Competition is good for us
Annet Nakawunde Mulindwa, the managing director at Finance Trust Bank (FTB) said that their niche gives them advantage to thrive in the market even when new players join.
“We are happy to see more banks join the industry. It means we are more people serving the population; competition is healthy,” she told The Independent.
She said Uganda’s largest population is unbanked and that provides an opportunity for new players to come and bring onboard new people into the banking sector.
“It is health competition; there is no scare,” she said.
She said they will continue to target women as it has been over the years. They will also move in line with changing technology to achieve customer satisfaction, retention. They will also increase the number of agents from 100 to more in the coming years in addition to tapping into new products like bancassurance.
Anthony Kituuka, the executive director at Equity Bank said that Uganda’s market is open for new players and that each player comes in with a new strategy.
“Having new players won’t alter our focus as a bank,” he told The Independent.
“As Equity we continue to implement our customer oriented strategy focusing on convenience, freedom of choice of the products,” he said.
Like Kibuuka said, Anthony said, new players will enhance financial inclusion, improve savings and reduce the overall cost of money.
He added that they are continuing to invest heavily in digital channels, agent banking and agriculture financing to reach out to as many customers as possible.
William Sekabembe, the chief of business and executive director at dfcu bank too said they are not worried.
“Competition is always welcome and we are happy that the industry is growing,” he told The Independent. He added that the industry is going through a lot of transition in terms of technology that is being used to deliver services.
Banks that are going to survive in the future, he said, are those that have embraced change, innovation and technology. “That means you need to keep surprising your customer through innovation and that is the end game,” he said.
As dfcu, he said they have rolled out their enhanced e-banking solution, investment club app, enhanced their core banking system.
They have grown the number of agent bankers to over 1,400 and are looking at enhancing opportunities on other new products.
Going forward, Bank of Uganda said in a report that they are optimistic about good growth in major sectors of agriculture, construction, manufacturing and trade which are cash cows for banks.
It however, said that increases in interest rates could heighten credit default rates and that the IFRS 9 accounting standard, which came into effect in January 2018, could lead to an increase in provisioning for expected losses, which could then pass through to bank profitability and capital.
Banking at a glance
About 6 million Ugandans hold bank accounts out of a total population of 40 million people.
According to Bank of Uganda’s Financial Stability Report for June 2018, profitability of the banking industry improved in the year to June 2018 compared to the previous year.
The report says that Banks’ aggregate net after-tax earnings increased by 82.6% from Shs404.5 billion in the year to June 2017 to Shs738.7 billion in the year to June 2018.
The primary reason for the improved profitability of banks was a large fall in expenses on provisions for bad debt.
Total income increased by USh.46.6 billion in this period, mainly on account of gains of Sh54.1 billion from foreign currency operations as a result of the depreciation of the local currency in the quarter to June 2018.
The report says that the banking system remained resilient, with adequate capital and liquidity buffers. The ratio of core capital to risk-weighted assets as at June 2018 was 21.8 percent, more than double the statutory minimum of 10 percent.
The growth in demand for loans was mainly from households, the manufacturing and agriculture sectors. On the other hand, business services, construction and real estate, and trade and commerce all recorded larger declines in demand for credit over the year, in comparison to the previous year.
In the year to June 2018, banks maintained a sectoral lending pattern similar to that witnessed in the same period in 2017.
The building and construction sector, trade and commerce sector and personal loans continued to account for the largest share of total loans as in the previous year with 20.1 percent, 19.2 percent and 18.9 percent respectively at the end of June 2018.