Contrary to the perception that the increasing adoption of digital solutions by bank customers which has resulted in a slowdown in branch expansion, would lead to job losses, the Chief Executive Officer of Diamond Bank Plc, Mr. Uzoma Dozie in an interview withÂ Chika Amanze-NwachukuÂ andÂ Obinna Chima, explained that digital banking solutions create opportunity to employ more people. Excerpts:
The 50th anniversary celebration of the installation of the first ATM was marked in London this year, now the question is where would the next innovation come from?
There are two types of innovation that we are going to see from the channels perspective of banking. ATM is going to be the new branch. So, unlike in the past where we saw ATMs as just the cash vending machines, as time goes on and in line with the cashless policy, the ATM would be used for value added services. Some of the attributes of ATM is that it is 24 hours unlike the branches and it can be used for self service. So, going forward, we expect the ATMs to be used for paying utility bills, paying cinema tickets, and it can be used for vending solutions. So, there are many things that we expect to happen on the ATM space. But look at mobile banking, ATMs came before mobile banking. But with mobile banking and mobile solutions today, everything that you do on the ATM, you can do with your mobile phone. So, why do you need ATM? What you need are smart phones or even USSD, which is beginning to take the place of some ATM functionalities. So, are we going to be rolling out ATMs aggressively in the future? No, because there are other innovations in the mobile space that are coming up faster. I guess for millions of Nigerians that don’t have a smart phone, there would always be a place for ATMs. But in 10-15 yearsâ€™ time, when the cost of smart phones becomes cheaper, when data is practically free in some services, tell me what you would need an ATM for? So, I am sure that if you look at the growth rate of ATMs, you would see that the role it plays is gradually changing and it would be like providing content for those who don’t have smart phones.
So, how is Diamond Bank optimising its digital channels to drive your retail banking strategy?
Digital banking has allowed us to serve more customers we could have never done if we were using the branch network and at a fraction of the cost. We have 6.9 million customers and 80 per cent of them are doing their transactions using other channels. Then, we have our new generation customers. These are the ones that actually open the Diamond Y’ello or BETA proposition which has over 500,000 customers and of which the accounts were opened using mobile. Those ones are not even willing to come into the branch because they preference other cost effective services. What digital also does for us is that it gives banking more reach and also enables us to create more products and services. The one that comes to mind for us is the Esusu product, where we took a traditional way of group savings, and put it in a mobile platform. Digital gives you more security, more enhancements and more trails. It also enables us to partner other non-bank organisations and creates value proposition for those who do Esusu on our platform or personal savings. So, for us, you have to go beyond banking to compete against those who say fin-techs are eating into our business. And I have always made them to realise that we are also eating into other people’s businesses. So, with our BETA proposition, we have taken over the business of the ajo system in markets. So, I am not interested in stealing market share in existing markets. This is because there are 60 million people that do not have banking services. Those are the ones our digital strategy would bank in a cost effective way. Those are ones that need banking services, but as an organisation, we have developed solutions around them and that is what digital banking does for you. In addition, a lot of our activities have social impact. If you look at what we are doing in the small business space, there are 17 million businesses that are unbanked. But we donâ€™t approach it from a banking perspective. We donâ€™t just give you money. We approach it from the perspective that we are partners. The Enterprise Development Centre, which is the biggest development institution for providing management capability services for small businesses, is our partner and we provide capacity building so that these businesses are sustainable. We also create access to market for these small businesses because if you donâ€™t have access to market to sell your goods, you will not be sustainable. In any developing country in the world, the SME space is the biggest employer of labour as well as the biggest contributor to Gross Domestic Product (GDP). Government cannot continue being the biggest employer of labour because it is not sustainable. If we have 17 million successful businesses providing employment, that would go a long way in solving the socio-economic problems that we have in Nigeria. If a lot of youths in this country are unemployed, then we would be sitting on a time bomb. We are also promoting gender diversity initiatives lately. If we have 180 million Nigerians and about half of that population are women; so, if you donâ€™t provide banking services for everybody, it means you are excluding some person. If you exclude 90 million persons, which is the population of some countries put together, then you are not delivering services. Diversity brings creativity and innovation. You will also look at what we are doing from the sustainability perspective
Recently, your bank was rated among the 1,000 top global banking brands. What are those qualities that earned Diamond Bank that rating?
I guess those things we have been trying to do from a banking perspective earned us that rating. I think if we were doing banking the normal way that every other bank is doing, then, we may not be looked at. I think it is because of the things we have done from innovative perspectives that are supporting us. I keep talking about our mobile app because it is one of the best in the world. You also look at solutions we have developed in bringing people into the banking system. There are over two billion people that are not banked globally and the fact that we have partnered some global institutions to come up with solutions to bring more people into the banking system and drive financial inclusion, we are helping to enhance the ability of people to do banking in convenient and cost effective ways. We would continue to play our role to enable businesses to thrive.
Despite all you said you do for SMEs, reports still show that a lot of operators in this segment lack access to finance. In specific terms, how much has your bank committed to the support of SMEs and how much of the Central Bank of Nigeriaâ€™s N220 billion MSME funds has Diamond Bank disbursed so far?
