15 March 2017

East Africa: Regional Banks Downsize Staff As They Embrace IT Solutions

Banks across the East African region have in recent months laid off employees across departments as the sector adjusts and embraces new IT solutions.

The most affected are employees serving in age-old jobs such as clerical and secretarial positions.

In the region, banks which have cut staff include Equity Bank, Family Bank, and Sidian Bank all based in Kenya.

In Uganda, staff layoff has been reported at Centenary Bank and Dfcu.

Locally, among banks that have moved to reduce on their staff include Banque Populaire du Rwanda (BPR), KCB Rwanda and GT Bank, with analysts indicating other banks may follow suit.

Some banks say the downsizing is aimed at reducing cost of operations.

For example, with the Bank of Kigali profit registering an after tax profit of Rwf20.8 billion in 2016, cost of operations in 2016 stood at about Rwf36.5 billion, up from about Rwf30 billion in 2015.

I&M Bank Rwanda, which published its 2016 annual performance last week, had a net income of about Rwf5.8 billion, with total operational costs of about Rwf11.7 billion.

With the increase in competition largely due to multiple players in the sector and improved customer preferences, banks are mulling ways to keep their customers loyal without additional costs.

Sanjeev Anand, the new Atlas Mara managing director, told The New Times that at the moment banks are competitive on costs whereas clients are demanding better pricing.

"Every bank has to be extremely competitive on costs, if you are not competitive you will be wiped out. Competitiveness is increasing, customers are demanding finer pricing and you cannot give finer pricing if your production costs are high," he said.

However, Anand said reduction of costs go beyond reducing the wage bill to using technology efficiently to improve processes, among other ways.

For example, BPR had quite a high cost to revenue ratio, at about 95 or 96 per cent, which they aim at bringing down to about 85 per cent this year.

Last year saw a restructuring exercise at the bank which saw about 275 employees laid off in the process.

Anand said that the move was geared at making operations sustainable and influenced by aspects such as level of business, products being offered and technology being used.

"We recently restructured, last year was done honestly and transparently and we gave them a very fair deal. Our headcount reduced by about 275 people and now we are at a level that is sustainable. We will never be overstaffed. It is a function of how much business you are doing, products that are there, the technology is present," he told The New Times.

New strategies

Bankers also attribute staff reduction to adoption of new strategies and business models that require different skills set.

Rwanda Bankers Association president Maurice Toroitich, who is also KCB Rwanda chief executive, said a major concern for most banks is how to remain cost-effective and at the same time deliver quality services to clients.

The bank earlier this year laid off 27 employees as part of its restructuring exercise.

"Customers are demanding a lot from banks and are not willing to pay any much more than they are paying. This leaves the banks to look at how the services are being delivered. Banks will, in turn, look for ways and means to deliver better quality of services at a reduced cost," he explained.

This, Toroitich said, has led to increase in expenditure on technology by some banks at the expense of a number of employees.

"This is why you can see technology is taking a bit of expenditure in some banks in the process of automation of services to deliver more and better services at a lower cost. Different banks have different cost structures and business models, which might require them to change the structure of their staff to be able to implement the strategies," Toroitich said.

He explained that the processes involve looking at competencies within staff and looking at upgrading their skills (to fit) a technology oriented banking services.

"On the one hand it might look as if one is reducing staff but we are actually replacing them somewhere else," he said.

For example, KCB Bank Rwanda has invested in systems where clients can open an account, make deposits and even apply for a loan without having to walk into a physical bank branch.

The firm has also partnered with Visa to scale up cashless payments in the country.

The trends bear opportunities for bank partners such as telcos, fintech companies and others as banks could partner with them to roll out new the new business models or outsource some services.

"The idea is that banks will not be able to provide all that consumers want but, through partnership, we can do it much more efficiently," Toroitich said.

GT Bank Rwanda officials told The New Times that, in their case, the decline in headcount was a result of redundancy as the bank closed a number of its branches.

Dr Diane Karusisi, the chief executive of Bank of Kigali, said that although they have noticed staff layoffs across the region it was unlikely to happen at her bank.

"We are still in a growing environment, there are lots of unbanked people. Formally banked stands at about 26 per cent only. We do not foresee ourselves reducing staff because of the opportunity for growth," Karusisi said.

"Like every organisation we look at how we can gain more efficiency in how we operate. We have been doing this regularly. We looked at our process, what can be digitised and done to improve the way we operate but we do not think that this will come with reduction of staff," she said.

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