On July 5 2018, President Emmerson Mnangagwa officially launched the Empower Bank at a ceremony in Harare. The bank was touted as the answer to the challenges that youths face in accessing funding for their projects. This week, Zimbabwe Independent's Nkululeko Sibanda (NS) spoke to board chairperson Raymond Njanike (RN, pictured) to review the bank's journey in its seven months of existence. Below are the excerpts:
NS: Let's start off by looking at what Empower Bank is.
RN: Empower Bank is a financial institution that was created and launched to cater for the youths of Zimbabwe. You will realise that in our planning, we agreed that we would dedicate 70% of the loans at Empower Bank to the youths while the other 30% is set aside for borrowing to any other business.
As you are aware, we are a deposit-taking micro-finance institution and we are dealing with the youth. They don't have much to deposit. So we have to then deal with the other segment, the 30%, that can deposit money into the bank. These are the savings that we will then use to finance the youth. That is the model in brief.
NS: Seven months into this business, how has the journey been for Empower Bank? What have you been up to?
RN: We have built a strong foundation for the bank in those seven months. It's a process that has taken time but we are sure that we have built a strong foundation for the house to stand on. We recently opened this bank. We have not been in operation for a long time.
The president launched the bank on the 5th of July 2018. From then on, we were busy at work putting systems into place and perfecting the systems so that we run smoothly when we finally open for business.
It has not been an easy thing to do. But we are confident that, going forward, everything should be flowing smoothly. We also need to work on the bank's penetration strategy so that we are able to reach out to all the youths in all the corners of Zimbabwe.
NS: President Mnangagwa launched the bank in July last year. He spoke, at the time, of his Vision 2030 mantra. How does your bank fit into that vision?
RN: As we have highlighted before, the whole essence is about empowerment of the youth and our ability to finance their income-generating projects. These income generation projects are what we believe to be the engine for the country's economic growth. The youth are very innovative and energetic. The challenge is that they are hamstrung when it comes to accessing funding for their dream projects.
That is where we come in, to finance their projects and enable them to play a role in the economic revival programme that government is pushing.
NS: This is a very big programme by any standards and requires a deep pocket. How deep is Empower Bank's pocket to bankroll this youth initiative?
RN: To be honest, as a deposit-taking micro-finance institution, we are adequately financed. The minimum capital required is $5 million. We were given $12,5 million. It came from the government for the youths. We have had to look at how much we are going to spend on the youths. We are looking at enhancing the capital and make some profits from it.
The capital which is there, which is way above the RBZ threshold of $5 million, is good enough to defend our book to the extent that when we look for lines of credit, we have a better underwriting capacity which will allow us to continue to mobilise resources and lend to the youth.
NS: Most financial institutions have shied away from financing youth-initiated projects because they are deemed not bankable. How are you dealing with this at Empower Bank?
RN: I think that is a very serious myth and a very unfair statement towards the youth. I will defend the youth. The whole packaging of the initial loans given to the youths was not properly done in the past. I mean that we at Empower Bank have a structured way of giving money to the youth.
We have mentoring programmes that help the youth understand how they are supposed to run their businesses. That is key. In the past, people were just told to go to banks and get loans without prior training on how the businesses are run.
That is why when you ask how we give people money without collateral, we will tell you that we have groomed and prepared these applicants on how to conduct their businesses and we will indeed assess their projects and give them money without that collateral.
If you are not serious, you will obviously come to us with that notion that the bank just gives people money and you just go away. That is something of the past.
NS: How does your bank ensure that the money that it gives to an applicant will be used solely for the purpose which it has been borrowed for?
RN: The appraisal process includes training and appreciation of what these applicants need. We don't just lend money to someone whose background we do not know. We do visitations to all the potential applicants. If it is a farmer, we visit the small farm that they have presented as a place where they intend to invest the money.
So it's a question of having field officers who will confirm the existence of the space on which this individual intends to farm and all the relevant details as supplied in the application.
We, in our processing of the applications, also help people by linking them with off-takers of the produce, in the case of farmers. We have got some of the off-takers who include Cairns Foods who, from time to time, require some raw materials that our applicants produce time and again. So, in a nutshell, we are not going to encourage people to venture into production without the market for their products. That is why, in most instances, we are talking about the value chain management.
NS: There is fear, from previous experience, that money lent to individuals is rarely paid back. How does Empower Bank deal with that fear and aspect?
RN: I am happy that you use the correct term: fear. It remains what it is. Fear. We cannot continue to fear. We can't continue to be doubting Thomases without testing the systems.
As an example, we have set aside $50 000 that we will give out as unsecured loans as Empower Bank. That is a test. If the repayment of these loans is at 90%, I will declare that we will double that and make it $100 000. If it turns out to be 30%, we will stop the unsecured loans approach because the model is not working. We have given out this gesture as a test case. It's a small amount which we are saying will help us study the repayment mode and we reach a conclusion on whether to proceed with it or not.
NS: Historically, how have the youths fared in repaying loans?
RN: Going by the statistics from the Reserve Bank of Zimbabwe, if you look at the total loan book, you end up wondering how people and institutions come to the conclusions about our youths.
If you look at the books, you will realise that of the total $10 million was borrowed to the youths. In fact, they did not borrow the whole $10 million. They borrowed about $4 million, of which $2 million was re-paid.
What I am simply saying is that the youths borrowed that much against a non-performing national loan which in the end was taken over by the Zimbabwe Asset Management Company (Zamco). We need to be fair to the youths at times.
NS: In the unfortunate event that youths fail to repay these loans, how does the bank get itself out of such a mess?
RN: We have made sure that, using our systems, training, and background checks I alluded to above, 99% of our loans are performing loans, meaning they are loans that will be repaid. That $50 000 that we have given out as unsecured loans is probably 1% of our total loan book, which we can write off.
The taste of the pudding is in the eating. Let us not be risk-averse to a point of destroying those very dreams that we want to push to come true. It's no use to talk about empowering youths when in actual fact we stifle the same by demanding collateral that they do not have.
NS: Over the years, the rural youth has remained largely unbanked due to a variety of reasons. Does Empower Bank have anything in store for those in this category?
RN: Yes, we have a lot of things in store for the youths in the rural areas. The launch of the bank in these cities such as Harare and Bulawayo is meant to be a launch pad for organic growth that will take us to cover those outlying areas such as the rural areas you are talking about.
We have said, as Empower Bank, we are not going to have agency banking in cities. We will actually have it in rural areas. This is how we are going to do it. We said if we are to ride on technology and use smartphones for our applications, it might not be available in the rural areas where there is no internet to then get onto the platforms. We will penetrate and give them platforms where they can bank without using smartphones.
NS: Looking into the future, what do you think will be Empower Bank's contribution to the economy?
RN: Empower Bank will play a bigger role in contributing to economic growth through empowering the youths so that they are able to be incorporated into the mainstream economy where they have been excluded.
We have always wanted to make the youth workers instead of making them innovators and employers. We want to change that going into the future.