In this interview with The Worldfolio, Mr. Alhassan Andani, Managing Director of Stanbic Bank Ghana, discusses Africa’s momentum, the performance of the banking industry in Ghana and how Stanbic Bank has positioned itself as one of the leading banks in the market.
Like the rest of the world, Africa remains uncertain about what is to come after global geopolitical shifts like Trump’s election in the US or the Brexit win in the UK. Investors are now turning their eyes to other regions and Africa is becoming a key part of their global portfolio. How can Africa take advantage of this momentum and how will the finance sector take advantage?
I think Africa can take advantage, and I think what comes as strongly is that African countries can now differentiate themselves. In the past, Africa was being painted with one broad brush. And that broad brush was poverty, which could be famine in Ethiopia, far away from Ghana, but they would still brush all of us. It could be a disease, like Ebola in Liberia and they would brush all of us as a diseased continent even if it was only one country. It could be conflict, like wars in Somalia and they would put the same brush across all of Africa.
Africa has more than 50 states, with very different characteristics. What has happened around the world now is actually helping Africa. We were taught the US was the center of the world but now Trump is saying “US first”, so there’s a distinction, like Macron in France and Brexit in UK.
So now the trend is to see the bright spots and that will help Africa. That is something undeniable and you will lose out if you continue to use that broad brush, because that broad brush doesn’t reflect anything. It actually reflects very tiny spots. It’s like digging for gold. So, there are bright spots with huge opportunities in Africa.
Events of the last few years have now brought the world again to understanding that there is no one place called Africa, but a continent called Africa; made up of 54 countries at different stages of development and with different stages of opportunities and now, we can begin to actually talk. Even African countries know and say that we can leverage on each other and create more viable zones of economic activity. This is how I see the world.
Over the last decade Ghana has been one of the fastest growing economies in Africa, however over the past two years it has suffered a significant slowdown. High inflation, a weakening currency and a large public deficit led to an economic crisis, forcing Ghana to seek a $920 million bailout from the IMF. 2017 marks a new journey for Ghana under Akufo Addo’s administration who has pledged to put Ghana back on track. How would you assess the performance of the Ghanaian economy and what is your outlook for this year?
My general outlook on the economic development of any country is to say people must learn to govern themselves and then economic development can follow. If you do not learn to govern yourself, things may happen but they will be reversed. What has happened in Ghana is that we, as a country, have learnt to govern ourselves. We have embedded a democratic system and we have embedded institutions that should work. Overall, we are able to change the management of the country from one government to the other, leadership from one institution to another and therefore there is a continuous trend, where every institution, every government and every leader is trying to outdo each other which is great for the country.
If you see the economic opportunities, the government that just left made some progress with internal issues like roads and infrastructure, but they had issues – I issues which had been highlighted very strongly by the incoming government, like fiscal deficit or corruption. Would you expect them to come and repeat those errors? No. Why? Because of governance. So, I think as we go forward, we should see more robust management of the fiscal deficit, better management of the debt, and of course better engagement with the international community.
We brought the IMF in because of Ghana’s good governance. We brought the IMF in because we realized that we had brought ourselves to a point where we needed an independent arbiter to help us recalibrate. A country without governance wouldn’t do that; it would just continue on its path of wrongdoing and slip down the hill, but we didn’t. So again, because of good governance, the incoming government sees wisdom and they are continuing with the IMF programme. If you look at the whole framework, it is a framework that is supportive of rapid economic development. That is what gives me confidence that our economy will continue to grow.
There are currently more than 30 fully licensed and operational commercial banks in Ghana that are serving just a little above seven million people. As the president of Ghana Association of Bankers, how would you assess the performance of the banking sector in Ghana? Is the market in need of consolidation?
Yes, there is a need for consolidation but we have to step back. First of all, the proliferation of banks just speaks to the state of development of the financial services industry in Ghana, which is still very fragmented. There are still niches of clients in need of financial inclusion. Therefore, all of the microfinance institutions, rural banks and commercial banks are a consequence of our fragmented population. The level of financial services is still at a very rudimentary state, so each of these small enterprises is able to cover their niche, serve them well and still make a living.
But as we get to convergence, i.e. as long as everyone across the country understands financial services, such as what liquidity is, what having a return is, how to create sustainable wealth, then we will begin to converge to larger and bigger institutions that are able to provide high-end products. But, at the moment it’s about inclusion. Every microfinance, rural bank and commercial bank is able to build a client base, so once people understand what true finance is we will get a level of convergence. Bigger institutions will be needed to provide real added value, real protection, and real wealth creation. At that point, we will begin to see these institutions coming together.
One way is to raise the bar, in terms of barriers to entry. If you raise the minimum capital requirement that the Bank of Ghana is talking about then some of the smaller banks that have niche customers will look at getting together, and we will start to see those organizations coming together before they all get locked into a few larger institutions. But at the moment, let the party go on.
We are today 27 million Ghanaians, out of which fewer than six million are in the formal banking sector. That means that there is a further pool of six or seven million bankable clients out there. Let’s bring all of them on and as they mature in their use of financial services, then we will see the convergence. Right now, the dispersal of financial services is more driven by client attitudes and client preferences rather than by true delivery. Once they all get in and have a feel of what modern finance is, it will be the age for higher-level products.
You have mentioned corruption, good practices, and good governance. Since the global financial crisis, the financial services sector still does not enjoy a good image. What do you think Ghana’s financial sector and your bank in particular have learned from those events and how are you ensuring that you develop a sound and transparent sector in order to gain trust?
