uniBank Ghana: Overview of the Financial and Banking Sectors in Ghana

Interview with Felix Nyarko-Pong, CEO of uniBank Ghana

What is your assessment of the financial sector?

My current view of the financial sector is that it is vibrant, liquid and trying to meet the needs of the people. If you look around, you can see that you don’t only have 28 banks but you have a myriad of other financial institutions from micro-finance institutions to savings and loans to many other downstream institutions. All of these are making profits, they are increasing the regulatory environment. We have a very vibrant, with a healthy financial sector which I’m pleased to belong to.

Do you think there’s more space for other banks and financial services to come here?

There is space for even more institutions to come in but it depends on how you look at it. Fundamentally you have to see Ghana as a country which still has over 40% of funds with a non-bank public. It is a country that is largely, in terms of numbers, under-banked and to the extent that all of these other people need to have financial services and financial inclusion, yes, I would say there is a need for more. The question is which type of financial institutions.

At the moment, I think that two categories of financial institutions are required. The first type will cater to the masses of un-banked people – such as those in the rural areas – in terms of financial inclusion and financial intermediation, to ensure that gradually we can move to a cash-less, paper-less system. We need those that can cater to that need. Secondly, because of the new economy – defined in my terms by the oil and gas area that we happen to find ourselves in – there is that great requirement for financial institutions with high capacity to service those areas in terms of the financial requirements. By this, I am referring to very large institutions.

So how is this sector going to evolve? It is going to evolve into a race. On the one hand, we might have mega international banks make bold attempts to come in, and I’m not surprised that UBS is now opening in Nigeria and looking at Ghana. On the other, we will have to count with the existing, entrenched ones like Barclays. With them, the capital that they can pump in and the financial muscle that they can use with the backing of their mother companies will enable us as an emerging oil economy.

Of course, this will mean for us already here that we need to redouble in terms of capital accumulation. As a bank, the extent of risk you can undertake is largely determined by your strategy and capital. With all the Basel II and III regulations coming in, that’s where there is always a likelihood that really consistent local banks may also merge, especially if it is going to create the positive synergies that are required to enable them to get into the new economy in terms of service.

If you are asking in a nutshell how the service is going to evolve, I can only say that it is going to be very interesting because there is no way we are going to have an oil economy and not have mega banks. How this is going to happen, locally through mergers or through association with others, we will see. There is no way our newfound status of Ghana being in the lower to middle income category is not going to work its way downstream in terms of financial intermediation. There is room for everybody and I can foresee the sector continuing to grow in different areas and using IT to enable us to move forward.

How will uniBank be part of this solution? Do you foresee a merger?

uniBank is a local bank with first-class expertise and first-class local knowledge. This first-class expertise is in terms of management and caliber of business. I can exemplify this not only by the depth at which we are able to service the SME customer but by also having the best-known performing portfolio in that sector. So at least on paper we do know that area of the market best. Now how do we combine these two within the evolving market? We need to play on our niche and try to service our niche. We want to serve our niche. We can’t be all things to all people. This requires substantial capital. We want to continue to play well within the niche.

In playing with the niche, we need to look toward the many new evolving customers and companies that need to service these giant oil companies. They by themselves are SME, which is our niche. Due to the local content stipulations of the regulations of the oil sector, many of them need to be Ghanaian. We have the expertise there, in knowing the Ghanaian businesses. We need to capitalize on our strengths and then make inroads into both the new economy and also downstream as we are doing now in opening up to be one of the very well-diversified retail banks. At the moment, we have 20 branches and we are growing. We have sister companies that are also into the micro-finance area, so we tackle both, just playing on our expertise.

There are other banks in the same niche market in Ghana. Is there room; do you just need to be better than the competition or is there still thought of merging?

There are many reasons that drive mergers but the primary one can be because there are synergies. If one plus one is going to give us four, then why not merge? Another thing that also drives these can be regulations. Now we have all met the regulatory capital requirements. Overall, for us at uniBank, we believe that it is not the number of players in the SME market that matters, but the add-ons that you give the SME customer and the delivery of customer service. In terms of customer service, last year we won and this year we were runner-up for reputable banking in terms of advisory services. These things are important to the SME customer and the understanding of these things is what puts us ahead.

We are forever in competition and new products can be copied in a minute, but it is the training and emphasis that we place on giving the SME customer what he wants, where he wants it, at the right amount, and walking the journey with them. We are a fully indigenous company and we truly believe in that SME customer and want to walk the journey with them. We are not here to run away to another market because we think it’s going to create the best value. We are here to stay. So we hold their hands and run with them. We have realized that if we are able to nurture these businesses, they do not leave you mid-stream. We are not afraid of the competition. There is room for everybody, the economy is growing, and we will commit. It brings the best out in everyone. In the end, the customer also benefits. So yes, competition, but no, we’ll stay on course.

