S TA N D A R D L E S O T H O B A N K
STANDARD LESOTHO BANK
Improving Financial Inclusion in Lesotho PRODUCTION: Manelesi Dumasi
As the largest bank in Lesotho, Standard Lesotho Bank is always in the sights of the competition as smaller players look to take market share away from the leader. But, by being innovative and investing in digital solutions, this important bank manages to stay ahead of the chasing pack. CIO, Samuel Koatla talks to Enterprise Africa about how going digital is helping the company to further improve financial inclusion in Lesotho.
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Transformation of business strategy is no easy feat. Taking methods and tactics built around helping the customer, that have been developed over many decades, and reimagining them to fit into a new landscape is a true challenge. But, as everyone knows, businesses that don’t adapt to stay in line with the needs of the customer, are those which are quickest to fail. Banking is the latest industry which is being completely revamped thanks to technology. Everything must now be faster, more accurate, safer, and easier than ever before. Even in regions which are not technologically and financially advanced, the market is changing and utilising new ideas to deliver for customers. It has already been seen in retail,
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in transportation, in delivery, in food, and in communication. Tech, especially mobile tech, has increased the rate of change in industries faster in just a few years than what has been seen over the past few decades. In Lesotho - a country with a population of just over 2.2 million, loosely dispersed across just under 12,000 square miles – digitisation and the uptake of technology has been slower than in neighbouring South Africa, but that has not stopped one of the country’s biggest brands pushing a digital agenda. Standard Lesotho Bank, part of the Standard Bank Group, remains the country’s biggest bank and can trace its roots back to 1995 when Standard Bank acquired Barclays Bank and formed a new entity, Standard Bank Lesotho.
Today, the bank is jointly owned by the Government of Lesotho, Lesotho Unit Trust and Standard Bank Group. It has a presence across all of the country’s districts, operates 19 branches and more than 80 ATMs. Asked in 2018 by Enterprise Africa if Standard Lesotho Bank would consider opening new branches, Chief Information Officer Samuel Koatla said that the focus would be on updating existing infrastructure to provide customers with digital branches, using technology to speed up a number of different processes. “One thing that all banks are looking at is the ability of mobile devices. We have to make sure we align ourselves to our customers in terms of what access they have to technology,” he said.
INDUSTRY FOCUS: FINANCE
LAGGING LESOTHO? Despite having almost country-wide 3G coverage, many Basotho still do not have internet access because of high data costs. Mobile device accessibility is good – the majority of the population has access to feature phones or smart phones and USSD technology. Wired broadband is less common and is serviced through a connection into South Africa and its three main submarine cables. Research from the International Telecommunication Union suggests that just 3.4% of Lesotho’s population are regular broadband internet users. On the mobile side, research for the United Nations Trade and Development Conference (UNCTAD) suggests that 37% have an active mobile broadband subscription. Unfortunately, trust in ecommerce remains low. Few people make digital transactions, and laws and regulations surrounding digital trade lag far behind more developed nations. Shamika Sirimanne, UNCTAD’s Director of Technology and Logistics says that small improvements in the system could make all the difference. “Mobile service costs, in some instances, represent almost 6% of the population’s monthly income. Lesotho, like many developing and least developed countries, has enormous
// ONE THING THAT ALL BANKS ARE LOOKING AT IS THE ABILITY OF MOBILE DEVICES. WE HAVE TO MAKE SURE WE ALIGN OURSELVES TO OUR CUSTOMERS IN TERMS OF WHAT ACCESS THEY HAVE TO TECHNOLOGY // 4 / www.enterprise-africa.net
potential to embrace the digital economy and make it work for them. But there are a series of conditions for its success. These include reliable and affordable infrastructure, legal and regulatory frameworks for payments, access to finance solutions, and the capacity to respond to the needs of the digital economy.” For Standard Lesotho Bank, digital transformation remains a priority and, while progress has been slow, Koatla insists improvement is inevitable and essential for the growth of financial inclusion. “The approach is now to go digital and work on digital branches. Currently, we have converted two branches to become fully digital branches. Every branch that we work on, every way that we can touch it, we are trying to make it digital. We are forced by the clientele to still go semi-digital and semi-brick and mortar. It has been so far, so good and we are seeing the take up being ok and we hope it can increase from there,” he says. He believes that improved digital services, from Standard Lesotho Bank as well as the rest of the industry, will help to bring the unbanked into the financial system. According to the World Bank, this is vital to help grow the economy. “Financial inclusion is critical in reducing poverty and achieving inclusive economic growth. When people can participate in the financial system, they are better able to start and expand businesses, invest in their children’s education, and absorb financial shocks,” says the World Bank. “This is the main driver,” confirms Koatla. “The use of mobile money is really assisting in terms of financial inclusion. We, as banks, are trying to integrate the mobile networks in cases where we don’t offer such, so that we can continue to generate financial inclusion.” As well as digital financial inclusion, alongside the rest of the industry, Standard Lesotho Bank is also ensuring its service portfolio is easily accessible through traditional channels so that
