Amaechi Ogbonna; Chinwendu Obienyi
Mr. Uzoma Dozie is one of Nigeria’s leading bank chief executives redefining service delivery in the financial services industry using technology. His bank’s foot prints in the small and medium enterprises (SMEs) space have created millions entreprenuers across the country and the West African subregion where it has presence. In the last three years for instance, the bank’s ingeneous strategies have created over nine million new account holders through the deployment of technology.
In this interview with Daily Sun, Dozie spoke about the bank’s commitment to grow more indigenous enterprises using its SME footprint.
Impact of technology on the bank’s performance
First of all, technology has done much good to us as an institution. We are paperless and unless we have to write to CBN to sign a document we don’t need papers. Technology plays so many roles in the sense that we don’t have to be in our offices, we can stay at home and work. I don’t have to be physically here for meetings, I can just do it through a tele video call via skype. We are paperless because security of information in Diamond Bank is safer as it gives us security. For the customers, Diamond Bank opened nine million accounts in two years and those were opened by customers themselves on their phones. This is cost-effective as they did not have to spend money to come to the bank to open their accounts and the bank did not even have to get nine million forms. With three million activities in a month, 85 per cent of them are actually done through the phone, one of the biggest benefits of technology is its security. Despite the increase in diesel, inflation, petrol price and devaluation of the currency in 2017, through technology we increased the number of people working in Diamond Bank. For direct sales and better proposition, we had 2000 people employed (contract staff) so we are adding more jobs to the market. If we had not done the financial inclusion on providing services, then we don’t need many full time employees so we are still employing people because there are more jobs to be created. Once you create opportunities in the real economy, there are people you have to show how to do those things. Another thing technology has done is to increase customers’ experience because they can do more.
The Tech-fest is still going to hold this year. We are looking at the month of April 2018. Why it wasn’t held in January is that we wanted more time to get more activities that will be more beneficial to all the partners involved.
Is Diamond Bank selling its branches?
Our footprints have a role to play and we did not say we are selling branches. What we said was that we were going to look at our footprints and we were going to decide the maximum risk for each one whether it is changing it, modifying it or adding more things or in areas where it is not beneficial to customers, subject to CBN approval, we will get rid of it.
Capital plan too had to be made over a three-five-year period and the question we asked ourselves then was whether we had enough capital to put into where the opportunity was or are we going to raise share capital within Nigerians and be at the mercy of the central bank which might wake up one day and request for more capital?
If you look at penetration in Nigeria, it entails working on existing businesses, deploying technology and spending a lot of resources on training people to understand the process. So it is a case of putting your money where your mouth is, and we took a long term view two years ago.
When we went to other West African nations, the reason for going there was for a capital decision and we were the only bank to get a licence from the regulators over there that allowed us to go through the West African Monetary (WAMZ) to open a good location. We looked at it that it was just one country with the head office (Benin Republic) and others being branches. So it was good cost capital utilisation as well. That is why Diamond Bank went there. In that period, there was also consolidation as we had just merged so there was excess capital in the financial sector. People had to deploy the capital because of the returns so you had to find areas where you can get returns from capital and as at that time, we didn’t have deployment strategy. But as the business terrain changed, we have had to come up with innovations that will suit the market and make sure the business is sustainable in the future and that is what we are doing.
The WAMZ environment is different from the Nigerian environment in terms of work. So for us, it took a lot of managing the people and the business over there and we felt we were putting in too much in managing what was happening there. For instance, in Cotonou, you cannot use your credit card to get something so the development level in Togo and Cotonou is different from the development level in Nigeria, as the business was here. So for us, it was important that we streamline and focus on Nigeria. If we put the amount of resources we had put in those countries in Nigeria, we will make enough money.
In the last two years, we have shown ourselves to be very solid and I am not coming from the size of bank’s balance sheet, but we have built a more efficient customer base than any other bank, by raising new businesses and exhibiting our strategy to grow the retail base. We have always said we will be a technology-driven bank so as to reduce cost of deployment, access to financial services and customer experience as well. We have managed to add 10 million more customers in three years and that is because we put the choice of opening an account into the customer’s hand. Our partnering with MTN made it easier to get this volume of customers as it takes 45 seconds just to open an account by just dialing the *710#. There is a big difference with Mobile Money and opening an account. Mobile Money is just like a wallet; you taking money from your wallet and sending something to someone in another area and that is financial exclusion. That is not what we wanted. Rather, we wanted Nigerians to open a full-fledged bank account wherever they may be.
On the business side, we have displaced the traditional financial system and one thing we know is that these people are not poor but the banks are not suitable for them and so they prefer keeping the money to themselves. Secondly, the ajo system is what is prevalent in the market, so what we did was to create a new banking solution that enables the agent to go into markets to open accounts for market men and women. If you go to Iddo, we have a branch there but no one goes there because their work starts from 6am till 6pm. We also found that they were not used to the terminologies of the banking system, so the bank went to them basically. And to show you how successful that was, balances in excess of N5 billion were reported in such locations.
The most important thing here is transformation and what it does for people because we have stories of people who would come and say if we were not for Beta Account, I would not have been able to take my kids to school. That alone gives you the ability to save money because you are generating cash and if you keep spending it, you won’t be able to save. So it is more like planning for the future and in most cases, it moves people out of the poverty bracket.
On the small business side, we thought about lending people money because you can lend people money and they can throw it away because they don’t know how to use money. And so, our Diamond Beta Savings Advantage, which is our small business competition, is about getting people in the state of readiness to borrow money, and also creating a platform for you to access the market because you have many people fantastically producing but nobody knows about them. So Diamond Bank is a platform for identifying good businesses and exposing them using our footprints and customer base like connecting our customers to the market because we have partnerships with institutions that are involved in capacity building like the Lagos Business School that trains entrepreneurs. So our business model is not just providing a place to keep your money and a place to borrow, it is also a place to help one grow his/her business. Most of our business customers will tell you that it is not about the lending, it is about how we can help to support their businesses from either the capacity building perspective or connecting them to market places because in the retail space, people need our help in channelling or facilitating their financial flows.
Raising capital through rights issue
Our need for capital is to invest in assets and enhancing our technology and lending. Like I said earlier, we are alive to the economic strategy of building the economy. The capital requirement for lending to retail is 75 per cent in the business space and as we begin to adopt more of the principles of International Financial Reporting Standard (IFRS) and enterprise risk management, which helps to diversify your business portfolio in all dimensions because once you diversify, cost of risk will actually go down. One thing we have learnt from the past economic downturn is that no matter how big you are as a company, when there is an economic downturn, there is a big impact to big or small businesses. So the days of saying you want to put 90 per cent of your customers’ business in one portfolio are over. We would rather share or collaborate in growth of big businesses. So our capital requirement won’t be as much as before. What we are doing is not capital management activity, which is moving capital from places where it is not generating enough returns to the bank to places we think it will be deployed better. The capital need is still there but the source of capital is more like from those areas that were high capital returns to areas with less capital returns.