[Africa CEO Forum] Herbert Rajula: Banking and Economic Development cannot exist without Access to Credit
There are issues that make this a tricky question. First, that the African bank can truly hold its position in the region’s progress, where we have seen only a few jumping ahead of others e.g. Equity bank. Secondly, the failure to realize the huge opportunities presented by the region's diversification demonstrated (M-Pesa, Kenya) and MTN, Nigeria) gap to tap into and customize solutions, which address the need for the different target groups (i.e. SMEs, youth and startup). Thirdly, innovation and lack of the creative support structures are another part. So I will try to expound on the observations highlighted above.
My take on African banks is that they are doing well in stretching their reach to more African countries (a recent case being Equity Bank acquiring a bank in Congo). Are they ready to compete with the rest? Not so sure. Ok but doesn't that then say they will be swallowed up by the prepared ones? I don't think so; the banks have mastered the business dynamics in Africa and are better equipped to survive here than foreign ones. But I think they're ready to compete amongst themselves in terms of expansion.
As for promoting development, very few African banks have offices outside the continent and those could be challenging markets to venture into and until they're ready to provide greater access to credit at lower rates, they remain self-serving, profit making machines. That then raises the question, isn't it supposed to be so? Yes, but even customer centric products and tools should be a focus, and then they can reach their self-serving goals. Far be it for our banks to offer credit at lower rates and still make a profit; this is just not in their interest. Lower rates would mean greater access to their products for people (growth). But they all seem to focus on seeing their banks accumulate enough deposits to be able to fund mega projects coming up in Africa without external support, and this also they are not executing well. A starting point could be syndicating loans for the mega projects like the LAPPSET project (Kenya) before building the individual capacity to take-up such ventures alone.
Access to credit is a major contributor to development and business. What would make them change the mindset currently held and who can spearhead it? It's a culture that works for the banks, not for the ordinary mwananchi (citizens). That's why banks like Equity that allowed ordinary people access changed the game and the industry but it was not sustainable, hence they changed their tactics mid-way. You can't discuss banking and economic development without discussing access to credit.