few years there will be mergers and acquisitions. We will always be looking for opportunities. However, we will do something while we look, which is to grow organically and we know that we can grow 100 branches a year and we will continue to grow organically.<\/p>\n

We have proved to ourselves that we can do it. We will continue doing that and if an opportunity to acquire another bank arises, we will look at it.<\/p>\n

Which is more cost effective, is it organic growth or acquisition?<\/p>\n

It all depends on the price that you pay for acquisition and the number of customers you get from it, as well as, the quality of the network. You may also have to consider how much has been invested and what will be gotten from the investment. I do not think there is a right or wrong answer, it all depends on what you are looking at.<\/p>\n

One of your grassroots products offering called esusu, from our enquiries, has been well received in the market. May we ask, to what extent has it impacted on Stanbic IBTC\u2019s customer acquisition? Are there similar products offerings now in the works?<\/p>\n

The challenge now in that market is that we serve that market through an agent network. It is not conventional banking and we are working on our agent model. We are working at making sure that we appoint the right agent and that we pay them the right kind of commissions for the work they do.<\/p>\n

We have learnt a lot since going into the pilot phase of esusu. We are getting better at managing the agent network, understanding them better, and the results have been coming with it. The account opening in the last few months have been phenomenal. The liabilities may seem small but when you put all this together, it actually brings quite a nice liability base to the bank.<\/p>\n

We are also starting to lend to this segment. Once again, as a conservative bank, we always go into a pilot phase and this one looks positive. We are however aware that once when you start lending money, the economics change drastically.<\/p>\n

From a liability point of view, it may take a much longer time for us to start breaking even in this segment, but it remains a volume business. We need to push the volume, the volumes are out there, it looks positive, and we will continue doing what we are doing.<\/p>\n

Do you think esusu is a potent force to gain some ground?<\/p>\n

Definitely, it is the first building block in a much bigger picture. It allows cash in cash out at the ground level thus the market place. From there, it can flow to the retailer and then to the wholesaler or distributor and lastly to the big corporate. In such a way, it assists the value chain to become cashless and at the end reduce the cost of cash, which is an expensive commodity in the economy.<\/p>\n

How is Stanbic IBTC leveraging on the pedigree of Standard Bank to add more value and efficiency to its operations?<\/p>\n

The Standard Bank Group has been operating on this continent for close to 150 years. It also comes down to much more than what have we done in South Africa, it is more about what we have done in other countries on the continent.<\/p>\n

The learning is around what my colleagues are doing in Uganda, Ghana, Swaziland and other parts of the continent. There is a lot of learning coming out of that and if you take all of that together, all of the 17 countries, all of the people that have got different experiences, that gives us the strength in this market. I do not think there is \u201cone size fits all\u201d, each country has their strength and customers have slightly different needs.<\/p>\n

The strength in Standard Bank Group is the fact that we are in so many countries, we have so many experiences and that is what is guiding us to offer the right kind of products and customer experiences.<\/p>\n

Is there the possibility of having a template that addresses the much-needed transparency in pricing and bank charges? We ask because the issue of hidden charges is rife in Nigeria.<\/p>\n

It can clearly become a competitive advantage in this market if you are upfront with your charges. That is the model we run. There are no hidden charges and customers are able to see what we charge on transactions. We do a yearly review of our charges and then we publish the charges. We published the charges for 2011 on the 1st of April.<\/p>\n

The challenge is for our staff to understand the charges and clearly communicate it to the customer. There is no reason why any of our customers cannot get the right kind of information on what we are going to charge per product and on a transaction because they are all out there. When we do the review like we have done this year, we make available a lot of documents to customers to enable them see what the charges are going to be on any transaction they want to do. We are quite open about it and these documents are available for customers to pick at our branches.<\/p>\n

It comes as a shock, when one meets you, a non-Nigerian driving Stanbic IBTC\u2019s quest to cover all parts of the country. What has been your experience from other parts of Africa where you have done this compared to what you are seeing in Nigeria?<\/p>\n

I was privileged to be part of the commencement of the Standard Bank Group retail business in Uganda in 2002, and there was a lot of learning experience from there. We are in 17 countries in total and we learn from what works in other countries and what doesn\u2019t work. There are some best practices.<\/p>\n

But also, I am leading a team, a very big team of capable Nigerian colleagues. I have worked together with the team for over three years. I am in my fourth year in Nigeria, so I have learnt a lot about this market and I also have colleagues that have been in this market for the last 20 years.<\/p>\n

We are a very strong team and all our decisions are taken as a team and I have a very vocal executive committee in the retail segment of the market. Looking at the different experiences of people as a team, we are not only relying on views around the Nigerian market but around 17 other markets in Africa and other parts of the world. I think that makes us a stronger team.<\/p>\n

\u00a0<\/p>\n<\/div>\n<\/p>\n

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\nSMEs deserve banks\u2019 financing, says Troost<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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