TBY talks to Simangolwa Shakalima, Managing Director of Investrust Bank Plc., on being the only indigenous bank in the country, expansion, and ambitions for the future.
As the only indigenous bank in the country, Investrust has a rich history in Zambia. How has the bank developed since its establishment?
The bank has now reached a level of maturity. Investrust Bank was established 20 years ago, initially as a merchant bank and then as a universal bank, under private ownership. Around 2007 Investrust Bank was listed on the Lusaka Stock Exchange and it became a public company. 2015 was the peak of our expansion in terms of the bank's footprint. Prior to that, we spent more than five years investing in the network. We are a medium-sized bank with 27 branches, three agencies, and 60 ATMs across Zambia, making our presence here highly competitive. Another key factor for the bank is that there has been significant investment in various platforms, to a point where our capability is similar to foreign-owned banks. We have invested particularly in alternative channels, such as mobile and internet banking.
From 2010 onward the bank's strategy has been one of consolidation. How do you seek to expand in the coming year?
Now that we have built up our network, it is a question of sweating these assets to get a return. During the years of investment, obviously the returns are quite challenged, and now we hope to reap the benefits through profits. The other consideration is that bricks-and-mortar are not the only form of expansion. Investrust Bank is one of few banks that offer agency banking and this will be quite defining moving forward, as it speaks to the financial inclusion agenda. We have some of the large retailers as our agents in communities where the bank is not directly present. They can open accounts for customers through our mobile platform and our customers can make withdrawals and deposits. These are mostly supermarkets, because we are aware that that is where footfall is, as well as other vendors and cooperatives. We try to select agents with high levels of liquidity so there are no issues in terms of offering the services.
How has the middle market grown in the last two years?
Prior to 2016, the Zambian economy was growing close to 7% annually. There was a bit of a slowdown in 2015-2016, but the middle market has been growing in spite of this. This is especially true of the productive sectors. The other factor impacting the middle market is the emergence of SMEs that we have seen over the last 10 years. Those businesses contribute to a large extent the rise in activity we have witnessed, not just adding to economic activity, but also to employment. A third notable factor is a growth in entrepreneurship; we now see people in full employment who are also doing other activities or investments at the same time.
In what ways does Investrust, and Zambia's banking community as a whole, engage with the SME sector?
If there is any area of opportunity and growth in Zambia, it is still the SME sector. In the private sector, as well as the public sector, this is widely recognized. Fortunately for banks, the fact that the central bank increased our minimum capital requirement in 2012 meant that financial institutions had to find better ways to make returns. Historically, banks sought to avoid the SME sector because of the associated risks; however, these capital requirements have encouraged us to look twice at SMEs and how we can offer further support. To a large extent this has started to address the issue of access to finance. The second important consideration is that the largest contribution to GDP in most African countries comes from SMEs. For us, in the financial services sector there is always the desire to go where the flows are; therefore, we are opening up more and more to SME markets. The third important thing to bear in mind is that the Zambian economy is a trading economy. Most of these traders have sprung up in the SME sector. Finally, it is important to note that multilateral institutions now better support these economies. There is funding from Europe that is specific to SMEs, through lines of credit. As Investrust bank, we have accessed these funds for on-lending to SMEs in specific sectors.
Which of Investrust Bank's solutions for SMEs make you a strong competitor in this sector?
To date, we have relied on the technical assistance that comes from multilateral institutions because the biggest issue is risk management: corporate governance, how an SME is structured, and whether it has a bankable proposal. We are in a unique position because we do not just look at providing financing to SMEs; we provide capacity building. Furthermore, since we are local, we can apply our local knowledge to this business. There is also the goodwill created by the government and its peripheral institutions. It says it wants to work with local partners and that is where we naturally become the partner of choice. We also pride ourselves on our competitive turnaround, because most SMEs face time constraints. Our solutions range from working capital finance, leasing, and term loans to off balance sheet items like offering letters of credit and guarantees, therefore cartering for a diverse range of needs.
What measures, other than supply through agencies, does Investrust take to reach out to a largely un-banked population?
We have some alternative, simple products. For example, in 1Q2017 we launched a VISA prepaid card that is available also to non-customers of Investrust Bank. Anyone can walk into one of our branches, purchase and load this card, and use it to complete transactions. This product is not as onerous in terms of requirements as other financial tools, and thus acts as a way of making sure people have access to certain banking products in the market. We also do money transfer services via our ATMs, meaning, again, that someone who is not a customer can still receive funds. Finally, many mobile networks have come up with innovative mobile money solutions. Rather than compete with them, we have decided to collaborate, working with Zamtel to bring bank-to-mobile and mobile-to-bank services.
What key ambitions do you have for Investrust Bank?
In 2016, Investrust Bank raised capital twice and that will give us extra capacity to be able to do more going forward. Consequently ZCCM-IH became the majority shareholder, and we also have Meanwood Venture Capital, other institutional investors, and more than 600 individuals. We are also optimistic that in 2017 the central bank will loosen its monetary policy, which has inhibited growth and causing a liquidity strain in the market. Following this, Investrust Bank is positioning itself for growth and we have been particular about managing our value chain. We want to ensure we are present in the entire ecosystem, right from industries through to suppliers and consumers, and that we tailor our products to suit their respective needs. We ambitiously seek above 30% growth on average in 2017. We are look to support SMEs, with some external funding to augment our internal resources.