zambia:Inevitable growth of non-conventional banks

BENEDICT TEMBO, Lusaka

ZAMBIAN banks that for some time have slightingly been termed as ‘plain vanilla’ banking institutions, focused on taking deposits and lending are slowly shaking off that tag.

The banks that initially did not fully incorporate the dynamic changes in the market are now posting positive developments by playing a big role in investment banking, portfolio financial packages, and issuance of corporate bonds and commercial paper for some of the huge investments in Zambia.

However, commercial banks have been static in terms of embracing the majority of the citizens to benefit from their services; they have remained in silos, thus failing to respond to Government’s desire for financial inclusion to capture the informal sector that includes youth and women traders.
This failure by commercial banks to embrace financial inclusion for the youth, women, traders and students has created a huge opportunity for money transfers by institutions such as Zoona and mobile phone providers.
From mere facilitation of cash from one point to another, Zoona and all mobile phone providers have graduated to opening accounts for people who are subscribed to their network.
Some of the key issues that have driven other non-conventional players in the market include micro-businesses in both rural and urban areas which have remained unbanked and yet handling huge transactions associated with trade in agricultural products and other services.
“Because of the frequent regulatory requirements for depositors in commercial banks, liquidity has partly 2017remained in the hands of informal markets, who still have to transact and network,” says Chibamba Kanyama, a renowned development economist.
Mr Kanyama, who is managing consultant for Bridges Limited, says the country’s national gross domestic product has expanded five-fold in the past two decades, meaning there is an increase in economic activity.
“This is a huge opportunity for financial players to tap into this window through lending activities and cash transfers. Digital and information technologies have networked almost every citizen to the mainstream economy and this means a serious requirement for efficient and effective financial transaction platforms,” he says.
He adds that the commercial banks are hugely regulated, with very demanding corporate governance standards that call for high risk management processes in the introduction of new products.
“Their cost structure is also too high to fully penetrate smaller markets as they are disadvantaged by unfavourable economies of scale. You may recall that many commercial banks introduced products for small and medium enterprises that were initially the preserve of micro-banks. They also ventured into salaried loans. Most of them burnt their fingers, especially at the time the Bank of Zambia capped interest rates. These banks have retreated into their traditional products and have now left the space for mobile money players,” Mr Kanyama explains.
He has advised the new mobile money players is ‘keep your lane, grow it and deepen it’.
“There is a huge temptation among Zambian financial players to exploit opportunities outside their mandate and level of competence. We cannot import banking methods from other countries and lump them into Zambia without understanding the socio-cultural dynamics of the country. Kenyan micro-economic players are different from Zambian,” he says.
Mr Kanyama adds that this is because of the history; Kenyans having been capitalist for a longer period of time and their view of financial products is different from Zambians.
“My own investigation shows that the traffic of mobile money transactions in Kenya is driven by business motives whereas in Zambia, it’s social (school fees, funerals and extended family support). This alone tells you about the risk profiles of the two countries in terms of finance and banking,” he says.
Bankers Association of Zambia chief executive officer, Leonard Mwanza says mobile network operators (MNOs) and banks are in collaboration to ensure an increase in the number of touch points which are providing services as part of the financial inclusion agenda.
“Banks are increasingly using mobile apps which enable users of MNOS mobile wallets to interface with bank mobile wallets which are linked to bank accounts. Banks see mobile payments as a key driver in creating a digital payment system in the country and looking forward to a partnerships relationship with MNOs based on mutual co-operation,” Mr Mwanza says
Christopher Chileshe, the country head, Airtel Money says the wallet-based service helps Airtel customers to save cash without incurring any interest.
Through this product, Mr Chileshe says clients are able to pay bills effortlessly.
“We have seen a lot of people registering. The [product] is growing exponentially,” Mr Chileshe says.
He says that although the product was initially targeted at the unbanked population in areas where there are no banks, it has become popular across the population.
It has grown to an extent that even corporate have embraced it by using the service to pay people across the board.
Government through the Ministry of Community and Social Welfare is using the facility to disburse social cash transfer while the Food Reserve Agency has also used it to pay farmers.
Mr Chileshe also said Government has through Madison Life Insurance been disbursing pension.
In conjunction with the Zambia Revenue Authority, Airtel money is now being used to pay taxes.
“Cash usage in the country will reduce,” Mr Chileshe says.
Zambeef’s newly-opened Masala Macro in Ndola is the latest outlet to offer customers the Airtel Money ‘Tap and Go’ service following the partnership between the two organisations aimed at offering customers safer and more convenient payment solutions.
Speaking at the launch event held at Zambeef’s Masala Macro outlet in Ndola, Airtel zonal business manager – Copperbelt, Mwansa Nchinkulo, said: “‘Tap and Go’ is a new and exciting offer from Airtel Money that allows customers to pay for goods and services using the ‘Near Field Technology’ [NFC] on their mobile phone.”
Zambeef general manager Retailing and head of marketing and head corporate Affairs Felix Lupindula noted that this would not only enable customers to make purchases without having to carry physical cash around but also make transactions faster and easier.
“Today’s customers are very technologically savvy and are constantly seeking innovative solutions that make it easier for them to operate on a daily basis as we move towards an increasingly cashless society and economy. And as it turns out, the mobile phone is the most accessed and used digital device so it is no surprise that they are more inclined to transact using their mobile,” said Mr Lupindula.
Customers need to be signed up for Airtel Money with an active Airtel Money Wallet, which is linked with an NFC Tag that is usually placed at the back of the phone. Payment can be done simply by tapping one’s phone on the Point of Sale device (POS) and entering their Airtel Money PIN to complete a transaction essentially making The ‘Tap and Go’ service, transactions much faster rate than using the conventional way of selecting from the Airtel Money menu.
“This significant development is in line with the national efforts of moving our country towards being technologically proficient by finding ways to innovate services to benefit the community at large,” added Mr Nchinkulo.
Such technology should not take away from the customer experience but rather add to it, he added.
The service is already being offered at several other Zambeef outlets including Ten Miles, Kanyama, Mungwi, Nkwazi outlets and Mtendere Macro outlet.

SOURCE:DAILYMAIL