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Executive Chat: Financial sector embraces technology

TETRAD Investment Bank Managing Director, Emmanuel Chikaka (EC) says those banks that will leverage off technology will emerge as the winners as financial sector will be more technology driven in 2011. In an effort to cut costs and reach a wider market, Chikaka says banking is trending more towards internet and cellphone banking and the use of plastic money. He speaks to businessdigest chief business reporter Paul Nyakazeya (PN).

PN:What have been the major highlights at Tetrad Group in 2010?

EC: I would say our successful transition from a discount house to a merchant bank. We also managed to meet the Reserve Bank of Zimbabwe’s minimum capital requirements, launched the gold fund and the e-mali transactional card.

PN: What has been the response to the Tetrad Gold Fund, particularly from small investors who see the fund as an alternative to the unattractive Zimbabwe Stock Exchange?

EC: The response from the market has been good. Clearly the product came in at the right time when the market was starved of alternatives given the lacklustre performance of the stock market. The fund has managed to attract over US$1 million since its launch and is growing.

PN: Can you explain how the e-mali transactional card works?

EC: E-mali is essentially a convenient, cost effective and very powerful banking solution designed to bring the convenience of mobile banking to the unbanked and under-banked population of Zimbabwe.
It works off a distribution network of strategic partners that have been given point of sale (POS) devices around the country in their various outlets. The POS devices are essentially a bank in a box where one can open an account in less than 60 seconds, proceed to make a deposit, do in store purchases, transfer money in an instant to friends and relatives throughout the country where e-mali partners are present, pay for their bills at the point of sale and if they so wish withdraw cash out off their account.

PN: So how does one get the card?

EC: Getting an e-mali card is very simple. All one has to do is approach any of our distribution partners or Tetrad branches with a copy of their I.D and the rest of the process will take less than a minute.

PN: Who are your distribution partners?

EC: Our distribution partners to date include TM supermarkets countrywide, Innscor Fast Food outlets such as Chicken Inn, Creamy Inn and Nandos, Truworths stores, selected Spars, Moonlight Funeral Assurance outlets countrywide and many more partners are still signing up. It’s really that simple!

PN:What should shareholders and your clients expect from Tetrad in the current financial year?

EC: They should expect consolidation of our position and new status as a merchant bank and to grow our market share and profitability. We also want to expand on our product offerings and improve existing ones. Tetrad has always been a product driven organisation.

PN: What makes Tetrad different from other banks?

EC: We pride ourselves in innovation which is one of our key values. Six months ago Tetrad, through its asset management company, TFS launched the first commodity-based unit trust product in the country, the Tetrad Gold Fund. Our merchant bank also launched a transactional card, the e-mali (transactional card) which has the lowest transacting costs in the market. The response has been good and has definitely put Tetrad on the map.
PN: What challenges are banks likely to face in 2011?

EC: Lack of liquidity has been the main challenge facing banks since the advent of dollarisation in 2009. Other challenges include, the absence of long term financing options, high cost of capital, unaffordable wage demands and limited success in securing lines of credit.

PN: Do you think these challenges will improve in the second half of the year?

EC: It is not possible to look at these challenges in isolation. The banking sector is intertwined with macro-economic performance. Most of these challenges will be resolved as the economy recovers.

PN: What significant trends do you see in the future of the banking sector?

EC: The banking sector is likely to be more technology driven going forward, in an effort to cut costs and reach a wider market. Banking is trending more towards internet and cellphone banking and the use of plastic money, which is convenient. Products will be tailored to capture the informal market. Those banks that will leverage off technology will emerge as the winners. Also expect greater competition from within as well as internationally leading to some mergers and acquisitions as competition intensifies.

PN: What is your take on accusations that the banking sector has not done enough to mobilise lines of credit?

EC: That perception is not fair to say the least. It is not a question of if we have done enough. Banks are working hard to mobilise lines of credit both locally and internationally. We have no choice but to continue working harder. At Tetrad, we are working with a number of local and foreign institutions to facilitate more lines of credit, which will in turn reduce our cost of on-lending to the productive sectors.

PN: Confidence plays a huge part in banks attracting more depositors and lines of credit. To what extend do you think it has been restored among depositors?

EC: In comparison to when the economy first dollarised, we have seen some degree of confidence returning among depositors, though not to the extent that we would want. The banking sector initially had zero US dollar deposits when the economy dollarised and we have managed to increase them to about US$2 billion, which is commendable. Unconfirmed reports indicate that a similar amount could still be stashed away in homes or warehouses; we are intensifying our campaign to increase confidence and lure these to formal banking channels.

PN: What do you attribute the stagnation to?

EC: It reflects the pace at which the economy is recovering and the level of confidence among depositors as I have mentioned earlier. It is not an immediate success. Though the Zimbabwean economy has managed to register positive growth after years of decline, we still need to do more to attract significant capital and improve liquidity.

PN: What is your position on the Indigenisation and Economic Empowerment Regulations on the financial sector?

EC: The regulations need to be clear and consistent to attract both foreign and local investors. We as a sector need to deal with the issue collectively and transparently for the benefit of the sector, our clients and the economy.

PN: Financial institutions stand accused of charging punitive interest rates on borrowers, while rewarding low interest rates on deposits. Can you explain the anomaly?

EC: This assessment is a bit exaggerated. The bulk of deposits, about 96% are demand deposits and these cannot be loaned out without banks taking undue liquidity risk associated with the volatile nature of the deposits.

PN: Who is Emmanuel Chikaka?

EC: Chikaka is a career banker who is the managing director of Tetrad Investment Bank. Tetrad Investment Bank is a member of Tetrad Holdings Limited which has interests in banking, property and insurance.

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