It is beyond the N220 billion. There is actually much more money for MSMEs. There is the central bank, the Bank of Industry fund as well as other development agencies. So, when you add all that together, you get close to N500 billion available for MSMEs. But I can assure that there are over N1 trillion of personal capital available looking for MSMEs to invest in. There are people that have money and are looking for businesses to fund. We also find that there are people who are looking for businesses to invest in either as loan or as equity. If you do an investigation, you will find out how many angel or hedge funds are being set up in Nigeria. These are people who want to invest in business. So, there is a lot going on. Of that central bankâ€™s N220 billion, we have done about N1 billion. In most donor agencies, when they give you money to provide to small businesses, they also give you money for capacity building, because they go hand-in-hand. For us, it is how we create the enabling environment for businesses. There are so many customers with great ideas, but with no structure and no cash flow plan at all. You need to know when you have grown to the next level where you have to know how to separate yourself from your business. People see moving from a book-keeper to an accountant as an expense, but it is supposed to be an investment to safeguard your business and nurture it into the future. So, that is why I said we are working with a lot of organisations in the area of capacity building to empower our customers. Secondly, we are creating access to market. Access to market means we help you create awareness of the products. For instance, we sponsor a lot of events that involve small businesses and businesses run by women. We also make it easy for these SMEs to come into the financial system. We support these businesses to make sure they are registered. There are many advantages of being registered. If your business is not registered, it excludes you from doing anything with Diamond Bank because if you are not a registered company, how will I pay you? I am not going to pay you cash. Some would tell you that if you register your business, the tax man would look after you, but they donâ€™t tell you about other benefits of operating a registered business. And I think that is our roles in that segment and that is why we have been doing things right. We have about 500,000 customers in that space and we have not started yet. That goes to show you the opportunities in that space.
We have seen some of your peers in the industry raise funds through Eurobond sales. What is Diamond Bank funding strategy to shore up your capital?
For us, what we are doing is that we are allocating our cost to our strategic objectives. Right now, we have adequate capital because we are not building new branches any more, which is one thing that takes a lot of cost. We are also looking at assets that are not in line with our goals again, to see what to do to them. These are assets that may be of benefits to other people. Any of the assets that are not in line with our retail strategy can go. So, regardless of what our capital is, we are making sure that we have adequate capital to absorb shocks in the system and also to grow our business in the areas we want to grow in. One of the advantages of trying to build your business through the retail space is that from a capital perspective, it is cheaper. But just like every other financial institution in the world, capital is a key critical factor in determining how fast you drive your business. For us, our strategy enables us to use capital efficiently because retail banking requires lower capital. We are not growing our branches anymore and what we are rolling out are channels that help customers carry out transactions much more conveniently. We are also looking at some of the areas where we have branches before. If we are convinced that most of those customers there prefer the alternative channels, we may enhance these channels and downsize the branches.
You said you will be selling some of your assets; can you name some of the likely assets to be put up for sale?
I canâ€™t mention them now. But among our assets, anyone that does not align with our retail strategy would go. But it depends on the price as well and as long as it is within regulatory approval.
When you downsize your branches, donâ€™t you think it would lead to job losses?
When you downsize, there wonâ€™t be loss of jobs. We are not going to sack people. Digital banking creates opportunity to employ more people. Do you know how many sales agents that I have now that I didnâ€™t have before because of my retail banking strategy? I have more people that I employ now than before, all because of digital banking.
I have 3,000 full time employees and I have 10,000 outsourced staff and that is because we are giving people opportunity to create business for themselves. In my BETA banking, I have 2,000 agents that I would never have had if not for digital solutions. I have Diamond Yâ€™ello agents I would never have had if I was just doing my normal traditional banking. I am now creating more complimentary businesses for people through our agency banking network. So, the more solutions you bring to the market, especially through digital platforms, the more opportunities you create for new businesses to grow. I will give you an example. People like Konga, they have created a new industry, but they have also created logistics business opportunities. I have small businesses that have okada (motorcycle) services that deliver goods from point to point. So, digital enables commerce while commerce enables more businesses. Today you see restaurants doing home delivery. The person that created the ipad, has also created an industry where ipad cover and many applications can also thrive. I always tell people that the banking industry is creating more employment than people think; it is just that we have not told our story well. If you look at those we are serving as a bank, 20 years ago, we were just serving commercial and corporates. But to go retail, you need a retail workforce. Nigeria is a game of numbers. So, if you think you are going to do it the same way you were doing it before, it is not going to work. You are not going to employ graduates to do that job; you need people that can sell your services. So, the skills required are completely different. And it is easy to deploy training on selling and customer experience skills and you can employ more people. So, we are definitely adding more, by just changing our business model.
Why are banks shying away from investing in agriculture?
I love agriculture. If you look at the richest people in America, apart from information technology, they are actually farmers. But in Nigeria, the risk profile is very high. It is not about planting, but about planting, harvesting, moving the goods from the farm to the market and processing. If you look at the Nigerian environment, the basic infrastructure are lacking. Despite all these, if you look at banksâ€™ lending to agriculture five years ago and presently, you will find out that it probably has grown sharply. Beyond that, the central bank and the federal government have tried in creating an enabling environment to encourage confidence along the value chain. As a farmer, you have to be incentivised to deploy your resources into a particular product.
What is your forecast for the economy for the second half of the year?
If you look at it from a macro-economic perspective, the last GDP figures from the National Bureau of Statistics showed that the rate of decline has reduced. We are beginning to see that the policies put in place to diversify the economy appear to be working. We have also seen stability in crude oil production and we are even producing more than we were doing two years ago such that OPEC is even considering to cap our production. So, with that level of production, our reserves are expected to rise. We have also seen a decline in demand for certain goods as people are beginning to adjust to local production and cutting their coat according to their cloth and not their size. So, if that continues for the next two quarters, we expect to see more confidence in the economy. We just have to continue with the same level of discipline and consistency. We also must continue to diversify the economy from oil to agriculture. In terms of foreign exchange, we have seen improvement in supply, which is very key.