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Nigeria 2016 | FINANCE | VIP INTERVIEW

TBY talks to Uzoma Dozie, CEO of Diamond Bank, on how to expand inclusivity in the banking sector.

Diamond Bank is among the region's newest and most ambitious players and has a unique take on the Nigerian banking arena; can you explain how it fits into the larger banking sector?

Diamond Bank started by building a platform that would enable people to transfer from one place to another in real time. The middle market, which is mostly trade across Nigeria, was physically carrying cash from one place to another to exchange. This helped drive our business and acquire new customers in a short space of time. When you are facilitating payments it also helps you to understand the customer's business, and when you understand their business you can lend. We were one of the first banks to start lending to a segment of the economy that was not structured that consisted of one man businesses and entrepreneurs. Technology has allowed us to reach SMEs and the unbanked, but the application is more important. We see ourselves as a retail organization with a banking license. Mobile is a big bet for us; for example, customers that use mobile banking do seven times more transactions.

Last year Caryle Group took a stake in Diamond, its first in any Nigerian business and one of the largest private equity transactions in Africa last year; can you talk about what the capital will help the bank to do and what the significance of that level investment from an internationally recognized private equity is in the Nigerian banking space?

There is strength in the Carlyle brand, which gives us global respect. Carlyle is one of the biggest private equity firms that has invested in Africa, after doing their due diligence, and so that speaks volumes. That allows us to leverage their global reach. They made an equity investment, and their goals are to continue to optimize our technology and to increase our footprint. In terms of branches, we have covered most of Nigeria, but we will invest in modernization, ATMs, and connectivity. Once the majority of our customers no longer feel that they need to come to the bank to perform transactions, they are going to be used for advisory services. It is particularly through SME customers that we are trying grow, access to advisory services and access to markets will ensure that they are sustainable and to help them build that capacity from a governance perspective.

The first half results from Diamond are strong, the bank has managed to grow its revenues overall, but profit has fallen slightly; what strategic decisions and what head winds in the larger economy have contributed to these results in the first half?

Quite a few regulatory policies came into play: in the first half of the year there were three. The cash ratio played a large role in the harmonization of private and public sector funds, which hurt us due to our portfolio. And then of course, the new foreign exchange laws have not helped. We command quite a lot in terms of trade and business that goes on, and there has been a vast drop in trade as a result of the availability of funds. And then in light of the economic situation, and of course the drop in oil prices as well. What's more the individual States lack the resources to investment, whereby contractors have not been paid, having to provide adequate provisions on that front, too. The upside is that we have a diverse customer base and customer business and do not have extensive public sector involvement. Meanwhile, we have also observed that our mobile business channel will help us withstand any shocks to the system.

You have invested in mobile technology and are recognized as a bank in West Africa with a unique take on that concept in Banking. What is the way forward?

We cater to mainstream customers numbering 4.5 million, half a million of which have signed up for mobile banking. We intend to reach the 1 million mark by the end of this year, and double that by the end of 2016. The cost of the internet is declining, as is that of smart phones, and we are even lending to facilitate aquisition. An interesting example of our strategy is Better Proposition, a product mainly aimed at women. When you travel around Lagos or indeed elsewhere in Nigeria you come accross markets where women hold the authoritative role. You find in many cases that while they may be close to bricks-and-mortar branches, they never enter a bank. In fact, they lack a bank account, relying instead on an informal system fraught with high interest rates and uncertainty. What we did was do displace this with inclusion in the formal financial system by taking the bank to them. We built a proposition wherby we hired and trained sales agents, and built a cloud-based banking application to be linked to our main server and then signed customers up with interswitch to then be followed up with a SIM card based bank card. Basically, the agent identifies the potential customer at the market and has a banking application on his mobile phone. He takes a photograph of the applicant, keys in their name and mobile number, and the woman receives a text message on her mobile phone saying that the account has been open and revealing the account number. Once she hands over 10,000 naira to deposit in the bank, the agent keys it in the system, she receives a text informing her of the balance, and vice versa, whereby if she makes a subsequent withdrawal, that also happens. We launched it 24 months ago and today have 200,000 customers, according to 100 branch locations, with over 3 billion naira in total balances and an engagement rate of 97%, where the average balance is comparable to mainstream savings account holders, and bear in mind that we are talking about mobile banking. So what we are trying to do with our banking and application perspective is to go beyond banking and make our mobile banking application in particular, more of a lifestyle app.

What are your expectations for the year ahead?

It is going to be a tough year for many reasons, the first being that there are a few policies that have been put in place that will come into play and really start biting. Essentially, as an economy we need to suffer before we see that light at the end of the tunnel. We have entrepreneurs, and wealth and human capital to really leverage Nigeria's resources. But next year is going to be challenging and tough, where Diamond Bank will need to weather conditions beyond its control. We have, however, invested substantially in technology and can still provide services at a flat cost. We also have sufficient capital, which means that we can absorb unexpected losses and also have adequate liquidity. In challenging times there are also opportunities and you have to see the opportunities and take them, and we are positioned to take advantage of opportunities in this depressed economy and also when it picks up as well.