What are the challenges that you face?

Our challenges are mainly within the economy. Whatever challenges your economy is facing, you are part of it. Your economy also exists within the global economy. The first major challenge we all have is that of ensuring that our general economy in Ghana continues down the path that it is on, and that the nation remains and continues to depend on democratic principles and rule of law which we are enjoying now. This means that to the extent that the climate remains as it is, we think it is okay. So now what are the challenges that our economy is facing? The typical one of commodity prices coming down. Gold is a major export of the country and it is not doing as well as it used to. Last year we had a focus on cocoa and we were not able to bring or take out as much as we planned. Generally it is all these drivers which might not be moving very well because of the global situation. That is one of our challenges. Gold is down by over 25% this year and cocoa is just hanging in there. Oil, our new economy, is about flat.

The service industry is growing, isn’t it?

The services sector is growing but don’t forget that the major impact on growth for many positions was also banking on the anticipated three billion dollar injection into the construction sector that we are expecting from the Chinese. This is massive for our economy. We are hoping that all of these inflows will come in quickly, with everyone in position for it, to enable us all to receive the benefits of it.

The first challenge is our economy. We are all hoping and praying that commodity prices will rise and we will get everything that comes with it. Other than that, it is the typical challenge of more banks coming into the system. You can begin to get squeezed out in terms of expertise, competition, and good people, because the market is also fluid. You have to look at the human resource potential, not in terms of all the many graduates being produced, but in terms of experience. Everyone wants experienced employees but that is something being well-managed. We see that as a good challenge.

Another challenge is that for me in the industry the fact that I think at the back of the international scene you will also potentially look forward to new capital requirements. That is always a challenge in the context of a developing country and for indigenous banks because it means if the regulator says you need another 100 million, you have to find it or get forced into some other position. All those things keep us alert. Besides these, I think things are going well. If you look at our non-performing loan book, it is all related to the economic movements. Make no mistake, Ghana is largely government-dependent in terms of the government being the largest spender so government flows are key. If they are not flowing that quickly because of delays with some donor or some influx, it slows you down. Overall, we remain very bullish in the sector and in the country.

What is your vision for the bank in three years’ time?

There are a couple of things I can foresee happening. First, our footprint will be different. We are aiming to have 25 branches by the end of this year and I can foresee us opening more as we try to reach beyond banks and deepen our retail presence. Secondly, we also intend to follow the footprints of our key customers. Many of the key customers within the SME sector are also involved in international trade, in the import and export sectors. It shouldn’t be surprising to see us opening very soon in one, two or three international markets that we have targeted. That wouldn’t be so much to go there to compete as to follow the natural footprint of our key customers to offer them the services that they require.

What regions are you targeting? Would you start from scratch?

Naturally when we look at the flow, it will first be to Asia. The natural markets of Ghana are also in Europe and London and the Asian stopovers such as Dubai. It’s not difficult to look at that in terms of following the footsteps. We would be going there primarily to offer add-on services to our existing clients. Starting up wouldn’t be difficult because we would be starting with what we know. It is not to say that we want to go into those markets to establish retail outfits. Another thing would be to see banks like us also deepening our presence in terms of financial services in the oil economy because this is growing as more Ghanaians take advantage of the local content to start being involved there. Again, we will be following those same SMEs into that area. Those are some of the things we are doing.

Why should customers consider uniBank as their banking choice?

First, we are a bank that cares. Customer service is key to us and we have won all the awards to go along with that. I think two years ago we had four awards, last year we had five and this year we had seven banking awards. Those attest to the service quality you will get from us. When you come to us, you are assured of getting a bank that will also walk the journey with you. We have an understanding of the local market but with global international expertise at the helm of that. That balance gives us success in this country. We are one of the fast-growing banks, and one that listens. Why wouldn’t you choose uniBank? If you want to grow, call the bank that wants to grow with you.

Do you have anything else to add?

I want to give our assurance that Ghana has an economy that is growing, that is democratic, and that has the right institutions. We have institutions, uniBank being a good example, that follow best practices and can offer financial services that meet every requirement and can structure all forms of intermediation. We have the beauty of what I call the new economy. The new economy is coming completely out of oil which means that in terms of growth potential, this is it. We are in a global village now. No institution can do it alone. We require others internationally to come in, either bringing expertise or capital. They are welcome to come in and once they are here, they hopefully will not forget uniBank is their bank. They can also have the other added services of the key companies all housed here in a one-stop shop.