Nigeria: Challenging Market with Goldmine of Opportunities

05 Jan 2013

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Prince Kofi Amoabeng

An Ex-Ghanaian Military officer and currently the Chief Executive Officer (CEO) of Unique Trust Holdings (UT), which comprises Nigerian based UT Financial Services, UT Bank Ghana, UT Insurance, Securities and more—Prince Kofi Amoabeng, was born 60 years ago in a village in the eastern region of Ghana. He is undeniably one of Ghana’s renowned businessmen. He consecutively clinched the coveted Most Respected Chief Executive Officer award.

He is currently the Most Respected CEO in Ghana, an award he was adjudged in a programme organised by Pricewaterhouse Coopers and Business & Financial Times. He is an alumnus of the popular Adisadel Secondary School and a second-class upper graduate of Business Administration from the University of Ghana.

Amoabeng chose to join the Ghanaian army in 1975, because according to him, it seemed to have all what he desired at the time: “a disciplined way of life, three square meals a day, free room to live and a salary.” Prince Amoabeng has carved a niche for himself in Ghana’s financial sector and is looking to leave his mark in the Small and Medium-Scale Enterprise in Nigeria. Afia Grillo spoke with him.

My early childhood…
Born in 1952 in a village in the eastern region of Ghana, his father could not get an education due to family problems. “He had to really invest in me and made sure that I went to the best schools in Ghana. After my secondary school, I went to University of Ghana where I had a second upper in Business Administration and passed out in 1974.  After that I joined the army in 1975. I joined the army because I felt I was not disciplined enough and the army was going to provide practically everything for me. You have three square meals a day, free room to live and you also have a salary. It was the cheapest way to life. While I was in the army I had a scholarship to go to the UK, to do what was called CIMA. By 1979 I finished the course and became a Chartered Accountant after which I came back to Ghana.”
On his return to Ghana, the Ghanaian military had taken over power from the civilians and was ruling the country. Amoabeng hung on in the army trying to put things back together, but became discouraged when he found that the discipline that had taken him into the army in the first place was now lacking. Disheartened, he resigned in 1982 without even knowing what to do next. In this state of mind, he found himself journeying to Nigeria, London, Liberia and then back to Ghana as he explored various leads that would take him towards getting his civilian life going again after a stint in the military.

It was at this time that Amoabeng’s next-door neighbour and friend sought Amoabeng’s assistance to drive him to his business meetings because he’d had an accident in his own car.  “By attending those meetings I started learning and doing business with him and he now felt comfortable because the military was in power and he was afraid of the military. As a retired soldier, I was not afraid of the military. So that was how I got drawn into business,” Amoabeng says of the experience.

Exploring the fields of business…
For 15 years—1982 to 1997, Amoabeng did all types of businesses, including, buying and selling of everything from second hand clothing’s to second hand car tyres, to importation of wine. He was also a contractor, building small rooms and venturing into sawmilling, petroleum and air-conditioning business.

He soon realised that the biggest constraint in doing business in Ghana for SMEs and the informal sector was gaining access to money. Banks were not giving out loans to the informal sector and even where they did, it was taking them so long that the business would be gone already before the money is approved. One of his personal experiences occurred when he applied for about 20 million Cedis (or $6,000 then) for a business transaction and the bank took two months to approve only three million out of the 20 million required.

Amoabeng was mad about this, but then it gave him an inspiration: What if he set up an organisation that was able to quickly provide funding for SMEs in the way that the banks had been unable to do for him and for other small businessmen. He applied for and got a financial services license from the Bank of Ghana and then entered into a 50/50 partnership arrangement with the chairman and owner of the office in which he was setting up in the centre of Accra.

Their first major challenge was raising the money to get the business going. “People who would promise to give us money would ask us to come and we talk for hours only for us to hear that they can’t really give us the money and it was very frustrating,” he revealed. But after one meeting with another friend ended almost with the same result, except that this friend was willing to make available only a fraction of the money Amoabeng had asked of him, it suddenly occurred to him that perhaps he may have been approaching raising capital in the wrong manner. Maybe he should be thinking of asking for smaller sums of money from different people, rather than looking for one big investor, he thought.

