‘Nigeria must harness its entrepreneurial potential for growth’
How are you strategising alongside others, as Payment Service Banks debut this year?
I’m sure you will find time to read the guidelines that have been issued. They are not lending banks. They are essentially going to assist us. For us, it is an enabler for the financial inclusion, not necessarily a competition.
Yes, it is competition to the extent that we will compete with them in the financial inclusion space- our agency banking products will compete with their payment platform, but we all have very good payment platforms.
For most of us, our payment platforms have developed much more than they could even be able to compete with.
But for us, it is important that we have such other organisations that help the lower side of our economy where people put money under their beds or leave money in their stores and when fire comes, it destroys both the money and their investment and it is back to square one.
We need to bring in as much people under the formal platform, so we can measure them.
How would you describe the bank’s experience with the market and customers so far?
For Heritage Bank, it has been an interesting journey for us.
We came at a time when the market was almost turning into depression in the international space and there was quantitative easing in the United States and the markets were going down.
But somehow, we were able to find a space in the area of SME banking and retail. And we have kept on that promise to be able to make SMEs bankable, not necessarily by throwing money at them, but being able to educate our entrepreneurs on the need for cooperation and the need for partnership to run their businesses.
That has paid off overtime because we have seen more cooperation among entrepreneurs. We have consolidated their businesses and they have gone into areas they wouldn’t have been able to go into.
Young lawyers have been able to come together to help nurse these small organisations to keep proper records in terms of their incorporation and records in terms of how they do business.
Again, small accounting firms have been able to put together a system for these companies on how they put their records together for tax purposes and we have able to measure their progress over the period.
So I think that as a bank, we have lived up to a promise, especially on our course- the SME clinic, which has helped SMEs to grow.
We have also taken that a bit further to grooming new entrepreneurs in the “The Next Titan”, which we are on our fifth season this year, where we allow young minds come in and develop businesses, ideas and take them from scratch unto a platform where they are able to express themselves on national television on what they can do in the development space for our country. And I believe going forward, we are going to continue in the space of SMEs because it is the bedrock of development for any country.
On the back of that is the challenging issue that most of our people don’t have financial services products they can latch on too.
So, there is the whole financial inclusion strategy being spearheaded by the Central Bank of Nigeria (CBN) and we are latching onto it.
Agency banking is also vehicle through which we are trying to help the financial inclusion strategy for the country and we believe that as we increase that space, you would pull more people into the economy thereby increasing development in the country.
What is the bank’s proposition for customers and stakeholders this year?
Am sure you are all aware that the Octopus platform, which is a digital bank in itself is currently running.
We have gone through the testing phase and we are already beginning to launch it. This year, we will see full-blown engagement with our Octopus platform.
The reason the platform is interesting is that it is not just a payment platform, it is a social engagement platform- it is a community.
It is not only a community of social activities, it is a community of economic activities and it can go way beyond the borders of Nigeria.
So, those are the kinds of innovation we bring to the table. We also allow our customers on that platform to trade amongst themselves, to do e-commerce on that platform.
Not only are they able to do commerce, they are able to do citizenship services on that platform.
So there is a convergence of technology and commercial services and being able to project that into the wider society for the basis of development of the whole economy.
There is a general decline in borrowing and lending. What is your take?
It is a function of the general economy. If a sector is not growing, there is no need going to borrow, because if you have an economy that is not growing and you borrow into that sector, you are destroying capital.
And the last thing you want to do in a growing economy is to destroy capital. When they say customers are not growing, it is because customers are being realistic.
So, the reason for not much borrowing in the industry is because the income that would sustain that borrowing doesn’t exist. And we need to create avenues to make those incomes begin to come back to life for us to borrow again.
What are your options on the challenging issue of human development in the country?
The policy options are a lot. I don’t want to jump in and say what the policy options should be.
What we have canvassed in dealing with the policy options, for either a new government or a continuing government, is that it should be inclusive.
It shouldn’t be just human capital development or economic growth, but has to be inclusive.
We have to take a view on if we are planning to pull out ‘X’ percentage of people below the poverty line to above the poverty line and then what would it take.
Do we also need to reduce our infrastructure deficit and what would it take and if we need to increase our social investment? But in all this, there is thin line that runs through them, which is if there is no savings, there is no investment and if there is no investment, there can be no development.
So, we need to walk through that trend and until we have a policy that addresses this trend, we would not be able to achieve inclusive development.
What would be the outlook for the financial sector this year?
I try not to be a soothsayer, but we all believe that it will be stable. We have seen the naira stay stable almost all round last year.
We have election campaigns almost ending and the naira has stayed stable without any major fluctuation and we believe that it will continue.
We believe that after the election, the portfolio investors who normally take flight, even if there is no election, would come back and you will see the capital market rise again. That is my prediction.
When would Heritage Bank likely list after years of plans?
I want to predict, a good prediction for that matter, it will not be this year, but it will definitely be listed on the stock exchange, especially now that we are expecting new investors and one of their core expectations is that we will list in the nearest future. So, we will list.
By expecting new investors, do you mean merger and acquisitions?
There may be mergers and acquisitions in the economy and I am happy to see them happen.
Yes, investors are coming because they are happy with our returns. We are one of the companies that have returned good results on the financial institutions side.
So, investors are always very happy with the kind of returns that we make.
So, yes, they will come and we are expecting more investments and I expect that as those investments take place, mergers and acquisitions may take place this year, both local and foreign investors.
International Financial Reporting Standard (IFRS) 9 would soon hit the ground. How will it affect banks?
IFRS 9 is essentially a risk-based activity where we are trying to make sure that we measure what we have and we are able to report our financial strengths as true and near reality as can be.
So, when you move between the generally acceptable accounting standards, which is the GAP methodology and the IFRS, there is always some level of disparity as to what constitutes a proper assets deficient.
For example, if today I own this asset and it cost me N10 to buy, is it still N10 ten years after? Or if I lend money to somebody and he is unable to pay after a particular number of years, is it still possible that he can pay that money? What has changed in the economy to make him pay? Have you been able to measure those things? Essentially it allows banks to measure their assets, both risk assets and physical assets in a way that it will reflect their strengths, and taking ahead of the curve, projections that you think could possibly happen or issues that could affect the possibility of anything going wrong and taking the hit ahead of time.
Yes, it will affect us at the initial point when we are taking the hit, initially when we are beginning. But it is a zero sum game for me.
So, initially, yes we are all going to feel a jolt. There will be a depression in some of our earnings because we are taking more hit, but again it speaks to the strength of the bank and that strength of the bank is what the customer needs to be comfortable about.
After such conversations you have a bank that is still able to carry your liabilities.
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