In recent years some of the best performing banks in Africa have been indigenous banks that serve the small and medium enterprise community. This has been largely unanticipated by the investing community. For many large commercial banks, banking small businesses has always proved challenging, and in most surveys of small business finance. The reasons for this are clear. Not only do small businesses fail to fit into conventional categories – personal or retail, but they lack the ingredients that conventional banks look for in lending: audited financials, physical assets as collateral, leaders with respectable paper qualifications, and a separation of personal and business accounts.
Some of the best performing banks in recent years have focused on the SME market, often for no other reason than the scale of their balances sheets initially prevented them from accessing the larger corporates, and inefficient payment systems locked them out of the lucrative white collar market, as workers banked where their employer banked.
From adversity springs opportunity
For most African countries, large corporations account for a far smaller proportion of economic activity than in other countries. In Tanzania, a country of 40 million people, there are only around 1100 firms that employ more than 100 people. But there are almost 800,000 small and micro-businesses. The sweet spot, is not such micro-businesses, but businesses with turnovers between $5000 and $100,000 per 소액결제현금화 month and with between 5 and 20 employees.
Three banks in particular illustrate this trend – Exim Bank in Tanzania, FMB in Malawi and Finance Bank in Zambia.
What do these banks share?
There seem to be some similarities between these banks and their business models. All of them have grown and continue to grow by servicing the SME market, although over time they will inevitably serve larger and larger firms, the core of their customer base is small businesses. Surprisingly, given the importance normally attached to segmentation, this seems to have played a relatively limited role in their development and strategy. Rather than separate lounges and access to a “personal relationship manager”, good old fashioned access to the branch manager appears to be the model. All of these banks have some affinity for the Asian business community, both at a shareholder and a customer level. Of equal importance is the fact that these banks seem to “face east” and rely, to a larger degree than their competitors, on lower cost expatriates and technology and solutions vendors from India, and are able to meet the trading needs of businesses with links to the Middle East and Sub Continent. But these banks are very much indigenous institutions with many of the founders and managers being nationals even if of foreign decent.
This deep integration and knowledge of the market and local business community seems to play to their advantage. At the same time all of these banks have graduated from being community banks to serving the population as a whole. Their websites boast a wide range of products and services that meet the needs of small businesses and recognising the continued importance of cash handling, they focus on creating lots of branches close to the businesses they serve. But these services need to be sold and delivered effectively, and nothing is more important to a small business than a rapid decision. Almost all the winning local banks pride themselves on their service and their ability to make decisions rapidly at a local credit committee without reference to a distant credit committee in Johannesburg or Dubai.