Banking Sector in Ghana: Prince Kofi Amoabeng Presents UT Bank

Interview with Prince Kofi Amoabeng, CEO of UT Bank

Ghana has been growing enormously over the last ten years. What is your perspective of the economic development in Ghana?

I think the issue about Ghana is that it has always had a lot of potential, even without the oil. It has mineral resources, it has great agricultural potential. It’s a matter of the chemistry, everything coming together for things to just take off. The oil that [has been found] is welcome and also the other finds that are going to come are ok, but I think then we also have a democracy which a lot of countries are jealous about, our stability and so on, so these are the basic ingredients that everybody wants to find in a country that is actually going to make big strides. So, I think we have the right image, expectations, everything about the country now, but we have to be a bit cautious about our expectations.

This is still Africa, countries around us are perceived differently and this perception also affects Ghana, because a lot of people see Ghana as Africa, or Africa as one country, so unless we actually make our case clear that this is a country dealing with countries in Africa and that we are quite different in terms of our politics, our stability, our potential, and things like that. Then we may not optimise our position.

Having said that, I think we also have a lot to do internally, because to attract investment you must get your systems and your structures right and working, and I think this is where we have a bit of work to do. Because if we don’t do it, people will come, happy to invest, but when they fall into some pitfalls and the system cannot save them, they will therefore go away with a bad image of the country.

So yes, we have the potential, but we also have to work hard to build the systems and basic structures and build institutions to ensure that investments coming to the country feel safe and secure. That will really set us apart from other African countries and other developing countries. So although I would say that yes, it’s a good place to invest and we are very hopeful of the future for this country, I must say we have to be cautious, we have to do our own bit to sustain the promises that we make.

What is the outlook of the financial sector and how will it develop, in your view?

I think that a lot has happened in the financial sector. Over the last few years the central bank has ensured that the banks are more robust and are able to withstand shocks, by asking all the banks to increase their minimum capital requirement, which we have done. There’s the Basil [basset] two and now Basil [basset] three, therefore there’s a lot of bad risk and managing risk in the banks to prevent here what happened to maybe the western world in 2007/2008 and control has actually been heightened by the central bank. Also there’s the proper management of the fiscal policies and other regulations, and I think that when it comes to the financial sector, the government has actually done a lot to make sure that we are stable. We had the re-denomination to make sure that the currency was a bit more user-friendly. If nothing at all, we have the backlash of it, because I think we will now be facing a bit of inflation that the government will have to fight, and the cedi was also losing its value but I think the government has put in some measures to arrest the fall of the cedi against major currency.

So the financial sector has on the whole been good. In the banking sector specifically there has been a lot of competition. We had Nigerian banks come in and a number of banks, perhaps around 27 banks, and that has got in its wake a lot of competition and modernisation with a lot of investment in technology, which was also enabled by the additional capital that the banks were supposed to put in. So we are quite modernised; nearly all the banks have visa cards, which enables easy mobility and are easier to manage. There’s e-banking, there’s also – probably ahead of western countries – mobile banking, which a lot of banks are pursuing. It’s quite vibrant and very competitive and I think it’s ultimately good for the consumer, for the Ghanaians.

You mentioned mobile banking, ahead of…?

Of the western world. You know, the electronic funds transfer to meet the requirements of those in the villages and in the outskirts and places like that, because the telephone penetration is really quite high in Africa. You find that the very poor in the villages all have mobile telephones, or access to mobile telephones. And therefore it’s an easier and more feasible means of reaching all the people and therefore it encourages the money transfer system […]. So a lot of the banks are exploring this avenue of moving funds electronically, to the benefit of the people in the rural areas.

Now let’s talk about your organisation. What is the specific purpose of your organisation? What makes you unique or different?

We are very, very different from the rest. We are quite unique. To begin with, we started as a non-bank, non-deposit taking institution, with a capital of about 20,000 dollars, with a staff of about four. This is about, fifteen, sixteen years ago. And we were a micro-company, and then we grew to become a small company, a medium company and then a large company and then in 2008, we went public to raise some capital and later bought a bank. Now we did that in several ways. No bank starts that small. No Ghanaian entity has actually bought a foreign entity; it’s very rare. And because we are or were an SME ourselves, we understand the SME mentality.

I see a lot of banks saying “we are for the SME, we are for the SME”, and I tell them that you’re not really for them, you don’t know the SME. We do, we have been an SME ourselves. That distinguishes us completely. And our story is also known by the whole of Ghana: how we started, how we grew and so on, so we are currently a Ghanaian super-brand, because if anybody needs a loan, the first place that comes to their mind is UT Bank. Because we came with the unique selling point of supplying the SMEs with fast loans; it looked very risky, and very doubtful as if we were gambling, because it was too fast: how do you give loans to SMEs in 48 hours? And that was our slogan “A loan in 48 hours”.