The good thing about the banking sector in Ghana is that we didn’t have the tertiary level of finance that perpetrated the financial crisis. We were still at the real sector, the direct intermediation with personal clients, SMEs, large domestic corporations or international clients at their points of need; deposit management, cash management, direct loans. There wasn’t a tertiary level where we traded interest rates, tenors or currencies.
What precipitated the crisis was more risk management tools that went out of control. They sell interest rate swaps, they get transferred and the entire contingent goes up, nobody is keeping a database, you sell credit default swaps, somebody sells it on. You are making money, making fees all across the chain. It is not real. African banks hadn’t got to that level yet; we were still at the real end. Deposits, personal loans, that’s where we were, so we didn’t get the full impact of the financial crisis. In fact, it only impacted us because the foreign banks we dealt with lost money.
Now that we have learnt the lessons, the financial sector agreed to be moderated.
Despite the challenges faced by the Ghanaian economy, the big players in the banking system have managed to remain profitable. What have been Stanbic Bank’s growth strategies in a market like Ghana? What services have you placed greatest focus on?
The growth strategy has been one of inclusion and at the same time segmentation. We try to get into the broad spectrum of personal, SME and corporate banking markets, international corporate and government. We target all of this with specialized products, and with people with specialized skills.
We have a holistic bank. We are a bank that can talk at the levels of international finance, bringing our group and international resources to high level products for governments or multinationals. We have the local knowledge and expertise to deal with the local corporates, to meet their needs, whether it is cash management, loans and advances. We also have the skills to be able to deal with the personal markets where people are just looking at basic salary products, basic mortgages. Bringing this all together, we have a decent universal banking model.
One of the major challenges in Ghana is interest rates and SME access to credit. How is Stanbic Bank supporting SME development in Ghana and enabling adequate access to finance?
It´s a great question and it is really at the heart of the economic challenge for Ghana. A large amount of the corporate structure is in the SME sector. The difficulty is that the SME sector is largely informal. The banking sector is very formal. How do we bridge that gap? We have the funds which we need to lend out to them but we are regulated institutions, we have formal structures, so we want to see that they have some basic rules, a basic business plan, a basic financial management model, a basic way of working that we can understand and report.
What we have ordered is financial literacy. We see them as a “diamond in the rough”. We wrap some financial literacy issues around them and are then able to migrate them from the informal gradually to the formal sector and get a perfect fit. The biggest challenge between banks and SMEs is the formality of banks, and the informality of SMEs and somehow, we need to bridge this gap.
How are you working towards financial inclusion and integrating people into the banking system, especially through digitalization?
I think digitalization has provided a platform for financial inclusion. Before digitalization, you needed physical premises literally across every village in the country. And banks are banks; we need to be able to put infrastructure in. But now with digital portals you can actually reach out to a group of farmers on their smart devices, provide them with prices of foreign exchange, and provide them literally with everything they need on their hand-held devices.
Digitalization has literally brought them on board, along with the telcos as well. Telcos are also using their platforms to provide basic financial services, and I know the users will all wash back into the financial services sector. Technology has really helped banks and financial services to drive the financial inclusion agenda without having to build infrastructure. The cost to serve has dropped significantly as a result of technology. Penetration has increased significantly as a result of technology and access has also been improved as a result of technology.
Remittances can be a serious engine for economic growth as evidenced by countries such as Turkey or the Philippines. Taking into account that the UK has one of the largest Ghanaian diaspora population, what can Stanbic Bank do to harness their power?
We have signed up with a number of remittance firms to ensure we can be a conduit by which people can easily access Ghana through remittances. We have a big program for diaspora Ghanaians; we run road shows in London, Germany and the US where they can come and have a trusted partner through which they can buy a property in Ghana. Before that, they used to remit the funds to family members, and the family members were diverted to do other things. But with our diaspora product they contact us and we put them directly in contact with a number of real estate companies who are in direct partnership with us. We don’t have issues of divergence of funds.
Ghana is one of the UK’s longest-standing and strongest partners in Africa. What makes Stanbic Bank a reliable partner of choice for UK companies seeking to invest in Ghana?
Standard Bank Group has been in Africa for more than 154 years. We are literally older than the oldest independent country in Africa, and we have been in banking since then. We say Africa is our home and we drive its growth. We have international reach and we are able to facilitate international clients who want to come to Africa. We are able to share with them on-the-ground stories of the places they want to come to.
In terms of human development, training and developing the necessary skills, what efforts is Stanbic Ghana making in order to provide people with the right tools?
Stanbic Bank Ghana is part of Standard Bank Group, and enjoys the use of the global leadership training center in Johannesburg, and it’s probably the best corporate learning institution I have ever seen and I’ve worked for a couple of international banks.
All of our programs that we run, whether it is personal development or practical knowledge is run by international faculty firms. Everything we do starts with the people.
In five words, how would you describe the essence of this bank?
We are passionate about Africa.
Why would you encourage international investors to come to Ghana?
We have proven again and again that if the government doesn’t hold the promise of economic development, we will change it. Politicians know that, so they will give their very best effort to develop the country. People are very educated, they are engaged, and they want to see progress. So, they are now asking very tough questions about leadership. In the past in Ghana people just voted along ethnic lines; now people don’t do that. They want jobs. They want to see their companies grow.