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‘How we invaded Gambian financial market’
Sunday, 07 November 2010 11:56
With seven Nigerian banks operating in the Gambia out of 14 banks, the Nigerian banks
significantly control the financial sector of that country. In this interview with finance journalists who were in Gambia on training on the auspices of Guarantee Trust Bank Plc, Mr Lekan Sanusi, the Managing Director and CEO of Guarantee Trust Bank, Gambia Limited, provided insights into how the Guarantee Trust Bank led other Nigerian banks to weather the storm in the Gambia and how they took over the financial space there. ExcerptsHow did the global economic crisis affect Guarantee Trust Bank, Gambia performance in 2009?
What we have done here in the Gambia is to import essentially all the systems, processes, enforcements, controls, risk management, credit analysis, credit approvals and every other thing that is done in Nigeria GT Bank. Our management team in The Gambia foresaw the problems coming; we saw what was happening in Nigeria’s banking industry and we quickly responded.
We looked at our loan book; we identified the vulnerable loans that could give us problems. Fortunately, for us in Gambia, there is no stock market so we didn’t have exposures to margin loans.
Secondly, Gambia has no oil, at least for now, so we didn’t have to worry about loses as a result of financing oil imports. In the Gambia, we only have four fuel marketers and one fuel importer, so we were not exposed to petroleum financing or lending.
We also responded by supporting our customers and helping them put in place appropriate structures that would enable them meet their loan obligations. Meltdown affected us because if you look at 2005 to 2006, our profits grew by 100 percent; that is from D14 million to about D29 million; 2006 to 2007 our profits also grew by 100 percent from D29 million to D60 million; 2007 to 2008 our profits grew from D60 million to D70 million, representing only D10 million growth.
There seems to be not much activities around the banks here particularly the Nigerian owned banks. What is responsible for this? Do you think the market is viable?
The majority of the people of this country are Muslims. If you probably enter Gambia Friday during Jumat prayers, you would think there is no one in this country. So if the time you monitored coincided with prayer time, you wouldn’t see much activity.
Secondly, it depends on the location of the bank. If a bank is located say in Brusubi, at the outskirts, if you are coming from the airport, you will not see activities. The people who live there commute to the city centre during the day to work. So branches can’t be very busy.
But we locate branches there so they can be served weekends because we do Saturday banking. But if you look largely at Gambia, it is a relatively small country. So if we are used to the kind of population we see in bank branches in Nigeria, to compare that might not be the case here.
Banks in Nigeria, to decongest the banking hall, they surcharge you when you use the banking hall to withdraw a certain minimum amount of cash. They prefer you use the ATMs. It is not the case here in Gambia. Sometimes we beg people to use the banking halls so we can see a little bit of crowd.
But then, we need to ask a fundamental question. Do we really need as many as 14 banks in a country of about 1.7 million? I expected newer banks would have done their own home work before they will open shop in the Gambia.
How are you tackling the challenges?
For a country like Gambia that has been affected by these shocks, one of the approaches is to consistently look at our loan books—it is critical because the loan book is the source of income and a source of major expenses. The most important thing is to engage the customers closely and support them out of the crisis.
The second approach is cost management. When you are in a boom, nobody thinks about anything. The money comes in and you spend. But when in crisis period, you look at the ratio – how much am I spending on electricity, diesel, etc and what can I do to reduce other overheads. For instance, to cut down electricity cost, we decided that all offices that have good illumination from the sun shouldn’t use bulbs.
We said if lending isn’t profitable now, what else can give us additional money? We thought of what can move the hospitality industry in the Gambia because that is their economic mainstay. That was how we introduced Visa cards. Before we introduced our Visa and point of sale terminals, when people bring in their Visa cards in Gambia, they were turned down in most places because they didn’t have the facility to use it.
In some hotels, they do VISAP. VISAP is one manual machine which takes the details of the card. They were not even sure if the card had money on it; they just took the risk, download the information and send to Barclays in Kenya. Barclays will trace the cash globally and collect the money for them; sometimes, the cards had no money on them. They could wait for as long as three, four or five months to get the money. We saw that as an opportunity. We told Visa we wanted to be their principal member here in Gambia. They were initially reluctant given the population. We showed them the number of users beyond the 1.7 million people. We showed them massive figures of tourists coming into Gambia.
If you come to Gambia from November to January, you may find it difficult to get hotel accommodation because the tour operators do block booking for tourists. Virtually every week, you have about five flights from Europe into Gambia conveying tourists. We now have several Visa machines operated by GTbank Gambia, and we get commissions on the transactions.
