Interview: Thierry Tanoh

How can the sector take advantage of low penetration rates to boost retail growth?

THIERRY TANOH: With innovations in technology, such as mobile and internet banking, and given changes in regulation, with agency banking as an example, this is probably the most exciting time in recent history for African banks to increase the banking penetration in hereto unprofitable territories. Resistance to change is the most common obstacle faced in the push to encourage the African community to move their savings away from their homes and into the vaults. The need to have cash to meet simple needs has been an impediment to people who should be willing to put their cash in banks.

In what way can banks expand lending to new African markets while minimising risk exposure?

TANOH: The introduction of credit bureaus in key markets, such as Nigeria, Ghana and Kenya, has aided the lending model immensely. We are now in a position to do first order background checks on new prospects. Granted, these credit bureaus are still in their infancy, but as more banks sign up to share information with these bureaus we are likely to see further reduction in non-performing loans as their databases grow exponentially. The key to improving loan-loss provisioning is discipline. Banks should make sure that all exceptions to standard loan applications are well documented, regular reviews of the credit granted to ensure that the funds are clearly being used for the purposes outlined, and also allow for a third-party review of credit files to see if industry best practices are being followed.

When is an acquisition strategy preferable to organic growth when entering a new market?

TANOH: Each market is unique. If the economics of an acquisition strategy supersede that of an organic growth strategy then it makes sense to pursue the acquisition approach. The same logic applies on the flip side, and the most important thing for entry into a new market is to have an open mind as to what entry model to use.

To what extent is providing intra-African trade financing an attractive opportunity for banks?

TANOH: Our geographic footprint means that we are on both the sender and receiver side of many transactions that occur within African trade corridors. With African intra-regional trade at less than 15%, compared to over 80% in the EU and North American Free Trade Agreement, there is room for growth, and we will continue to position ourselves to facilitate these exchanges.

How can increasing demand for trade finance and asset management services be harnessed?

TANOH: First, commercial banks can capitalise on increasing demand for trade finance and asset management services by procuring larger trade lines from development finance institutions. Second, this can be done by providing advisory services to new entrants into trade flows to Africa, particularly Asian and Australian investors, who are now deeply engaged in African trade, especially in commodities and heavy minerals. Third, with the growing middle class in Africa, this prosperity has fuelled the rise of pension funds, social security funds, as well as sovereign wealth funds. All of these institutions require safe but profitable asset classes in which to invest these surplus funds. Commercial banks are best suited to create these asset classes, such as inflation-linked bonds and commercial paper, which form the bulk of these funds’ investments.

What are the challenges in complying with prudential ratios in the Central African Economic and Monetary Community zone?

TANOH: Compliance is a prerequisite in order to empower a strong banking sector in the region. To that end, banks shall be at above prescribed capital adequacy ratios across their affiliates in the zone. Additionally, it is vital to be capitalised over and beyond minimum capital requirements. And, it is crucial to closely monitor all proclamations by the regulator, the Central African Banking Commission, and execute them effectively.