“So I wrote a list of all the friends I could think of that could afford to give small amounts like $500 to $1000 and I wrote personalised letters to all of them. In that letter I stated that if you can give me five million Cedis or more I would pay back a five per cent interest a monthly. Some people decided to try small amounts. I wrote about 55 letters, but only 13 responded positively. Some gave me 5 million Cedis some gave me 20 million. In all I raised 255 million Cedi’s, which was, the actual figure I was projecting to be able to break even. When I got all the money was when I knew that it was going to be successful,” Amoabeng said about the experience.

Getting Started…
Putting to great use his 15 years entrepreneurial experience with running businesses in Ghana, Amoabeng started UT Financial Services with three barely qualified staff, “but highly loyal people” he says. The first employees of UT Financials comprised of a driver, a bookkeeper and a national service person. At the time, he didn’t have in place any documented processes, but what he had was a system that ensured all loan re-payments were made on time or a day before they were due. This approach created for UT a clear perception of trustworthiness and it in turn led to more money and more referrals for UT.

A disciplinarian and never one to shy away from taking the hard decision, Amoabeng whose role models are Barack Obama and Kofi Anan, remembers once at UT when he had to sack his entire workforce after discovering they had devised a system of taking bribes from the customers. He says about the experience that he however had to eat humble pie and recall some of the sacked workers on realising that they and not he were the ones who had the information of how to trace customers who had taken loans from UT.

The problem was with the muddled up contact address system existing in Ghana, which hindered tracing people who had taken loans. Amoabeng had to put in place a system to overcome this challenge since it was key to the growth of his business. “I decided that for us to give a loan because we did not have a good address system in Ghana at that point, we have to sketch the route from a good reference point to your house and your place of business,” Amoabeng said.

On his Experience and Challenges setting up UT Financials…
At UT, Amoabeng said he had to work hard to overcome the widespread Ghanaian mentality at the time that bank loans weren’t meant to be repaid. With his team of five retired senior military men coordinating debt recovery drives, visits to houses of UT debtors were undertaken morning, afternoon, evening, night and at the break of dawn, he said. Though he admits that debtors may have wrongly feared the consequences of not repaying loans to people with a military background, he maintains that they went about their debt collection in a friendly manner. “We would have an agreement that if they had any problem meeting their loan obligations that they should come to us so we can talk.”

For a company that started out with just $20,000 in 1997, it took UT only 10 years from 1997 to 2007 to grow its worth to $81 million.  He revealed how UT came to be so named. “When we first went to register the business we chose the name BEST FINANCIAL SERVICES and the Registrar General registered it for us then and we took it to Bank of Ghana. I remember talking to someone at Bank of Ghana and he said,

“What do you mean by best financial services who said you are the best”. I said that was the name of the company and he told me they would not approve the name ‘best’. So I asked him what kind of name he wanted and he asked me to go and choose a name that is unique. So I left and the word unique was stuck in my head. I asked myself ‘what do we want to do?’ We want to lend based more on trust than anything else. I thought of ‘Special Trust’ and unique is the same as special and so that is how the name came about.”

According to the award winning CEO, the company has come a long way from those early days when it started the business without a clear understanding of the business of lending and a clear vision of where it would be in five years. “Today UT is very big on strategy, has the right structures in place, understands its clients, and has learnt to understand the staff, Amoabeng says. “Our main focus is to raise the level of our performance to meet whatever challenge.”  Today’s UT, he revealed always conducts a strategy session to look ahead to the next three years and to review whatever has been stated as its vision every six months.

“It was at one of such strategy sessions that the decision was taken to acquire a bank in Ghana and this was achieved within one year.” Amoabeng further said that UT’s new vision is for the holding company to be in 10 African countries outside Ghana within the next two years. “We have already set up in Nigeria and South Africa and we know what it takes to set up to five of those offices in one year,” he says.

His Entry into Nigeria…
On how UT came to begin its Nigeria operations, Amoabeng said they had to bypass the challenges of obtaining a fresh operating license from the Central Bank of Nigeria (CBN) by examining all the existing non-bank financial institutions and buying one that they thought did not have much baggage.  “We bought a company which was called Supreme Finance and we went through all the legal and regulatory requirements to turn the business into UT Financial Services and we started business just about three years ago,” Amoabeng says.

He sees the Nigerian business landscape as a goldmine of opportunities for a non-bank financial company like his. “I walk through the city of Lagos just smiling to myself and saying that these people need our services more than anything because people here are very entrepreneurial and want to see things done. So we are highly upbeat about it,” he says.