We put POS terminals in most of the big hotels in Gambia. The hotels get instant cash and we enjoy a commission. In the next two years, we will put Visa into maximum use in the Gambia; we will then enjoy significant income.
We also issue Gambian Dallasis Visa card. Some banks issued Dollar Visa card, which means any customer that wanted to use it must put dollars in it. But we thought that could be cumbersome, so we issued our cards in the local currency, Dallasis. That worked perfectly for us, Gambians carry our cards and use them globally.
What impact are you making on manufacturing?
Every economy has areas of comparative advantage and every investment decisions are driven by economics. If there are five brewers in Gambia today, I’m not sure they can make enough profit to justify their investments. As we speak, we have one brewer who brews beer and bottles some orange drinks and we have one bottler of soft drinks who bottles coca cola products. These companies have been able to post marginal profits because they have been able to relate capacity to demand.
We have only one soap manufacturer and the producer is able to service the market. So, if someone else comes up with a soap factory, where would the demand come from? We also have a cement bagging company in Gambia. If someone else wants to bag, the question would be were would the market come from? So, it is not as though the manufacturing base is neglected or deliberately not being developed, but it is a function of the economics of the investment. For the companies already existing, we give them banking services and support like Banjul Breweries, the soap industry and others.
Gambia has a relatively liberal import system compared to Nigeria for instance. If you want to import into the Gambia, once it is not a banned item, if you have your supplier and money, you import. If the man is comfortable with you, he can send the goods to you; you sell and pay back later. At times, when we present our data and present LC to head office in Nigeria and it is small, Lagos people will say we are not doing business. But that is not the way. Here we do remittances and people are comfortable. Nigeria is different from the Gambia. But of course, the system is working perfectly well for us.
How did you enter the Gambia?
We started as a top-end bank, which is easier to start anyway. We started with one branch. We were able to sign those corporate entities after some hostilities - soap manufacturers, water corporation etc. every new bank that comes in looks at that market segment. So after sometime, we discovered the margin in that market segment was getting thinner and thinner. That also explained why we developed retail banking.
We did that consistent with what our parent companies have done in Nigeria. We moved from five branches to 15 so we can service the retail market. With 15 branches, we have the largest branch network in Gambia. We also established branches in the provinces in addition to our e-banking services like money transfer.
What is banks’ capital base in Gambia
Currently, the capital base for a bank in Gambia is D60 million, about $2 million. The Central Bank of Gambia has said that by the end of this year, banks should have paid up equity, not shareholders funds of D150 million ($5 million) and by 2012, we should move to D200 million, about $7 million in today’s exchange rates.
In Gambia what is the thought about universal banking vis-a-vis the Nigerian experience and CBN regulation?
Gambia is a small country without a capital market and we don’t really need all of those subsidiaries. So the CBG here issues commercial bank licence to everybody.
On the concept of universal banking or national banks or international banking models in Nigeria, I think the Nigerian CBN wants to put some sanity into the system. If you look at the advanced countries where the concept of universal banking came, they are beginning to break the walls too.
This is because it is becoming extremely difficult for the central banks to supervise a universal bank. Because the bank will have other specialised subsidiaries like asset management companies and insurance companies. The asset management company will report to SEC while the insurance company will report to NAICOM. So, the CBN may not have a holistic view on what a bank is doing.
Courtesy of the Sunday Trust, Nigeria
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Comments
In 2000 you got 2000 dalasis for £100
in 2006 this was upto around 4000 for £100
The present rate is now pushing upto 5000 for £100....
Put this into perspective...
Steak and chips....
went from 500 dalasis...to 1500 dalasis.
You can still get a bag of rice at 900 dalasis...
But then the gambian has rent, electric and transport to pay.
Then school fees....and in some cases medicines...most of which are useless.
The average wage....for most is around 1500 dalasis.{month}
They work a month for a plate of steak and chips?????
I would love to return with lots of steak and chips...But they would put me in Mile 2.
Sad ?
Of course the Hotels take alot of commission from tourists,,,as they pay there day to day holiday expenses.The hotel tarrifs..on beverage and phones and currency exchange are extortionate.
I always paid cash...to negate that large bill at the end of the week..and the last minute dash to the bank to get the dalasis required. For to convert sterling into dalasis in a hotel..costs a fortune.
The Banks have been slow to provide atm's, visa debits...I am informed that the arabs...are maximising profits and cutting staff.They would be reluctant to concede there profitable exploitation of the tourist...in favour of any bank.
The whole system...is at a dead end.
My mum.....would describe it as...
" She owns a fur coat..but can't afford and pair of knickers"
Gambia..is now far too expensive and uncompetative.
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