Barclays: Corporate Banking Solutions to the Multinationals in Mozambique

Interview with Rui Barros, CEO and Executive Board Member of Barclays Mozambique

What is your assessment of the banking sector in Mozambique? What is your view, from an international bank perspective, as well as your outlook for the sector itself? How do you assess the development of the banking sector in Mozambique?

I would start by saying that the Mozambican financial system is actually quite a mature one, compared to similar markets in the region, both in terms of its size and in terms of the time it has had to develop. We must bear in mind that the country has gone through a number of major changes, as well as roadblocks throughout those changes; such as a civil war and independence before that. But in fact, in light of the circumstances, Mozambique presents the financial system with a very clear regulatory framework, with very well established competition rules and players that are quite mature. On that count, it’s clearly dominated by South African and Portuguese banks, or by entities ultimately owned or based in those countries, which are two very well developed countries in terms of banking services.

This, together with a regulatory environment, was brought into Mozambique amid many years of political stability and quite a benign economic environment, with significant rates of GDP growth, stable inflation and the like. So it has developed quite nicely, and I would say that it presents itself nowadays as a very mature market. Evidence of this is how the markets reacted to the turmoil in 2008 or even to the more recent downturn in commodity prices and the appreciation of the dollar. Of course, we are facing our own issues, but I would say Mozambique has been dealing with these circumstances better than other markets.

What is the role of Barclays in Mozambique and what is its strategy here?

To give you some background, Barclays under its current ownership has been in Mozambique for about 14 years. However, we acquired a bank to begin with, so we actually feel part of a family that has been around for much longer than just 14 years. In fact, it’s almost 40 years since BPD, the regional entity that was owned by the State, was incorporated, soon after Independence in 1977. This means we have a very long history in Mozambique, which gives us a bulk of experience and local knowledge that we can then blend with our understanding of global markets – which is literally global, given that Barclays is present in more than 50 countries around the world; but which to a large extent is also African, since Barclays Africa is itself one of the largest financial institutions on the continent.

When it comes to retail, we are present in all of Mozambique’s provinces. We have one of the largest footprints in the country. More recently, we have also invested a good deal in digital channels, which means our customers are now able to access the bank pretty much any way they want to.

Therefore, we pride ourselves in having that unique offering, in terms of understanding global markets, the African continent and Mozambique; while bringing all of this together to our customers, to our clients and even to our colleagues, in terms of the kind of experience they can acquire by working with us. In short, Barclays is certainly a bank of reference in Mozambique.

The fact that we have this history behind us has also enabled us to evolve over time, and more recently we have been focusing our business on corporate and investment banking, as a franchise or operation, given the needs of the country. We have a very large retail presence. We have always been, and continue to be, among the largest banks in Mozambique, and we aim to maintain our retail presence. But historically, we may not have been as large in terms of corporate banking as we believe we could have or should be, especially since our international footprint also allows us to support multinationals and cross-border banking in a way that only a few, if any, of our competitors can. So we are in the process of transforming the bank, while still being very proud of building upon the values and the experience we have accumulated over all these decades. We really see our future as quite bright in that sense.

What is your approach towards corporate banking? How do you differentiate yourself from the competition?

First of all, we are locally structured in a way that brings together the product expertise – which covers everything from deeds, trade finance, to commodity financing and long-term funding – with sector expertise, which means we also have specialists in agriculture, in mining, oil and gas, and all the key sectors of the economy. While we don’t necessarily have them based in Mozambique, we always have them available, be it from Johannesburg, London, New York or Singapore. There is always a desk somewhere, with people very knowledgeable about these matters, who can support us and have been doing so. This, together with our coverage and presence in other countries, simplifies the process.

For instance, one of the areas where we have been receiving very good feedback from our customers is the way we are able to introduce them to Mozambique. So, for example, let’s say there’s a corporation based in the UK that has banked with us for twenty years and decides to come to Mozambique. We try and make everything simple: they can approach their relationship manager in the UK, he would then come to us and we would be able to prepare a good deal of information for them, before they even Google Mozambique to find out a little bit more about the country; which they obviously should know something about to start with. But we can provide them with a great deal of insight at a distance, and then almost bring them on board to Mozambique; which involves helping them through the legal process, linking them up with some of their potential partners, etc. So we also see that as a critical advantage to someone coming from abroad.

However, the local corporates, which are mostly SMEs, also benefit from the fact that we are creating this integrated approach to banking. One of the pillars of our offering is the way we aim – and are hopefully able – to connect what are corporate needs to their own providers, or their clients and their staff members. This means we can actually be your A to Z bank: we can process your salaries; we can have personal accounts for your staff – with benefits because they work for a corporate client. We can also deal with your supply chain, in a way that even your partners may benefit from differentiated pricing, through the relationship they have with you.

As a bank, we can create these ecosystems, in order to hopefully allow our clients to prosper, while improving our business.

Would you like to mention something about the retail sector?

When it comes to retail, we are present in all of Mozambique’s provinces. We have one of the largest footprints in the country. More recently, we have also invested a good deal in digital channels, which means our customers are now able to access the bank pretty much any way they want to. We are still very much focused on improving our clients’ experience.

One of the projects we began in 2015 (and is continuing in 2016) is the renovation of all our branches. As I mentioned earlier, we have been established in Mozambique for almost 40 years, and some of the branches were due for renovation, which we are now doing. Along with that, we are also trying to leapfrog and introduce a few things the market did not previously offer, through some innovation.

Convenience is central to us, which means clients being able to find what they need when they approach us – be it because we have a 24/7 call center available, for them to call at their convenience, or because we can offer them insurance services at our branches, or even because we have deposit-taking ATM machines that are available to them at any time, to save them having to queue up in-branch. So there are also a number of things we are trying to put together in the retail field, not to mention being innovative in terms of some of the products we are offering; all the while trying to be as competitive as possible when it comes to pricing too.

