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Banks can lend more without accumulating bad loans — Globus Bank CEO

*MD/CEO, Glabus Bank, Elias Igbinakenzua

The directive of the   Central Bank of Nigeria (CBN) that banks should give out 65 percent of their deposits as loans (Loan to Deposit Ratio) has triggered fears of increased Non Performing Loans (NPLs), which is presently above regulatory threshold in the industry.

However,  Elias Igbinakenzua,  the  Chief Executive Officer of Globus Bank Limited,   which formally opened its doors for business this week, averred that these fears are misplaced. He stressed that the CBN directive is proper and necessary to make banks focus on their financial intermediary role which is critical to growing the economy.

He also argues that allowing more banks to come into the industry is necessary to discourage complacency on the part of the existing banks, stressing that the aim of Globus Bank is to offer endearing customer services  driven by digital and green technology to ensure efficiency and  bottom line objectives.

One of the major challenges of the banking industry is financial inclusion gap. According to the 2018 survey on Access to Financial Services by EFINA, 36.6 million adult Nigerians do not have access to financial services. What is the aim of Globus bank in this regard? Is it the 63.4 percent  of adult Nigerians who are already financially included, and are customers of existing banks and financial institutions  or the 36.6 percent of adult Nigerians who are financially excluded?

Let me first commend CBN for seeing the gap in the market; that over 33 percent of the adult population in Nigeria are not given access to banking. Banking should not be elitists; it should not be a privilege game. It is something that everybody that is of adult age, and have aspirations should be entitled to.

The reason why I commend CBN is the fact that we have a CBN Governor who is a core industry person, and who ordinarily would protect the industry and say, “let me not allow too much competition.”  But beyond that he said that the system needs to be robust enough, that it needs to allow inclusion. I think 33.6 percent outside the banking industry is a serious setback for our nation and that is why I commend the idea of having more banks come into the system

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The new banks are not going to be waiting to share from the already financially included adult of 63.4 percent. The new banks will say, “how do we penetrate the hinterlands where people needs access to banking?  How do will make banking easier for those people who are not there right now?

That is why we say that as a bank, we are coming to better the experience that is seen today in the banking system. And we are going to use technology to do that. It is efficient, it is less expensive and can cover as much scope as you can imagine.

In our early days of banking, I recall, we were being told, “If you don’t have N1 million, you can’t open an account”. Then it came down to N100,000. But today you don’t need to open account with any amount of money. Just provide your data, your BVN details and it is opened. In our own system, in our mobile app, you can open account in two minutes and start transacting without anything once you are able to update your information. So it is going to be very simple, it is going to be easy. It is going to be an experience that you have not seen before. That is our target. That is our goal. We are not here to struggle to share the market that is already there now, that is already being fed.

But I must also say that the level of competition in the industry is not good. You have five banks controlling 60 percent of the market; that is not good for the economy. There is need to have some level of balance. What you see therefore is that the big banks are comfortable and therefore could be complacent.

But if you allow new, hungry banks to come in, they could also wake up the giant to start doing new things. Today you have the big banks start talking about digital banking. That is, elephants wants to dance. So let everybody dance. It is for the good of the customers. So that why we are here.

A statement from the bank read thus: “The bank aims to be the foremost digital bank and leading financial service provider in the country”. What do you intend to do in terms of digital and retail offerings, different from what the leading banks and Fintechs are already doing?

Interestingly when we say digital, it is not just the word that is important. It is actually in how you live the word. When you say you are digital; today in this bank, we don’t use paper for anything. You can see there is no document on my table, everything is on the tablet; I don’t sign any document for anybody. If it is not on the workflow, forget it.

That is the first phase. For a customer to open account, you don’t need to come and fill forms in any of our branches. Just take your phone and with our app, upload everything (documents), its open; and for the corporate that want to have a more robust documentation, we have the corporate and institutional banking that provides for that;  maybe you can sign mandates for now; but we are even saying, you can send your mandate on your tablet and it is captured.

Today because you have internet banking and the likes,   you say you have digital, that is not being digital. Being digital means that you are going to ensure that the waste that we have today is eradicated. We will be the first bank to run a truly  green banking system. You will not see in my branches generators being blasted with diesel consumption, what you will see is solar power alternative system.

You said that Globus Bank will be the first bank to deploy ‘green technology’ in banking especially for branch operations. Is this approach inspired by the bottom line or the climate change movement?

I think it is more by the bottom line because the game we want to play is an efficiency game. I want to ensure that, if we cannot make money, save money. If the big banks have taken the crème de la crème of the market and I am going down the market to enable the under-banked segment of the market, I must be efficient to do that. So it is savings from that that will help me to do what I want to do down the ladder.

Yes, the environmental issues come to play but primarily what is informing my game is efficiency. It will then  again contribute to sustainability issues. And then you will find that we don’t have an institution that negate the environment because one of our core value speaks to respect, respect for yourself, respect for the environment, your staff and everybody. So our environment must be happy that we are there, not that they feel  oppressed by our presence. So we say we would leverage technology and people in the most efficient and responsible manner. That is our mission.

What is Globus Bank definition of an endearing experience?

Experience is endearing when it is long lasting and when it pulls you together. It makes you want to be there again. We want to be sure that when you encounter us, at any of our touch points, what you get wants to make you come back again. And what you get is a feeling of satisfaction and fulfilment that you have found a bank that truly cares.

