Would a black bank deliver the goods?
Debate should focus on novel ways to satisfy clients’ needs
MORE and more prominent political and business leaders have been calling for the creation of a black bank, but the conversation lacks nuance, not focusing on the benefits that such a bank would bring to those who have had only inadequate access to banking.
The questions that need to be defined, perhaps, are what is meant by a black bank; would it be black owned; would it be black controlled or managed; would it cater only for black people; or would it be a successful combination of all of the above?
The main issue in the emergence of banks geared towards low-income earners — who are mainly black — is that the scope of products offered revolves largely around micro loans.
If there are any complementary services, they are usually limited to funeral policies or some form of unsecured lending that doesn’t promote long-term planning for customers or the buying of assets.
“We need more coalescence and understanding when we think about what we’re trying to solve when we say we need a black bank,” said Sonja de Bruyn Sebotsa, the founder of Identity Partners, a private GLOBAL VIEW: Standard’s Sim Tshabalala says transformation has to take investors into account NEW AGE: Herbert Kawadza equity firm that funds black women entrepreneurs.
Product offerings should be priced appropriately and be “inclusive and cater for a diverse set of needs”.
“If, in retail banking, depositors — that is, individuals who use banking services — feel that the products out there currently don’t suit their needs, then we need to ensure that the product design for individuals addresses the needs of the people,” she said.
A good example of a bank that has addressed the needs of customers is Equity Bank, in Kenya, and its success highlights the need for South African banks to think beyond big cities and towns and venture out into rural areas.
Equity Bank adopted an agency banking model in 2010, when it had 5.4 million customers, and this allowed it to grow its customer base to 10 million by the end of the 2015 financial year.
The model allowed the bank to contract banking agents, which are licensed with the Central Bank of Kenya, to facilitate basic banking functions as part of their normal business. For instance, tuck-shop owners and street vendors can get licences from the central bank to take deposits and conduct basic banking services, including selling products.
Equity Bank’s strategy provides products and services to the people who need it most in an efficient manner while saving money by using existing infrastructure NEW MODEL: Equity Bank, in Kenya, engages agents to handle some customers’ requirements within the communities targeted.
The issue of distribution is probably the biggest factor for any bank wanting to establish itself and grow its footprint.
In an age of sophisticated consumers well versed in mobile technology and active in social media, a new bank would need to consider how it could tap into this market, dispensing with conventional infrastructure such as branches, said Herbert Kawadza, a banking lecturer at Wits University.
While having a bank that is inclusive in terms of its offering would be good for the market, there are still issues of management, control and ownership that the dialogue around transforming the banking sector needs to address.
The top four banks in South Africa — Standard Bank, Nedbank, Barclays Africa and FirstRand — have a significant foreign shareholding, and a large slice is also owned by South African institutional investors — your pension fund investors. There are only a few individual investors.
“We operate in the context of a global environment,” said Sim Tshabalala, joint CEO of Standard Bank.
“Standard Bank’s share register reflects that the majority of Standard Bank shareholders are international. It reflects that most of them are institutional.”
Tshabalala said transformation in banking institutions such as Standard must take into consideration that banks operate in an open economy in which global investors who may have an interest in the bank can buy into it. “Part of the dialogue has to be how to transform in that context.”
Of course, if any black business or individual were to seek out a large stake in a bank — rendering them a shareholder of reference — that would bring with it a host of capital requirements relating to regulatory frameworks.
Since the global financial crisis, shareholders with a stake of over 13.5% in an unlisted bank need to hold enough capital to fund short-term liquidity and longer-term capital requirements in the event that the bank encounters a crisis.
Another aspect of transformation in banking includes the element of who controls them — the key decision-makers. These are the people who make or influence strategic decisions about the future of an organisation, as well as influencing the markets the bank targets and designing suitable products for those markets.
In most cases, shareholders have little to no input on strategic decision making and the running of day-to-day banking operations. At this level, the transformation project needs urgent attention.
If we include Capitec, the ratio of white men to black women across all five banks combined, is seven to three. This variance increases when you compare the number of white men to white women. There are only four white women board members across all five banks.
In banks, it is perhaps most vital to focus on ensuring that transformation isn’t simply a corporate buzzword, but that it forms part of company procedures — and perhaps is applied more rigorously than the measures taken so far.
Tshabalala said that approach would have to be structured and there was certainly a role for regulators to play. “The issue of transformation and economic inclusion needs a structured programme and a path for that.”
Tshabalala is well aware of the lack of transformation in his executive team. “I’d be lying to you if I said Standard Bank was transformed, because we do not represent the demographic of South Africa,” he said.
Street vendors can get a central bank licence to take deposits I’d be lying to you if I said Standard Bank was transformed
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