TanzaniaInvest interviewed Charles Asiedu, the newly appointed Managing Director of Ecobank Tanzania, subsidiary of the leading independent pan-African banking group Ecobank.
In this interview, he shares the group’s strategy in Tanzania and the way forward to accompany the socio-economic development of the country, in particular the initiatives in trade and commodity finance, forex services, and corporate social responsibility.
You were recently appointed Managing Director for Ecobank Tanzania after being in charge of Ecobank Malawi and holding several positions within the group during the past 20 years. What is the importance of the Tanzanian market within the Group’s strategy?
As stated in our vision and mission statement, we bring world class banking platform to help integrate and grow African economies. Bordered by eight countries, Tanzania’s unique location is very consistent with our African agenda.
There were 51 licensed banks in 2019 and by mid-2020, the number has decreased to 49 after the latest merger. Is this number in line with the market, characterized by a large population and a very low banking penetration?
Given that Tanzania has a liberalized economy, the issue of the number of banks is neither here nor there. Higher number of banks improves banking penetration and gives more option to the customer which is good for business. However, under such circumstances margins for banks become thinner and thinner which eventually leads to the falling away of the less competitive ones.
Do you expect more consolidation to take place or new players to enter?
Both are very much possible. Some players will exit for obvious reasons while others see opportunities they can tap into. For us Ecobank, we belong to the latter group. The future of banking is exciting for us in Tanzania.
You are a full-service bank providing a wide array of products and services for multinationals, local corporations and businesses, and retail customers. What are your priority sectors and clientele for the years ahead?
As a full-service bank, we should be interested in all the relevant sectors of the economy. Specifically in Tanzania, our expertise in commodities financing will come to play strongly given that Ecobank is present in all the eight countries bordering Tanzania.
We believe we have very competitive products to help promote the country’s objective of making Tanzania a cashless economy. We have a strong support system to help grow the agricultural value chain, manufacturing, and construction sectors. We believe the micro, small and medium enterprises (MSME) represent the future of the country.
We will tap into our global partnership platforms to help support this segment of the market leveraging our world-class electronic solutions. We have a strong role to play in providing every Tanzanian access to best-in-class banking services and we are keen to pursue this role vigorously.
The closure of bureaux de change operations in Tanzania redirected foreign exchange services to the banking sector which saw the profits from foreign exchange dealings up by 70% in Q1 2019. However, earnings from forex fell heavily in Q1 2020 due to the impact of the Covid-19 pandemic on international trade. How important is forex in your portfolio and what are your ambitions?
Forex will become increasingly important when the African Continental Free Trade Area comes into force and exponentially increases intra-African trade given the volume of different currencies across our continent.
Intra-African trade will also be driven sharply upwards by one of the learnings from Covid-19, which is seeing larger corporates–particularly–seeking to diversify their supply chains, rather than risk having just one main supplier, which as we’ve seen can dry up overnight as has happened to some due to the disruptions caused by the pandemic. Africa looks set to benefit as local and regional value chains will gain market share from global value chains.
Our cross-border remittance solution, Rapidtransfer, is a game changer for remittances being sent by the diaspora and others for remittances to Tanzania. The World Bank reported that the average transaction cost for USD 200 remittance to sub-Saharan Africa was 8.9% in Q1 2020. Rapidtransfer does this for 3% or less and also provides transparency, certainty, and convenience.
Group-wide, forex is big business for Ecobank. Our international network has helped create linkages for growth in our African economies, facilitating innovative trade products for ease of settlement across all markets.
As a key hub in supporting and attracting investments into Africa, Ecobank’s International Business in Paris (EBI SA) recorded USD 6.5bn of FX transactions in 2019, 27% up from 2018 in African currencies. In 2019, EBI SA transacted in 53 currencies, for a total of USD 20.5bn in FX volume.
How do you see the Covid-19 pandemic influencing your development strategy in Tanzania? Have you already developed a contingency plan?
At Ecobank Tanzania we quickly implemented our business continuity plan when the Covid-19 pandemic became apparent and our heavy investments in technology over recent years has enabled us to offer seamless continuity of service to customers through our digital channels and via our call centre.
We’re seeking to help our customers’ businesses to survive the challenges of the coronavirus and have accommodated legitimate request for moratoriums.
Our approach to lending is obviously cautious given the economic environment and we are growing customer deposits, particularly via our digital channels.
At the moment our primary focus is on making sure that we can meet the needs of our customers despite the pandemic, but expanding our trade finance operations will become an increasing focus once Covid-19 is consigned to the rearview mirror.
Meanwhile, we are continuing to extend our marketing and distribution reach through partnerships with telcos and others, in addition to expanding our Xpress Point agency network to better serve the varied needs and demands in local communities throughout Tanzania.
The bank is seeking more partnerships with fintechs, especially through its annual Ecobank Fintech Challenge to notch up its digital strategy and invest more in order to level up its technology.
In line with our purpose, we keep making banking more inclusive, convenient and accessible for our customers. This has always been our focus in Tanzania.
Notwithstanding the current headwinds, Tanzania is expected to remain among the fastest-growing economies. Which role do you aim to play in the socio-economic development of Tanzania over the next few years?
Ecobank is happy to be here to contribute to the success story of Tanzania. We aim at fulfilling our objective of being a bank to help Tanzania grow through integration with the rest of African economies on the back of commodities financing and collection solutions.
We will leverage our global partnerships to participate in large infrastructure project financing.
We are aware of how important the agricultural sector is to Tanzania’s economy. We will therefore continue to be a key player in the agricultural value chain.
We will help accelerate financial services accessibility to all Tanzanians leveraging our electronic channels and partnerships with telcos and wakalas.
We believe in giving back to the society which has accommodated us and given us human capital. We will therefore implement key corporate social responsibility initiatives in the areas of education, health, women and children.
Thus we will continue to implement a range of Group-wide measures to deliver beneficial socio-economic impact and these include strengthening micro, small and medium-sized businesses through our significant support for AUDA-NEPAD, fundraising for the likes of IFRC (Red Cross) and Africa CDC.
In addition, we are boosting our lending to women-led businesses and have implemented a 3-year campaign to raise awareness about Non-Communicable Diseases and educate Tanzanians about the lifestyle behavioral changes that will help prevent NCDs.