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Mobile initiative brings 1.2m unbanked Colombians into financial system

Interview - August 31, 2015

Davivienda started out as a savings and housing bank in Colombia, and over time has expanded to become a universal bank present in seven countries and among the top 30 in Latin America. President Efraín Enrique Forero Fonseca discusses how the bank’s initiaitves “can contribute to better financial inclusion as a basis for providing a better quality of life for the entire community.”


How do you assess the Colombian economy for 2015 and for the next few years?

I think Colombia is one of the emerging economies that in the last 15 years has been leading a process of improvement in different aspects, such as job creation, poverty reduction, increasing its middle class, strengthening of the public institutions and the private sector, and others. These last few years, the economic and macroeconomic growth has been very solid, and actually really remarkable compared to the rest of the region.

Looking forward, I think we can continue on this direction if we have a clear perspective of what can happen in five or 10 years, I think we can actually achieve very positive results. Obviously, like any other country, international factors will have their effect, especially in the drop of oil prices and the rest of the commodities, and the strengthening of economies like the United States and a reduction in the growth of China. This will certainly have an effect on Colombia, which is an exporter of oil and coal, affecting the profits of both the private and the public sector, and worsening the fiscal deficit problems. Still I am optimistic, and I think we will be able to continue with the task we started a long time ago, and that will allow us to continue being one of the preferred countries in the region for foreign investment.

Another topic on the Colombian agenda is the invitation to be a member of the OECD, the “Club of Best Practices”. Minister Cárdenas told us: “We are a very open country, we comply with the standards of this organization”. What can Colombia learn and what can it contribute to the rest of the OECD members?

We will manage to have much better practices of governance in the country. That will put us back in a better position among the global players in order to take advantage of the possibility of closing agreements on trade, or gaining support from these institutions. Just by having these practices incorporated into different areas we will be a better country, so from that point of view it is very important that we be among the OECD member countries.

The year 2015 could be a milestone if the peace treaty is signed, after five decades of armed conflict. Jorge Londoño Saldarriaga told us that “the private sector has to be a bastion of peace” and help build the post-conflict process. What do you think is the responsibility of the private sector in the achievement of peace, and beyond?

I think in that moment, as in any other, the main role of the private sector will be to take risks in order to create jobs, projects, and wealth, and in this way to improve its ability to create wellbeing and benefits for the general population.

This is a key moment for the development of the most ambitious infrastructure projects in Colombia’s history, the 4G program. We were present at the 50th anniversary of the Asobancaria Convention, where you announced the allocation of 8 billion pesos in these projects. How will this affect the economy and the companies involved?

This program has finally managed to consolidate the work of more than 10 years, started by President Uribe with the selection of all these projects. This will undoubtedly have an effect on the economy. It will generate direct and indirect growth in many sectors, especially in job creation. We must consider that this project and all its stages will take at least 10 years until we can finally see all that infrastructure completed, starting by the end of this year.

The country needs this, although these are not the only projects that are needed. We also need huge investment in ports, airports, communications, technology and mobility.

In all these activities we can see that a bank like Davivienda has an important role, and we are determined to participate very selectively and within our own parameters of credit risk and environmental analysis in each case. We expect to securitize many of those credits, and in that way to have resources for almost 8 billion pesos, which could be destined to the country’s infrastructure within a portfolio of some 22 billion pesos.

What challenges do you identify for the financial aspects of these infrastructure projects? What’s your opinion on the Public Private Association Law and the Investment Law?

The legal framework of this financing process is very acceptable and very convenient, and we already have the projects designed. Colombia needs to compete with the rest of the countries that are carrying out projects such as these in the rest of the world, among them developed neighboring countries like the United States. The investment, the best contractors, and the best banks, they will all come as long as we are able to compete with them. It’s impossible for the Colombian financial sector to do that by itself, even relying on institutional investors such as the pension funds. That is why we must be able to count on both local and international players.

In Mexico we had the chance of interviewing Agustín Carstens, Governor of the Bank of Mexico, and we talked about the nature of the Mexican banking sector, which is dominated by foreign banks like BBVA, Santander and HSBC, but here in Colombia the main banks are 100% owned by Colombian capital. Is this an advantage or a disadvantage?

I think it is a special situation, which doesn’t rule out the need for international financial backers, as happens in Mexico or in any other country. That is essential for the scale of these infrastructure programs, for which we need diverse and the best financial players, obviously with the very important role of the local banking system.

In 2007, Davivienda and Granbanco-Bancafé merged, allowing Davivienda to be present in Panama and Miami. In 2012 the bank acquired HSBC Costa Rica, HSBC Honduras and HSBC El Salvador, strengthening its presence in the region. We know that you are now interested in the assets that the Citigroup is selling in Central America, and you are looking at South America as well. What is the importance of this internationalization strategy for the future of Davivienda?

These actions are part of a process that the bank has been putting into practice in the last 18 years. We were specialized in the savings business and mortgages, and with time we progressively became a universal bank and the third player in the Colombian banking system. In this direction it is very important to diversify our operations, so before 2007 all of our companies were only present in Colombia, but after acquiring Bancafé we started to operate in Panama and Miami, and later in Honduras, El Salvador and Costa Rica. Right now we have 22% of our operating assets in those countries.