Do you have any specific service that you plan to launch soon, whether it’s to do with corporate banking, SMEs or the retail sector? Any big project in the works you would like to talk about?

Actually, there is quite a number. I would like to first refer to those focusing on the corporate side. We are bringing in a couple of systems, again with the customer’s convenience at the forefront of what we do. One is a client interface for large corporates, which for instance allows for centralized treasury functions, to track their banking positions across different countries, and is fully integrated into their own finance or accounting system. We do this on a client-by-client basis, almost allowing real-time banking for the finance or treasury functions of our large corporates. A second one I would like to highlight is a trading platform, which offers FX trading in, I believe, 13 different currencies, including African currencies and pretty much all other globally traded currencies. Again, our customers are able to do their currency trading from their own offices on our platforms. These are systems that we currently offer elsewhere in the world, but are now being introduced to Africa, where Mozambique is fortunately among the continent’s first few countries to offer these fully integrated online platforms for sophisticated clients.

Those are just a few of the things we will be introducing, most likely over the next couple of quarters. Similarly, we are looking to introduce some innovation in the retail field, especially when it comes to working together with corporates; in terms of leasing facilities, mortgages, etc. We are talking to some of our corporate partners, be it clients or those working with us in some other shape or form, in order to introduce some innovative products for our individual clients.

What are the major challenges you face as a bank here in Mozambique?

Well, I would just start with two or three key things that I feel are of concern to anyone operating in these markets, at least in the financial sector. The first one is financial literacy. There is still a lot to be done. I previously mentioned how mature I think the market is and how well integrated it is, in terms of all the banks; including the Central Bank, and even the different government bodies that oversee the financial system. There are plenty of efforts coming from all of these institutions in this respect and we are actually seeing the progress coming through quite nicely, but there is still some way to go.

This country is huge; it has some 26-27 million people, the majority of them very young. Our demographics show that there is a lot of education that is required; and I would define financial literacy as very basic knowledge of how to go about savings and how to look for financing, be it for individuals or small businesses. Obviously, when we get to the larger businesses, we don’t face that problem so much. But for the market to develop as a whole, not just in terms of the banking system but the economy in general, this is certainly something that we need to continue to focus on and make sure that progress is made.

On the less social aspects, and more business-driven ones, there is the issue of audited accounts and the need for more transparency when we talk about the mid-market on the corporate side; which I feel is also something that all banks are trying to improve as much as they can. That would drive not just more access to financing, but also better pricing.

It’s a catch twenty-two scenario; when you try and bring more people into a certain system and you need to learn about what they do and know more about them. This is something we need to improve, in order to be comfortable in lending to some of these companies. At the same time, as we see progress on that front, we will probably price the risk lower, which will clearly be better for the company itself. It will take some time, but we see things moving in the right direction. I have been in Mozambique for a few years now, and I still remember when I first got here, some of the people would tell me how it was very expensive, or for whatever reason, would not be looking to bring audited accounts to their businesses, yet are now producing them or telling us they will start next year, for instance, so that is certainly something that is coming along very well.

Then there is the macro environment. We are of course currently in a period where everyone is concerned with external factors that are affecting our economy quite significantly, namely low commodity prices and the appreciation of the dollar. The metical has depreciated quite severely in the last twelve months or so – actually, in line with most of the region’s currencies –, but with an economy that was growing 7% or more over the last decade, there are no doubt huge prospects going forward, while some of the mega projects that were sustaining this growth are not clearly going ahead, even if they had been progressing quite nicely in the last year or so. The economy has felt the impact of these two main macroeconomic factors, and has slowed down a little, so this is obviously something we are looking into very carefully.

At the same time, the Central Bank is taking the necessary measures to adjust our economy as much as possible to be able to deal with these factors. Interest rates are going up and we hope to see inflation controlled, in light of these measures. In fact, in the last couple of weeks, we have already seen some appreciation of the metical, or reduced depreciation when looking at a longer time frame, which is a good sign. We believe that in the next few quarters, we will have some challenges ahead of us. But ultimately, we are very confident and very positive about the economy of Mozambique. We truly believe that the pace of growth will be sustained at around 6% for the next few years, most likely getting into double digits if everything goes well, as we anticipate.

The next decade or two should be more about how these resources are being allocated and how well diversified the economy is to deal with the growth that is expected.

In the mid term, say in 2 or 3 years’ time, where do you want the bank to be?

I think the bank is already on a very good path, and we are quite happy with what we have done recently, but we do acknowledge there is still a long way to go. Ultimately, we want to be seen by our clients as the best bank to work with in Mozambique; and we want to be seen by our staff members, by our colleagues, as the best bank to work for in Mozambique.

If those two things are met within a few years, I will certainly feel that my job was well done – as will all of us, of course, because we need to achieve that as a team. We see no reason why we shouldn’t get there. We are very positive.

In terms of the more generic question, the one thing I would probably add, especially for those who don’t know Mozambique so well, is to really try and understand the culture before they assume their business model can easily be implemented. I do understand that many companies are already established in different countries, and Mozambique can be just another one. In some other cases, this may be a company’s first attempt to go abroad. But in any case, even for those who are very experienced, I think it is very important to understand the culture.

I was saying to someone the other day that this is kind of “Latin Africa”, and people need to understand what that means; because even in terms of the region, I still see many differences regarding how things are done in Mozambique, in the right sense. I think it’s different but not necessarily bad. But if you don’t understand that, you may face some challenges at the beginning, which if you can avoid will allow you to sail much better and get your business running.