But we recognise that SMEs for who they are, precisely because they do not plan, they do not have qualified people, they do not keep books or accounts, they cannot foresee their needs until it hits them. Now the banks think, “ah this is an SME for one sector, we have to be very careful”, and so they take maybe four to six months to process their loan. But we said no, if you do that, you will have structured the loan to fail, because by the time you give them the loan the business is invariably gone. So the challenge for us, (and we know the SMEs,) was to say how do we provide the loan fastest for the riskiest part of the market? It was quite a challenge. But because we found solutions to this, we managed to grow very fast to become a bank.

Could you answer your own question: how do you manage to provide loans to risky markets, like SMEs that don’t present all the security that is required for a bank?

Well the first thing is to respect the people who come through your doors. And to respect people means respecting their time. We therefore react immediately to requests. By the next day we are at their workplace, or their offices or their homes, to check the business that they say they are running. We look through all the documentation and we have people who are professionals and trained to pick figures from the workplace, maybe from the cash registers, from their bank statements, to say that the business is worth roughly this or that amount, and these are the profits and this is when we can do business. We still go for collateral, but we are quite flexible with the collateral.

However, we tie into the transaction, or if you have a landed property, yes, or if you have a car, depending on the bond you want, that’s ok for us. And it’s a matter of feeling the pulse of the business and leaving the trust with the client. If the client trusts you, they will tell you exactly the whole dynamics of the business. And we do all that in 48 hours.

That means dedicating time and employees. It’s extremely expensive to have a very close relationship and a close appreciation of your client. It’s time consuming and involves knowing your client inside-out even when they don’t have much that they can tell you. So how do you do this efficiently?

It’s true. But then you have to really examine the whole credit process and use technology to cut a lot of it off. For example, we never have had a credit committee, which will meet every two weeks or every month – which already means that every loan has to be for one month on average before the committee will see it. What we do is that right from the branch manager you do the assessment, you make your recommendation, why you would recommend them for a loan. We use good software which we developed ourselves, and it moves in real time from the branch manager to, say, the area manager, who also looks at it for maybe five, or perhaps thirty minutes, depending on what it is, and then goes on to the next person, then the next one and then to the CEO, or in the case of the bank now, if it is above a certain limit, they have to find non-executive directors to approve it as well. So at that point we print it out in hard copy and go to executive directors for them to approve it. So we use technology most of the time to shorten the whole process.

And we have gone away from the longer process of waiting for the next committee meeting, because if you are approving loans in 48 hours you cannot be meeting every time. And these are the things that we would use. For example again, our clients are not supposed to apply for a loan from us: they walk to us and as soon as they get to the office, the first person you see is the head of the branch. Normally people are to write, apply for a loan and look for an appointment to meet the branch manager, and about two weeks are gone. So we have to look at the whole process ourselves and cut out all the frills and deal with the main things for the benefit of the SME.

So basically you are cutting out all the time to work faster. You appear to be very different from the others. Now, what in this case, are the major challenges that you are facing?

Well, the challenges are maybe general. It applies to all SMEs, if you ask me. SMEs, as I said, don’t always provide enough information, because by nature they want to hide information, they don’t believe in the system, they don’t keep the right books, they don’t want to pay the right taxes and they don’t have the qualified people to deal with you and things like that. Even when they make money, their priorities tend to be different: some people want to buy new cars, or marry a second wife and things like that, but we try to curtail this with close monitoring.

So the risk is a problem with SMEs and this is why banks fail with SMEs, no matter how you mitigate those risks and how you understand them and monitor them to limit them. So for example, the non-performing loan average for the banking industry is 14%, but for UT Bank this is around 10% – 11%. So we are handling the riskier part of the market, but we are below the average for the industry.

You are going to South Africa, Nigeria and Germany as well. What is your international strategy?

Well, you see the group now, the flagship as I said is the bank, which is what started the financial institution with. And we were so successful in meeting the demands of the SMEs, that’s how we became a bank. And alongside that we have UT Properties, UT Logistics, UT Life Insurance, UT Collections, UT Private Security and Ghana’s economy is not that big. So I think after a while you start to plateau off because there are no new challenges and you can’t grow your portfolio fast anymore. And I think Africa is the same as Ghana, except for some very slight changes in culture. So if it has worked for Ghanaians and for us, why not export it to other countries?

So for the future we see Pan-African action that will take UT Financial Services, not the bank, to the other African countries and we are targeting at least about ten other countries. We are already in Nigeria and we are in South Africa. It’s interesting, you go into these places and you have to study the culture and the country’s habits and attitudes, so we have to tweak our processes and systems a little bit. But basically it’s like franchising. We take the whole process and it should work. After Nigeria and South Africa, we are looking at a country in eastern Africa and other countries in West Africa like Liberia and Sierra Lone and in southern Africa like Zambia and the countries surrounding it. So I think we are on track to actually provide the same, similar efficient, responsive service i.e. lending to the SME sector.

Do you mean to go on with local management, or local institutions, or what kind of partners will you need?

As regards that, to set up in another country, we will need a local partner who will have 40% – 45%. This is because we don’t have to go and learn the cultures and do the politics and so on in that country. That should come from the local partner. We will want to go with our processes, the training, the initial people who have the know-how to train the locals and employ people. We will probably go with about three staff from Ghana. But all the rest will come from that country. We will also have to get the staff from that country to come to Ghana and to actually go through orientation, because one thing which is crucial to this business is that it must be a good company, where the people are promoting a good family spirit and good values, because with speed you always have to have trust. If you don’t have trust, you can’t have speed.