We’ve had an extremely interesting experience of market expansion, risk diversification, and optimization of our results. Our profits have evolved positively, and we believe we can continue to improve these results and maintain the benefits of diversification. For instance, it’s interesting to notice how these countries have greatly benefited from the drop of the oil prices and the increase of remittances from the United States, which contributed to their economic recovery.

We will continue to analyze every opportunity with caution. We will have to consider the increase of the asset demands, both from our regulations and from our investors, for the future development of the company in the long term, which is our main concern both economically and regarding social responsibility.

Through your corporate banking, you have invested in important infrastructure projects and civil works, and you are planning to continue to be very active in the housing loans sector. You have also increased your agroindustry and renewable energy portfolios. How are you planning to continue this growth in the next few years, besides the 4G projects?

We started as a savings and housing bank, then we became a universal bank, and now we are present in seven different countries and among the top 30 in Latin America. Our intention is continue to work on all the different segments in the countries where we are present, whether it’s retail, mortgage, or commercial.

In 2011 you said that you accepted “the challenge posed by President Santos when he summoned the financial system in sparing no effort to search for the ways to increase access to banking services, that is why we launch DaviPlata with great results”, which was a great milestone in the Colombian banking sector and one of the largest investments of the organization. How has this program helped in making the banking system more accessible for the general public?

Until now, we have managed to turn it into a platform for electronic money used by more than 2.6 million Colombians, only three years after it was launched. The most important part of it is that 1.2 million of those customers are people from families who never had any contact with the financial system before. Right now we’re collaborating with the government in paying almost 2 million subsidies every two months, low-value payrolls for over 3,200 companies, and many other transactions for general customers. There are currently 5 million transactions being done through DaviPlata. It is important to notice that it has been a bank, in association with telecommunications and technology operators, which has been able to provide this ability to be present in every single corner of the country with operations that have no cost whatsoever for the owners of cell phones.

Davivienda is leading the way with its line of “green” credit. Additionally, it was invited to be a member of the Dow Jones Sustainability Index – Emerging Markets in 2014. What was the importance of this for the company?

Behind all this is the conviction that we must work very hard for this company to become sustainable in the long term, and somehow regardless of its managers and shareholders. We have a balanced commitment towards the community and we act according to our purpose of enhancing life with integrity. From that point of view, we understand that our goal is to make this company economically sustainable, viable, governed according to the best international practices – not only to become a more competitive and innovative company, but also to become aware of the kind of commitment that we owe to society. That is why we like to be a part of all the social housing programs since the beginning of the company, and now with 4G or DaviPlata we can contribute to better financial inclusion as a basis for providing a better quality of life for the entire community. Obviously we are interested in including in the system that 25% of Colombians who don’t really have access to the financial system at all.

About the environment, not only do we want to take care of the resources that our organization and its employees might use, but also to make an impact on all our customers, in order to increase the amount of people who are aware of these regulations.

Recently the Davivienda customers have awarded the company as the provider of the Best Quality of Service in the entire Colombian financial sector, although a few days ago in Concepción you expressed that the Colombian banks are a bit arrogant and they need to know their customers better. How does Davivienda take care of its customers?

We as a bank still have a lot to learn about the true needs of our customers. Very often, especially when it comes to communities we don’t know, we think we actually know things that they don’t and that we are there to bring them the benefits. But the experience of DaviPlata has taught us that it is better to open our minds to understand what they really need, and that way to provide solutions that can be convenient and acceptable, not to brag and expect them to adapt. So, to reach there, we need to associate with those organizations, companies, and people, in which the communities already put their trust.

In 2012, you were expecting the Miami branch to reach $300 million in three years. What is your assessment of your operations in Miami and how important is that branch for the bank?

We have been very lucky in entering the Miami market. We have made important investments in our facilities in order to provide better assistance for our local customers, especially our Colombian and Central American customers. The evolution of that branch has been very positive, in fact we have already exceeded the figure you just mentioned, and we are still growing in a way that reflects the clear support we have from our Colombian customers, who find there an extra reason to work with us here in the country.

We know that you have been working for a while on an issuance of shares, and on listing your ADR on the New York Stock Exchange, although you announced that it will not happen this year. When do you think you will achieve that?

We believe that a company such as this needs to prepare in order to enter the international markets, both in assets as in debt, and we’ve always wanted to be listed on the NYSE. We will continue to work; we don’t have a specific date for that in the short term, and the current situation is leading us to believe that this year and the next are not yet the right time to get to that stage.

As you know, we will be publishing in TheWorldfolio magazine at the G20 and the B20 summits. One of the topics of those meetings will be the global expansion of SMEs, and the promotion of entrepreneurial spirit as a means for economic growth. What are the opportunities for Colombia in this area, and how is Davivienda contributing to that?

The opportunities for a country like Colombia are enormous when it comes to the potential of SMEs for development and job creation. Especially for Davivienda, it is one of our challenges to be able to become a much more relevant bank among SMEs. We have the goal of going from 7% to 12% of participation in that sector in the next six years. We’ve been working very hard with very good results, it is one of our main goals in the medium term.

You have received many awards, among them the Best Businessman of the Year in Colombia. What do you think are the features of a good leader?

There are many different kinds of leaders, and I could mention two important attributes that every leader must have: the ability to dream, and the ability to persevere.