Question: This being the first major interview after the Covid-19 crisis, what were the difficulties that your bank went through and what lesson(s) can you share?
Answer: Covid-19 has taught us many lessons in terms of health, taking care of employees, and the challenges of managing resources. During the Covid-19 crisis we implemented a lot of protocols by providing basic things like sanitisers and masks and implement some social distancing. But it was still difficult to stop employees from getting infected. Once an employee was infected, it was a bit of a challenge. But we created teams to protect each other and ensure continuity. Also, we had to introduce ‘work from home’ arrangements. We did all this to ensure that the bank was not exposed to the risk of shutting down completely.
The bank actually had a special insurance protection to manage the situation. That has helped us as we didn’t experience major casualties.
Now, coming back to business, there are two ways to look at it. One is: there are some businesses that were directly impacted - like Tourism, Travel and Hotels. These businesses had serious problems. Many hotels were shut down and some are still recovering.
The other sectors like Transportation, Manufacturing and Trading had serious problems. Importers, for example, experienced problems because there were disturbances in the supply chain. Goods were not coming from China, the delays were there. From the economic and business side, there were some disturbances, even the cost of doing business went up, and container tariffs have gone up significantly.
So to support our customers, we dealt with this situation in two ways. The Bank of Tanzania (BoT) has given a lot of concession. You know they have been very supportive to our bank and the financial industry. BoT has given us support in terms of accommodative policies. So, that has really helped the financial industry.
We could look at customers’ cash flow problems. Some businesses were shutting down, so we gave them loan repayment extensions, we gave them restructuring and reduced the interest rate. If we would have not done that some of customers would have been at serious problems. I can see even the last quarter some customers have started reviving their businesses.
Fortunately, in Tanzania, we have an advantage. Since President Samia Suluhu Hassan took over, we are seeing a lot of positive developments. Investors, existing manufacture and businessmen who had quit are coming back. That is really creating a huge momentum. I am sure the economy is going to take off extremely well. We are very positive on the Tanzania market. All the measures we adopted have helped customers and they are coming back. Some industries like tourism and hotels are still struggling. That will take time. The government is doing a lot of efforts to market Tanzania. So, those initiatives expose Tanzania tourism to the market and is going to pay off.
Tourism is different from other markets. Our tourism is actually leisure unlike in Dubai and other places that are all business tourism which will be impacted because people are used to zoom calls now. Directors and board meetings are all taking place on zoom but leisure tourism is different. If you have, for example, a European or an American wanting to see a live lion, he comes to Serengeti. He can’t see it on zoom. With this advantage, the initiatives of the government will see tourism also recover faster.
Our evaluation after the difficult path of Covid-19 crisis clearly proved that the bank came out very strongly. We have actually demonstrated a strong resilience. Our resources have improved. The banking industry has gone up, most of the deposits have gone up.
The second thing is that; shareholders have injected additional capital. The idea is that this move is going to support the bank’s growth and any unforeseen challenges. So, these things made the bank stronger.
Briefly give us the performance of your bank for the last one year in key areas like assets growth as we start quarter one?
We were very lucky in the year. The total assets increased tremednously in a difficult year of the crisis. The assets crossed the Sh500 billion mark to Sh580 billion, meaning BoT now sees us as a large bank. We are no longer a medium-sized bank. The asset grew by 14 per cent. Again, customer deposits have grown by 22 per cent. We have reached Sh415 billion. That shows resilience and trust that the customers have on the bank.
Our loan book has also increased by about 10 per cent to reach Sh480 billion and I can say last year has been good for the bank in terms of performance.
What can you say about Tanzania’s contribution toward the bank’s success as far as the whole region is concerned?
You know I & M Kenya is the parent bank. It is holding almost 90 per cent of the whole group’s business. In Tanzania, we are still at Sh506 billion. There is also an operation in Rwanda. The objective of the group is to be a significant player in the East African market. So, with that intention we have opened a bank in Uganda to cover the east African region effectively. That gives us a special position because we have all the connectivities for operating as a regional bank. Our goal is to be Tanzania’s leading bank. We want to be stronger players in East Africa in terms of providing banking services and providing access to a lot of investment that we are doing in terms of technology. We want that position to be clearly known.
What are the likely challenges as you strive to expand your business and reach more customers?
We are a corporate bank. Now as a strategy, we want to move to SMEs. We are actually diversifying our strategy to serve more SMEs and retail banking. Suppose a customer in Dodoma wants to take a loan and similarly I have a customer, lets say in Mbeya, I can’t reach there because my branch network is only eight branches so far. So, how will we do that?
