Mr Mathias Katamba is the Chief Executive Officer of Finance Trust. He will, however, be leaving the institution at the end of this month after five years of service. Faridah Kulabako caught up with him and he shared his views about Uganda's financial services sector. Excerpts:
You are leaving Finance Trust Bank. Why the career move?
I have given the company five years. It has been growing at an average of 30 per cent per year for the last three years and its now well positioned to be one of the leading domestic financial institutions of tomorrow. A time like this presents the best opportunity for me to leave and pass on the mantle to another person.
What changes have you made at Finance Trust during your tenure?
We have expanded our footprint from 21 to 29 branches. We recently opened a 30th branch in Arua, making Finance Trust the largest Micro finance Deposit Taking Institution by branch number.
Our deposits have also grown by more than four times from Shs6 billion to Shs25 billion. The loan book has grown by close to three times from Shs12 billion to Shs36 billion and the total assets have more than doubled from Shs23 billion to over Shs52 billion. At the same time, the loan portfolio quality has improved significantly from Portfolio at Risk of over 24 per cent to 3.5 per cent.
Notably also, Finance Trust has also received regulatory approval for a Tier one Commercial Banking Licence, which is a major step in the development of the company.
How were you able to achieve all that?
We focused on the most critical elements of the business. Firstly we strengthened the control environment and worked to continuously improve our risk management and compliance. We also put emphasis on improving our customer value proposition and developing the right talent to drive the business. We then strategically expanded our footprint and leveraged technology to increase accessibility and convenience to our customers.
Banks have of late been revising their interest rates in reaction to the Bank of Uganda monetary policies. Aren't these actions affecting financial institutions' loan books?
For now, the effect may be different between the larger borrowers and micro borrowers. The larger corporate borrowers are likely to hold off major borrowing decisions in response to the higher costs, which may lead to a slowdown in the growth rate of the loan books for institutions that target that market. However, growth of demand for micro loans is likely to continue for some time perhaps for some months as micro businesses have a higher level of resilience.
The bigger challenge is that due to the increasing economic pressures, continued borrowing at the lower end might also increasingly be diverted to fund consumption and this is likely to lead to increased default rates in the future, if not managed.
Reduced lending due to falling bank liquidity, increasing interbank rates, a high risk free lending rate and reduced bank risk appetite could lead to a slowdown in the economy as businesses opt not to invest, not to take on new hires and reduce staff, eventually leading to recession.
You are one of the few Ugandan CEOs that the country has had. Why don't bank owners trust Ugandans to head companies?
It's not about trusting or not trusting Ugandans. It's a combination of factors for instance; who owns the factors of production? What is the quality of tertiary education for skills development other than universities and availability of post education corporate grooming? In a globalised world there will be winners and losers.
Winners are countries or communities that have prepared themselves for globalisation and this is purely commercially or business driven.
We need to take deliberate steps to build significant corporate infrastructure necessary to build and groom our human capital. For instance, a number of our professional bankers in Uganda were groomed within Uganda Commercial Bank and if you look around for professional bankers, they have some roots in UCB.
They were groomed for leadership because UCB had a vested interest to develop domestic human capital. It is rare that a foreign employer is aligned in that respect. It is no surprise that most of the Ugandan CEOs of financial institutions work for domestic financial institutions.
These institutions have deliberately groomed and developed local talent. As such institutions grow and as more local role models are developed, they will hopefully churn out a pool of high quality business leaders for the future.
What is the way forward?
We must have a deliberate strategy for human capital development and build strong tertiary institutions for skills development across all industries. We must also foster an entrepreneurial culture to build large domestic businesses to groom our talent for business leadership so that we can stand a chance to be winners in a globalised world.
What do you see as the biggest challenge facing the local banking industry?
Like all businesses, the industry is affected by the high cost of doing business today. But more from an MDI perspective, which might also hold true across the entire sector, is the availability of skilled talent.
I personally witnessed this three years ago during the banking sector boom. New banks opened shop in the local market and shopped around for talent. The effect was almost immediate as turnover in MDIs increased and payroll costs began to rise. Also a key challenge is the high cost of mobilising small deposits.
How can those challenges be tackled?
Managing costs requires that businesses constantly try to increase efficiency especially through the deployment of innovative technology. Regarding talent, I believe efforts are underway through the institute of bankers to close the skills gap.
Are you totally quitting the banking sector ?
I am certainly not leaving the microfinance environment but using private equity to get deeper and do more. I plan to partner with like-minded people to set up an investment management business that will support development of the financial inclusion space in East Africa.