Banking Sector and SMEs in Ghana: uniBank Ghana

Interview with Kwabena Duffuor II, Chief Operating Officer at uniBank Ghana

What is your general view of the banking sector? There are some issues with high lending rates. What do you think the government should do or not do in regards to these issues?

For us bankers, it is quite basic. The lending rates are not high because of the bank’s higher interest costs or because the bank wants to earn abnormal profits. The rates are high because the banks have sustained budget deficits over long periods of time. We have a situation in which the government has to follow domestic markets, in other words crowding out the private sector. We are all taking money from the same pool so if the government is in the domestic sector with a domestic-born market with the banks, it has a direct impact on our lending rates.

Does the government have a choice in doing this? What are the difficulties for the government in going to the international markets?

You need to have debt sustainability because it is not just about going to the international markets to declare debt sustainability in terms of GDP. It would depend on the existing debt stock that we have and whether it is sustainable for us to borrow more. Those are the things that they need to look at. Basically, the government has to find other ways of raising revenue because there is a lot of money in the system and a lot of revenue can be generated but the structures have to be in place. We know it is a long-term plan but I think we can all help in tackling this issue. That is the only way that we can start charging lower rates.

You, as a bank, are specialized in the SME segment and they are the ones that are borrowing money. Tell me more about this area.

Most of the banks here shy away from SME and this is understandably so. It is interesting. For every growing economy, the SME sector is the engine of growth. If the SME sector doesn’t grow, the economy isn’t going to grow. You can have a high growth rate and GDP, but on the ground you aren’t going to create employment because the SME sector is not moving. You need to understand how it operates. You have clients who don’t really have financials but they are working, they are selling, and they are providing services. So as a bank, how are you going to say that because the client doesn’t have financials you aren’t going to help them?

What we do is specialize in sitting down with the client, understanding their business and advising them. Sometimes we hold seminars such as on how to prepare financials or how to check stock. It is time-consuming but we think that in the end, as an indigenous Ghanaian bank, we are also playing a role in terms of providing jobs and helping the economy grow. If we don’t support the SME sector, who is going to support them? But it does take a lot of expertise and skill in that area and that is why we are comfortable there. It’s not because it’s easy but because we have taken the time to understand how the SME sector works.

One of the main things really hurting the SMEs is the interest rates so moving forward we are looking beyond that. We can’t say the government is borrowing so we are going to sit down and retire. As a bank, we understand that apart from attracting cheap deposits, you still have a large unbanked population. How do we get to those people who don’t have bank accounts but have cash? Those are the questions that we have been asking ourselves and in about 3 to 5 years we should have proper structures in place and we are waiting for that to attract cheap deposits and at the same time, find ways to reach the unbanked population. That is where uniBank is moving to right now.

Where do you see the bank in three or four years’ time?

Currently for example we have about 20 SME clients with nominal exposure of fifty thousand or hundred thousand. What I want to see in three or four years is that I want them to be millionaires. Once they become millionaires then I know I’ve done my job. I’m here to create millionaires from SMEs because they have a direct impact on the economy – building indigenous Ghanaian businesses. My dream is to create about ten or twenty millionaires in four or five years and then I’ll know we have contributed to the Ghanaian economy.

Which sector do you think these millionaires will be in? Which sectors do you think have room for SMEs to develop strongly in Ghana?

One of these is the oil and gas sector, in terms of providing ancillary services. There is a lot of local content when it comes to the oil and gas sector but we lack the expertise to tap into that. What we hope is that we can get some support in terms of training our SMEs or helping them research into the oil and gas sector and providing ancillary services – basic things from painting to providing catering services. Those areas are overlooked but sometimes it is because we lack the knowledge. I think if we create awareness, it’s a very good area.

Ghana also has a huge infrastructure gap and we all know there is no money coming into the country to develop our infrastructure. So in the next few years, SMEs will play a vital role there because you are going to bring in the big construction firms but you have SMEs providing services to these firms. These are the two main sectors that have a lot of potential.

What can the younger generation bring to Ghana? What do people like you and other young managers bring to Ghana?

My colleagues and I in other industries and sectors are bold; we are not scared of falling. It’s not about you failing but how you recover from the failure. We are bold, we are aggressive and we are risk-takers. We’ve been exposed to and have visited other countries. Why can’t Ghana be like those countries? That is the question we keep asking ourselves every day and that’s what keeps pushing us forward. Sometimes we may take a bit too much risk but we have our uncles and aunties and older people to sometimes keep us in check. They are there to guide us but I still believe they should leave us to move and create those opportunities.

I have a friend who says that in Africa, there are no challenges; all the challenges are opportunities. The young generation – we are not fazed. We have nowhere else to go so the best thing to do is make sure you are comfortable in your own country and that means we take a lot of risks and we are not discouraged but we just keep on pushing because at the end of the day it’s only the creation of jobs that will reduce poverty in this country. It’s not about aid or donor funds and all that, it’s about how the indigenous Ghanaians can create jobs.