We are not saying there want be disappointments but the way we would have our service failure recovery attended to will be like nothing else. You may go to an ATM and it fails to work but right there and then, somebody  gets across  to you, saying, “You tried to use the ATM and it did not work, how can we help you; are you in need of cash urgently? What can we do for you?”  So you will see that it is not like just saying, “Go and bank”. Somebody is there to make sure that what you want done gets done.

Some banks are focussed more on the corporate segment and they make most of their money from it. For others it is the retail segment. What is the choice and focus of Globus Bank and what informed this focus?

We took time to work on our strategy. And we took time to select industries of importance and  of  needs. We also look at the risks in these industries. And in all we found retail to be very potent. Retail banking is the future.

Our primary focus is on retail. If you  have retail driven by technology, you will ensure financial inclusion and we would reduce that gap of 36.6 percent. The second point is the fact that we have a lot of commercial banking names, those who run not too big businesses, MSMEs and others who are not able to approach their banks for simple advice as to how to manage the finances of the businesses. We would draw them closer to us to get the advisory services they need and see how they can be better packaged to access bank support.

Most Nigerians have good initiatives, they start businesses  but they don’t know how to grow it or when they start growing they don’t know how to manage growth. So it is to work with these names and say we have seen your growth trajectory, and say “We can help you project the future, we can help you develop the governance framework that will sustain it for a very long time.”

So we are going to build our customer base from the scratch; so you build that loyalty with your customer that you are more than just a bank, but you are thoroughly a partner of these companies. So the focus is the retail end and  MSME commercial.

For the corporates, we won’t ignore corporates; we have been here for years and we have friends in the corporate world that we would also need to be of service to them, so we would embrace them as well. We would offer solution that will also serve them. But like I said, our first focus is retail, the un-served segment of the population, the unbanked, the under-banked.

When we say 36.6 percent, those are the excluded. Many are in but they are under-banked. You know it is even worse to be half employed than to be unemployed. When you are underbanked, it is a disservice being done to you. It is like you are in the midst of the sea but you can’t drink water because it is a salty water. So we want to bank the gap that we have seen. We have seen a deficiency in customer experience. So it is that gap that we have come to fill.

There have been so much claim by banks  that they are banking MSMEs and even the CBN has  an intervention fund for them. But we are yet to see significant impact of banks’ support in terms of helping MSMEs play their role as the engine growth of the economy. For Globus Bank, are you bringing a  new approach to MSMEs that will help in ameliorating this challenge?

The answer is yes. If you have banks that are few and they control the market and they are very comfortable. They will have no need to take more risks. There would be no incentive to take more risk. They won’t want to dirty their hands when they can stay calm and make all the money.

But when you are new like we are today coming on a plain sheet and you are hungry, you have to be in the trenches. So MSMEs have been much talked about but the doing has been a challenge like you rightly said. I think the reason is that our people are perceived to be very very credit unworthy but wrongly so because Nigerians are not as irresponsible as people portray it. A few may  be  but majority of Nigerians are very responsible. There are those who want to borrow and pay.

Thankfully to the system today, we have credit bureaus who can give you credit history of some people. There are people who are of my age and they have not had  any credit issue. So if I find such a person who say, “Please borrow me N5 million”. Why would I think twice?

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Why would I insist on collateral?  When over his years, he has not has that misfortune, why   would he start that now. Yes there is risk in anything you do but overall look at the basket.  If I can filter the population and I have those who I find interestingly reliable and I can devise credit products that can suit their requirements. It will be off  the shelf. Once I have this rack, I run with it. That is what the SMEs need.

I call SMEs, ‘On the Go’ companies. A lot of them are portfolio companies, so the character of the individual is most importance. If I see that character, that this person has been doing this for years and he has not defaulted. For example, you have somebody, who say like Dangote, who  for 20 years, he did not have one bank say he did not pay what he borrowed. Even if it is importing and buying cement, but since he has been doing business, he has not defaulted. So why would I say, if you don’t give me a house I won’t lend to you.

That same business that you are doing I will lend to you along that line because I know that you know that business and you have shown character overtime. So our approach is going to be very practical. It is  not about mainly what I think, but what I see on ground  and we would engage. We would actually have a unit that would build new entrepreneurs, school them in terms of governance, accounting and everything so that they would know how to separate their profit from their capital, how to manage their resources so that when you borrow money, you will not see it as your income and you eat it, you have to manage.

And somebody will follow you through and through to ensure that you do the right thing. Probably we have to insist on you hiring so and so person as your accountant. So you create that framework that ensure that there is a structure that protects your lending and the business. It will be a win win for the bank and the customer.

Banks are currently battling with lending challenge. On one hand is the CBN’s 65% Loan to Deposit ratio, on the other hand is the challenge of Non-Performing Loans above regulatory threshold. What is the approach of Globus Bank to this challenge?

First I will say we have assembled people who are very competent in various areas. We have a very robust risk management framework and we have people who are very versatile in risk management framework as well.

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It is not because CBN says, raise your LDR to bottom 65 percent that bad loans will occur. It is because banks are not that rigorous as they should be in lending. If banks are rigorous and they maintain their rank, they can lend more and not accumulate bad loans.

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