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| Mr Maina |
Barclays Bank Tanzania first opened shop in the country in 1925 and saw
the country’s independence before being nationalised in 1967 and coming back in
2000 after liberalisation of the financial sector. Staff Writer ABDUEL ELINAZA
interviewed the bank’s Managing Director KIHARA MAINA who has been given the
task of seeing the bank attains its vision of leading in the country’s banking
sector by 2015.
Q: How do you perceive the
banking business in Tanzania?
Competition is good ultimately because it ensures that competitively
priced services are being offered. It helps to bring in innovation, expertise
and experience from different parts of the world. Ultimately the biggest beneficiaries are
Tanzanians. Performance wise, because the sector is growing, there are certain
challenges that still exist and a lot of infrastructure still has to be put in
place to facilitate even faster growth. A good thing about the way in which
these challenges are being dealt with is the dialogue going on between banks
and their stakeholders to ensure banks facilitate economic growth as a whole.
Q: What type of these financial
infrastructures…?
A: There are many, but for example…you know credit is very necessary to
drive an economy. We want to make sure we (as banks) who are offering credit to
the public feel comfortable we are not putting (client) money at risk when we
are lending. To be able to do that we want to make sure that lending practices
are as safe as possible. We need therefore infrastructure around safeguarding
credit to be in place.
So for example we need to know the person we are lending to is so and
so and to ensure the customer due diligence is as easy as possible—his or her
financial details and history are obtained with little transaction cost. This
helps ensure that the costs passed on to the clients through fees are not high.
So what may seem like a little thing like putting in a National ID solves a lot
of problems in processing credit. Other financial infrastructure will be things
like putting up a credit reference bureau which will itself depend on the
national ID to identify individuals correctly. We will need to ensure this
information given to the credit bureaus is obtained from all institutions that
offer credit.
For example utility companies who provide credit to a company or
individual who is not good at paying will need to feed that information to the
bureau. Right now we heavily rely on the cash economy in Tanzania. We want to
reduce the reliance on cash for various reasons. The central bank wants to make
sure that it can rely on its monetary policies being well transmitted through
the financial system. Therefore we need to ensure that most cash moves through
the banking system. We want to make sure that we reduce the cost of operating branches
because we move long distances transporting cash.
Therefore the ideal situation is to put in centres that allow cash to
be moved over shorter distances while we are in transition to a less cash
intensive economy. All this infrastructure requires investment. We also have to think about how we interface
with the international economy. So we are putting in systems that connect the
region to facilitate trade. You have probably heard about the real time
settlement system that allows us (banks) to move money around East Africa
quickly.
Q: Talking about credit
reference bureau that BoT says may start anytime this month, do you think the
presence of the bureau will help lower lending costs?
A: Yes, ultimately it will. Right now if we want to lend to an individual
we have to do a lot to search for the necessary information. This costs the
bank a lot of money. Every other bank will do the same. However, if banks were
to share negative information with the bureau when someone defaults we can
significantly reduce these search costs. This benefit passes on to borrowers
through lower credit interest rates.
Additionally we are going to see lower default rates because people
want to make sure that their credit history is good due to the fact that if
they default in one bank they could end up being locked out of the credit
market—for example six years. People will behave better with respect to credit.
Lower default rates will lead to banks charging lower risk premiums and
therefore lower credit interest rates. Although it would not happen overnight
ultimately the rates will go down.
Q: Since the recently world
economic crisis, banks’ non performing loans (NPLs) have gone high. Do you
think the situation will soon change to better levels?
A: Well, NPLs in this market are higher than others in the region. The
latest statistics are showing that they are around 8.7 per cent to gross loans.
This compares to 4.5% announced recently in Kenya and 3-5% around the region. Quite correctly there is a focus from the
financial sector to see how we can bring down these NPLs.
This will require understanding of what between the business cycle,
economic issues and operational issues is contributing to the high rate. We
have to do a lot of work to distinguish between good and bad borrowers.
Depending on what strategy a bank is following there will need to be an
understanding of the impact on NPLs. So you will see that some of the banks
which are reporting huge NPLs are cleaning up their balance sheet to make sure
that they go forward with a stronger position. We will need banks with strong
balance sheets to ensure the economy also moves forward.
Q: What is the NPLs situation to
Barclays Bank?
A: Well Barclays underwent a very significant expansion from about 2007
to 2009. It included both geographical and loan book expansions. As a result we
saw some significant growth especially in our loan book and admittedly there
were some challenges. We spent 2009 and 2010 pretty much on cleaning up our
books. We have got a robust team that is looking at recoveries of the loans
that went bad. We have changed our products and services so that they are more
robust. Going forward since then the quality of the loan books has been very
encouraging. We have done our clean up and
we are looking forward to our quality products improving our loan book quality.
Q: You made loss in this year’s
second quarter, what are the profit expectations at the end of the year?
A: If you look at our first quarter results we made a profit, but a
loss in the second quarter to reflect the changes we were doing to strengthen
the business in that particular quarter. We are expecting to make a profit at
the end of the year. We don’t want to jinx it but as I have said we expect to
make a profit.
Q: Banks want to expand
geographically but Barclays closed some branches in the first quarter, is this
not going against your own vision?
A: No. It is perfectly aligned to our vision. We (Barclays) run a
retail and commercial bank in Tanzania. We have presence on the ground that
allows us to bring all the strengths of the Barclays Group to bear in this
market. This includes advisory work for corporate or sovereign clients, whether
it is to bring in expertise to arrange debt programmes or any other kind of advisory
work we can do. We have other capabilities in the Group that we can also bring
here and we are always looking for the right opportunities to do so.
BBT (Barclays Tanzania) itself has got a strategy that is consistent
with bringing in the Groups expertise to bear within the Tanzania economy. One of the things that we had done earlier
was to expand across the country. We looked at the expansion we did and asked
ourselves whether we were in the position that we wanted to be and whether it
was the right one in terms of services we wanted to offer? After doing the
re-evaluation we thought we could strengthen and consolidate our position
further and serve our customers better by trimming our network. We are here to stay and will maintain our
focus on this market though we are (now) a bit more selective.
Q: What are your expansion
strategies now?
A: Actually we are expanding our customer base. As you can see
expansion does not necessarily mean geographical expansion, it can be about
increasing customers. There are some banks in this town that only have a couple
of branches but they operate throughout the country. There are places where we
currently serve customers but we have no branches there. The good thing about
technological advancement is that it allows you to expand your reach without
necessarily having a physical presence on the ground.
Source: The Daily News, http://dailynews.co.tz
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