Many changes have been taking place in Nigeria’s banking industry in recent years. To track the developments and how the banks have changed in this interview, Uzoma Dozie, Managing Director, Diamond Bank Plc, gave the insight from his bank’s perspective.
WHAT led to your decision to divest from West Africa Operations?
Four years ago we decided that retail was going to be an area where we must pursue and it means that we will focus our resources on a retail drive. The two resources that are very key to retail banking are capital and human resources. When you look at where we are in Nigeria, the second biggest economy in Africa and if you put the populations of these West African countries together, it is not up to Lagos and Port Harcourt, you see why we need to consolidate on Nigeria.
When you look at the opportunity and for Diamond Bank then, when our business was focused on corporate, commercial and retail, it was easy to justify it because we were actually following our customers’ business and that was one of the reasons of what we were doing in West Africa, a lot of Nigeria trading was going through there. But when we shifted and focused on retail, we shifted to the biggest retail market where the opportunities were.
We have 60 million individuals that are un-banked, on business side, on the small businesses side we have about 17 million un-banked businesses and when you look at where the Nigerian government is focusing their objectives and priorities is definitely in that space because that is where the future of Nigeria’s economy and development is. In any developed economy, the biggest contributor to GDP is small businesses, biggest employer of labour is also small businesses.
For us, we are channeling a lot of resources into that space to bring more people into the banking sector to provide more financial resources, we are riding that way and that is one area we started three years ago, we have skills and capability and infrastructure to do that.
If you look at penetration in Nigeria, we have not even scrached the surface fully yet, but it is also working with existing businesses in different areas, it is also deploying that technology and also spending a lot of resources on training people to understand the ways of doing it, so that’s a lot of capital and human resources required. So we need our best people to do that, and we also need our capital to do that, so it’s actually putting your money where your mouth is, because that capital is stakeholder’s capital not ours.
We have taken a long term view of that and not a short term view. We took that decision two years ago, but off course you have to find a willing person who will add value and which we have successfully done, and we have sold to a partner that also gives us the opportunity to have relationships in that area, so if it was a distress sale, it would have been an unprofitable one, but because we took our time it was a very profitable venture for us.
For some observers the international expansion by Nigerian banks was just an ego trip, a me-too kind of steps.
I don’t know about that, I have to speak for Diamond Bank. When we went to West Africa, our reason for going there was a capital decision as well, so we got a licence, we are the only bank in Nigeria that got a licence from the regulator there that allows us to go through one zone, so we didn’t have to buy five licences, we only bought one licence that allowed us to open in those locations.
So, while Benin was the head office, the other locations were like branches and so we looked at it like one country. So that is why Diamond Bank went in there. I think other organizations have their reasons why they went there, and off course, at that period we are just consolidated, there was excess capital in the financial sector, so people had to deploy that capital.
So we have to find areas where you will get good return from those capital, don’t forget that we didn’t have that deployment of IT now, where we could cost effectively provide services in the small and medium space that we can do today. So as things changes, people will adapt to your market and make sure your business is sustainable into the future.
If you also look at the way Nigerian banks were operating in the past it was like largely corporate, so the capital that was deployed then was just to quickly take advantage of corporate businesses where we figured there was high ends, but now our strategy has changed and we are looking at our business in longer term and we are doing retail business the opportunities are abound in Nigeria, and so why hold on to that capital when there is so much we can do now.
I hear that so many banks went international, it wasn’t a bandwagon thing, it was the kind of business banks were doing then. But the business terrain has changed, and everybody is realizing that retail banking is really the business, gives you more stable funding, at the end of the day, more profitable, lower NPL (Non Performing Loan). So it is just aligning our strategies to the reality right now.
The environment (other West African countries), the way they work is not the same with the way we work in Nigeria, so for us it took a lot out of us in managing the people and the business over there. For instance in the retail space, when we want to roll-out the card and ATMs it was difficult, in Cotonuo for instance, you can’t work into a shop and use your debit card to buy something. There developmental level in Togo and Cotonu was not at same level that we are here.
This (Nigeria) is where the business is, so for us it was important that we streamline and focus in Nigeria. If we put the amount of resources that we used there into the Nigeria space, we will make a lot more money.
Having taken that decision and chosing to consolidate your operations in Nigeria, what have you done with the profits you made in divesting from West Africa
In last two years, we have shown ourselves as the fastest growing retail bank, I said that from not a size of balance sheet. We are the number six bank in Nigeria. We have grown customer base faster than most other banks and we have done that not by stealing market shares but growing new businesses and executing our strategies which was growing the retail business, and to grow that retail business, you have to build infrastructure, you have to build businesses in areas where there is no retail. So it was taking banking to the people and we are using technology to do that. So when we were saying that we were going to use a technology driven strategy to drive retail and why we were using technology driven strategy, it is because of cost of deployment, access and customer experience as well.
We have managed to add 10million more customers to our base in three years, more than what we did in 20 years of business, and that is because we put the choice of opening account into the customer hands.
Twenty five years ago, if you want to open an account, you must walk into a branch and the bank might choose whether or not they will open it. If you want to do a single transaction 25 years ago, you have to go into a branch, but today, with an MTN mobile phone, it takes a few seconds just by dialing *710# and that is it.
There is a big difference with Mobile Money wallet and opening an account. Mobile Money is just like a wallet in which you take money from your wallet and send to someone in another area and that is financial inclusion but that is not what we wanted. Rather, we want Nigerians to open a full-fledged bank account wherever they may be.
Our business model is not just inclined to when you keep or borrow money but creating platforms for people to have access to financial flows.