When it was proving difficult raising money from within Nigeria to kick-start the loaning out processes to Nigerian SMEs, money had to be brought in from Ghana and even with that ordeal UT was still able to break even in Nigeria within nine months of its operation.
According to him, UT, which now has two branches with plans for a third branch in Abuja, will provide Nigerian SMEs and those in the informal sector with the kind of funding services that would empower them and bring out their creativity in a way that they can do simple things like look after their children, employ other people and get the multiplier effect going.  “We are happy about what we are doing providing responsive financial assistance to numerous entrepreneurs who want that kind of service in Nigeria. We still have financial constraints, but we believe that investors will align themselves with us and we will make the impact we want to make,” he declared somewhat triumphantly.

On UT’s major achievements in Nigeria, so far, he explains that UT has had to be creative with its approach to the Nigerian market. With emphasis on building a reputation of reliability, UT has, even though its core aim is lending to SMEs, used the preceding three years of its Nigerian operations to try to gain a foothold in the Nigerian financial services landscape, he says. Part of its challenge has been its assets, which would ordinarily have acted as collateral for securing the kind of funding it desires from Nigerian banks are all domiciled in Ghana and not Nigeria.

However, it is relying on its three-year working track record with such Nigerian financial institutions like Zenith Bank to put it in good stead to overcoming this challenge. It is taking confidence from the successes and experience it has had in Ghana where it achieved phenomenal growth and recognition with such awards as Most Respected CEO of the Year, Entrepreneur of the Year and Bank of the Year. Furthermore, UT is introducing a new investment product for depositors with a better interest rate than obtainable from any bank in Nigeria for deposits fixed for 91 to 182 days. 

Its goal is to use whatever gains or profits made to help the informal sector and the SME’s to grow and take advantage of their opportunities. “I can feel the business we can do and expand… If I look at the loan book sitting in Ghana and what we have so far in Nigeria, then we haven’t started yet. We all know that when business starts flowing in Nigeria it should be ten times what we have in Ghana and in Ghana we are big,” he said.

On the Nigerian Banking Sector and CBN …
He thinks the recent shake up in the Nigerian banking sector is only the beginning of a process to bring sanity to a sector that has been estranged from those it is meant to serve. “In a country where 80 to 90 per cent of the population work in the informal sector, our banks need to work more for those 80 to 90 per cent informal sector workers rather than how they work presently for the remaining 10 to 20 per cent formal sector workers and corporate institutions.

“If you want to really see the disconnection then look at a typical banker with an MBA from top schools like Harvard or wherever, speaks nice English, wears nice suits and sits in a big air-conditioned building. Then you have someone from the informal sector who probably hasn’t gone to school, doesn’t even own a suit and he has a business idea. This poor fellow is supposed to walk into this Harvard MBA banker’s office to collect money. It will be very intimidating,” Amoabeng says.

Because the bankers feel they are coming from a position of power they are always trying to tell the informal sector businessman what he should or should not do and what he needs. According to him, this is where non-banking financial institutions like UT, which are more flexible in understanding the clients, the nature of their business and in identifying with them come in and put in place the necessary structures to do this business. Banks can only scratch the surface, he says.

When Amoabeng compares the Nigerian regulatory regime with his experience in his native Ghana, he doubts that the CBN will be able to achieve its 2013 plan to bring down the rate of non-performing loans to five percent. “In Ghana it used to be at about 18 per cent and it came down to about 15 per cent for the industry. At UT even though we handled the informal sector, which is more risky, we were at just about 10 per cent, which is below the industry average,” he says. With Nigeria’s non-performing loans currently hovering around 30 per cent, he thinks the sector would have to do well if it is able to achieve a reduction of non-performing loans to around 10 per cent.
UT is staying away from the mistakes of financial service companies of the past that collapsed mainly because they gave out loans improperly to family, friends and politicians in power without adhering to instituted structures and processes.  “You must be disciplined enough to tell your family member or an influential person that this and this is how we do things and you need this and this before you can get what you want,” he said.

Future projections in Nigeria…
In the light of the fact that UT’s progress in Nigeria in its three years of operation has been slow, but steady and without losses, Amoabeng can only take positives away from the experience so far in the large Nigerian financial market. Expectations for the future, he says are fantastic, especially because learning has taken place for UT without much waste.

Tags: Nigeria, Featured, Business, Kofi Amoabeng

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