4 August 2012

Uganda: Executive Style - Aspiring for Market Dominance


KCB Bank will soon mark five years since launching its operations in Uganda. Albert Odongo, the managing director, spoke to Peter Nyanzi about their experience so far and their future prospects.

What is your personal philosophy of leadership?

I think leadership is about taking charge and responsibility for delivering desired objectives, be they personal, professional or of a business oriented nature. It requires a good understanding of your craft, and the ability to see round corners and not only anticipate but prepare to take advantage of the opportunities arising therein. Leadership also demands that you perform through others; so a key ingredient is to inspire the hearts and motivate the minds of your team. If you get this aspect right, they will walk through fire for you to deliver results.

How is managing a bank different from the other sectors?

Banking is the most highly regulated sector and is therefore built on a strict set of rules. The trick is to quickly learn the parameters of the banking sector and drive your key value proposition. If every member of your team knows these rules and also how they contribute to the bank's success, it becomes a lot easier to manage the performance and operations of the bank.

It will soon be five years since KCB launched operations in Uganda. What has your experience been like in this market?

KCB Bank spent the first three years setting up and driving its brand. This period was characterized by frequent branch launches, implementation of a new cross border IT system, and lots of sponsorships like the Pearl of Africa Rally among others. The brand is now well-known, is easily recognizable and accepted all over the country. The focus has now shifted to delivering our brand promise through products. In 2011, we launched asset based finance, mortgages, SME banking products and we are continuing this effort through Internet banking, mobile banking, and custody and trusteeship services. We are getting more intimate with the market and satisfying our customers' stated and latent needs.

In what ways is this market different from others where KCB operates?

KCB Bank operates in Kenya, Uganda, Tanzania, South Sudan, Rwanda and Burundi. It has existed for over 100 years in Kenya and is the largest bank by assets, branch network and profits. The Uganda market is not as mature as the Kenyan market, which has 44 banks and a deeper level of financial inclusion. We are getting there and through the harmonization of financial systems as proposed under the EAC, we expect increased growth of the market.

There are currently more than 20 banks operating in Uganda. To what extent does the competition worry you?

KCB Bank has a clear strategy on how it intends to grow its business and market share in Uganda and this focus is unwavering even in the face of new competition. We believe we can replicate our dominance of the Kenyan market in the Ugandan market. We believe in our brand, our products, our staff and our clients and these should keep us moving in the right direction.

What is your reading of the future of the financial services industry in Uganda?

It is bound to grow in the long term considering the majority of Uganda's population is unbanked. As per a Finscope survey in 2011, Uganda's unbanked population stood at 62% of its population. We expect deeper financial inclusion especially through the use of ICT in form of mobile phones and the Internet. With the continued exploitation of oil and gas resources, improved energy and infrastructure, we also anticipate economic growth that will see more regional and international players seeking to enter the financial market.

While banks are announcing big profits, economic productivity is sliding as access to credit becomes harder. How long will this situation persist?

Bank of Uganda has lowered its CBR to 19% for the month of June 2012 and inflation, though still in double figures, is decreasing; we should thus expect credit growth to rebound as the year progresses. This growth has already been noted in foreign currency based loans especially US Dollars where credit growth has increased mainly as a result of the low interest rates. Uganda Shilling based credit facilities should follow suit soon as the CBR lowers and subsequently the interest rates lower.

The current macro-economic environment therefore seems to be improving with inflation coming down, a stable exchange rate and interest rates coming off slightly as well. The bigger challenge appears to lie on the global scene especially in the Eurozone and the political situation in the Middle East.

But while inflationary pressures have subsided, interest rates still remain high. Why?

These rates still remain high due to the high borrowing costs that the banks incur. This has also been caused by the rather high loan loss ratios due to defaulting customers. Therefore in order for commercial banks to stay in business, we have to input the high borrowing costs and the loan loss ratios into this equation in order to properly price our products. Banks, however, have already begun reducing lending rates as evidenced by the numerous public notices over the past few weeks.

Where do you want to see KCB in the next few years?

KCB Bank will be the preferred financial solutions provider in East Africa with a global reach. We are a universal bank that will provide a seamless and satisfying customer experience across our network and the region. We will drive our proposition through appropriate and innovative channels in response to our customers financial service needs.

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