So, we have the values of the company which are very important to us and which we live every day and we have [brand images] and things like that, and that always has to go with the speed. So if we go to another country, we must go with these values, which are basic values of our people and how people should behave. It is therefore important that we actually carry along not only the processes, but the values and the people’s values to these countries. So they have to come for the orientation and see how we live, and what we believe in and what our values are, so that they can also develop the same values in their own countries.

But to come back to your point, we need a local partner who has equity above 45%, plus or minus 5%, and then we also need local investors like banks or companies with excess liquidity, because we need to fund the lending. We tend to pay interest rates that are higher than what the banks are offering because that is what we have to pay to attract the clients. So we need partners, investors, and we need banks to actually grow the business while we go abroad.

How are you getting on in terms of finding these partners? It’s not that easy, is it?

It’s not that easy, but I think we have a lot of exposure abroad. For example, in South Africa, we didn’t go to South Africa to look for the bankers; some BEU Group actually read about UT and came and said “we want you to come to South Africa”, because they wanted to create the first black South African bank, so that we could start as a non-bank, selling to the black communities, townships, to empower the blacks, because – I think they have all kinds of laws to ensure that blacks can get a bit of the economy – but they didn’t get the funding, because the banks didn’t understand how to fund SMEs. So we went in to actually lend to the black communities and help them to grow their businesses.

So in finding partners it doesn’t always have to be us and we do have a bit of a high profile. I think, personally, I’ve been profiled a lot, so it’s easy to go to any country in Africa and give my credentials and people want to talk to you, and see what you bring. And now with the Internet and things like that and with what you are doing, people can look it up and say “who is this guy who is coming, who is this guy we met, what’s his name, what’s his company” and quickly they have information about all that we’ve done and all that we stand for, so it should be easy for us to find the right partners. I think the problem is in choosing which partner will be the best.

You have received many awards. You are a leader in your sector, so that helps. That’s the positive side of it. Now I would like to ask you about the challenges that you personally face?

That’s age. I’m 61 now, I’m quite fit, but by Ghana’s standards, the pension age is 60, so really I’m thinking of my succession. We’ve started a succession plan; I’m no longer the CEO of the Group, I’m now President of the Group and CEO of the bank, but probably only for the next year or year and a half… I think one thing that I want to see, yes, to start a company and leave it and stay away and see it run before you die.

What about the challenges facing the bank itself, or the Group itself? What are the things that will keep you busy and out of trouble?

I think we’re ok with where we are now, but I think the main thing on our mind is developing Pan-Africa. We have come up with a prototype, what we need to start in any country, but I think we have to worry about the kind of partners we choose in the end, because it’s a partnership that we expect to last for a long time, because if we go into a country and develop the non-bank business and we expect that, all things being equal, we should eventually become a bank. So we need the right partners who will give us the right clout, decency, and respect of society. I think that is our biggest challenge, that we can get the right person with the right values and with the right respect from society, which will rub off on us, eventually. Because when you get into a partnership, and you are new, whatever the partner stands for will have an effect on the company, so we really must do our duty before selecting our partners.

We are into 10 countries, we also have to choose and again we think we must go into some countries that speak other languages, so it’s a matter of getting some bilingual people into the system who can speak English, French and Spanish, otherwise we will go straight to only the English-speaking countries. So those are the things that concern us and when I wake up in the morning and want to see how we crack them.

What your vision is for the future of the company?

Well, I think our vision is actually to be Pan-African, as a Group that provides unique solutions for businesses. Because what we do is not a normal, standard thing. We always think every client is different, and that’s rare. And we also want to be respected as a decent Group. And we’re not that successful, I must say, or we haven’t grown that fast, because there are a whole lot of things that we will not touch, and other companies who touch them will probably grow a little faster, but we won’t do a few things. For example, we don’t get involved in politics, we don’t really get involved in religion, we don’t entertain corruption and gift-taking, within the UT Group we don’t have amorous relations among ourselves, but we are family. We want to be seen over the next five years as a decent African Group that cares about people and provides unique financial services and solutions to them. And that has a solid presence in Africa.

So it’s about values again. That’s the most important thing.

I think that’s what we all need – a bit of values for us to open up and enjoy each other.

Do you have a message that you would like to say to the world?

I find that the most important thing for humanity is to respect each other, because no one has a better right to be here than the other person, and what will make us all feel safe and lead useful lives is to respect ourselves, to respect the next person and demand that you are also respected. Incidentally, I think what escapes most people, especially in Africa is that your life is simply the amount of time you have on this Earth. So people do not tend to respect time, and if you do not respect time, you simply do not respect the value of being. Therefore we have to make an effort from the leadership, if we cannot put infrastructure systems in place, to endeavour to make sure that we respect the time of every other person. That will imply that we are respecting the lives of those people and that will make us put the systems in place to ensure that people’s time, and therefore their lives, are respected.