What we did is that we have invested in … Technology. We are going to announce the expanded network as BoT has approved us for agency banking. We are going to have agency banking and we are going to implement a lot of digital banking solutions. Strategically, we don’t want to have physical branches. It is a huge capital cost. What the customer want is the solution. If I am a farmer in Mbeya or a small trader, the question is: can I get the bank’s facilities from Dar es Salaam? It is now going to be possible. We have got the technology platform. For example, we have just introduced the Loans digital Lending Product. With this product, if you are an Airtel customer and you want to do some purchase or want some money, you can do that through a mobile message. We have collaboration with telcos to provide digital lending.
Again, if you want to do SME lending, you can use the same platform. Similarly, even if you want to give insurance facilities to customers you can use this platform. All these things we are going to be driven using the digital space. We need to provide a mode where customers can come.
We have also plans to go for expansion in strategic locations like Zanzibar. We are planning to open a branch in Zanzibar because the isle is coming up as a big operating ground and a key market. Similarly, in Dodoma. We also want to do a lot of agriculture financing as we go along.
The bank of Tanzania has given us a window recently. Almost like Sh1 trillion was made available for banks to finance agriculture at a very small interest rate. So, we want to use that window and increase agriculture financing to support agriculture production and improve the lives of our farmers.
As a bank with a regional outlook, what can you tell us of your prospects in this frontier market? Many local banks are looking to extend their business beyond Tanzania. What is I & M doing to maintain growth and target new markets?
Today, it is not important to have 200 branches. That may be the old fashion. Today, what the customer want is the solution. The second thing is to better our interest rate. So, we look at what customers want exactly, how he wants it and how you differentiate yourself in delivering that solution.
The traditional model is not going to help. So, were are looking at a lot of innovative solutions. We have for example introduced one product called Spend, it is an e-wallet. Very few banks have that. To get e-wallet solution you just download an app on your phone and if you want to pay you can just pay without any fee.
The second important thing is that we are investing a lot of money on technology. We are one of the few banks in the country who has Whatssapp banking. With Whatssap banking you can check you balance and do other transactions. We encourage farmers to move on to the digital and mobile channels.
How is the bank leveraging on technology for financial inclusion? What new innovations do you have to push for financial inclusion?
Digital lending is one of our initiatives of technology supporting financial inclusion. Today you can reach a million customers on a digital platform. We have a solution called Bank Junior. It is again an application. So, you can just open an account with seven steps. We want to reduce pressure on customers by providing easily accessible and affordable banking services and facilities.
How will your bank stand out over the rest as far as services provision is concerned?
Today, banking products have become comoditised. We have advantage on some of these digital spaces.
When we say digital space physical transactions will always come down, you can just do everything on mobile phone. All these digital initiates are going to put us at the top in terms of quality services for customers. We have unique products which will give value to the customer. So, that value is the only the difference.
Banks are looking at customizing the solution. We need to understand what the customer wants, how is it working, what is his business need.
What kind of support would you like to get from regulators as you look forward to offer unique services and become the leading bank in Tanzania?
Honestly, I can say in the last one year there has been good development. There is a lot of positive signs. The economy was very tough in the past but now the sentiments have changed, the market is becoming more open, there is inclination for investors to come.
The second thing is from my regulator perspective, for example BoT. BoT has been very understanding. For example, during the Covid-19 crisis it allowed flexibility of restructuring, reduce NPS (Non-Performing Loans) otherwise all the banks would be struggling with NPS. So, BoT has been very accommodative and understanding. They are very strict but still understand the genuineness. We have been very transparent and proactive.
There are some areas, for example, write-offs, you know the regulator is very harsh. He wants banks to do the write-offs in clear processes. The challenge that we face in the industry is court processes. For example, if a customer has taken a loan and defaulted, the default can be for business reason or deliberate. So, we are not interested in selling securities and making money. That’s not the idea. The idea is to help people to grow their businesses and we make some margin in profit.
So, if he has defaulted we have to fall back on guarantees, collectors and security realisataion. When we have to recall the security, they apply for injunction.
The courts give them injunctions fast. The moment the injunction is given, our money is stuck because it takes time for the recovery to happen. That is a very big challenge we are facing today.
As and industry, the court proceedings and processes are very painful. Your money gets stuck for three years, four years or even five years and the process of enforcement is full of administrative delays.
The second part is that the regulator expects us to write off that loan in three years. Suppose the loan is not paid and it will be put on loss category in one year. That is one year you have to write off.
Write off means you have to take from your creditor and realization from the court can take three or four years, now where will you write off from? You should have a profit. It will have significant impact on your operation. …..big banks will manage but medium-sized banks and smaller banks will have serious problems.
If my balance sheet is, let say, Sh506 billion and then I have 10 to 15 billion to defaulters, we will be dead!
For us we are so lucky that our clients’ pace is good, our NPLs are in control; that we were at 14.6 per cent and now has come down to below 9 per cent is a positive strend. We have good improvement in the ration and we have good recovery also.
So, what we want is that this process of execution and recovery has to be faster. And the message that should go to the market is that: if you take a loan from a bank, if you default and don’t pay back, the bank will fully exercise its right.