// COMPETITION WILL ALWAYS BE THERE. EVERYONE ELSE WILL ALWAYS WANT A BITE OF THIS BANKING SECTOR PIE // it continues to connect with as many people as possible. “In places where banking services are not readily accessible, we will place ATMs so that we can bring service to the people. We are the biggest bank in the country and our closest competitor only has half of the ATMs that we have,” Koatla asserts. CUSTOMER FOCUSED Banking in Africa is a hugely profitable business. In 2017, retail bank revenue in Africa was at $35 billion and, according to McKinsey, it’s expected to increase by 8.5% per year, reaching $53 billion by 2022. The report from McKinsey suggests that Africa’s banking sector is almost twice as profitable as the global average. But this success does not come idly; it is only those that remain customer focused, solving problems for clients, that manage to achieve sustainable profitability. At Standard Lesotho Bank, investments into a new digital interface – Infosys Finacle, part of EdgeVerve Systems – was completed in June and is helping the bank to achieve new efficiencies in branch. This follows from the completion of a roll out of a new Finacle Core Banking system in 2017. A cut in customer waiting time, a reduction in paper usage, improved staff training times, and a reduction in branch costs have all been realised following the roll out of the Infosys Finacle Mobile Teller Solution. “The implementation of ‘Moby’, Finacle’s Mobile Teller Solution as we call it, has been a significant step in our journey towards customer centric
INDUSTRY FOCUS: FINANCE
digitalisation and process optimisation. ‘Moby’, in combination with our existing Finacle Omnichannel Hub, has been a game changer in helping us provide the best banking experience in Africa,” said Klaas Kruger, Chief Information Officer of African Regions at Standard Bank. “Ensuring world class customer experience is a key priority for Standard Bank and ensuring this at non-digital touch points such as branches was a challenge.” Koatla shared the positive sentiment, saying: “It is a fantastic platform which gives our customers great service and great opportunities. It also gives us a competitive edge as it is better than what is available elsewhere in the market.” The solution has been rolled out across 107 branches in Lesotho, Zimbabwe and Malawi, Zambia and
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eSwatini. It is an enterprise level tablet-based solution that comes with designated workflows for each role – teller, relationship manager and agent. With an interactive user interface, intuitive navigation, an offline mode of operation and inbuilt analytics engine, bank tellers are empowered to provide personalised services on-the-go, virtually eliminating waiting in queues. NEW MARKETS In an effort to further assist with financial inclusion, Standard Lesotho Bank is targeting a sector of the economy that holds much promise – the informal business sector. Last year, Koatla described the situation where many members of the public who are unbanked still have access to funds and are still spending. Many do so, in cash, through informal traders or informal organisations and,
while convenient, this remains risky and unsustainable. In 2016, the World Bank conducted a survey where formal businesses listed the informal economy as the third biggest threat to growth and success, behind only political instability and high taxation. By introducing a number of new solutions, the hope is for Standard Lesotho to build trust and gain customers that might have previously remained outside of the mainstream financial sector. “What we have noticed is that there is a lot of money circulating in the informal business sector. Sometimes people do not get normal financial statements, they do not have physical addresses that the law normally requires for you to be included, and there are billions and billions of bucks circulating in these types of market,” details Koatla.
STANDARD LESOTHO BANK
“That is where the notion of financial inclusion needs to be realised. We have developed plans to cover this market and we are looking at solutions that would not require the normal regulatory Know Your Customer (KYC) principles. That way we can go a little easier on this market but still provide high-quality service. The idea is to provide banking for those unbanked while always expanding financial inclusion.” The Enterprise Banking division of the organisation has come up with a number of solutions for micro, small and medium sized enterprises. In May, an announcement was made detailing the launch of several new products. Firstly, for small businesses, is the Molleloa Transactional Account. “This account is for start-ups with annual turnovers of less than M300,000 at the lowest management fee of only M60.00 per month, arguably one of the lowest in the market. This product also comes with free cash deposit fees, and free Mobile Banking, free Internet Banking and a free funeral cover for the owner of the business. Businesses that have turnovers above M300,000 pay a management fee of only M149.00 for a business current account on Bundled Pricing that comes with many benefits including free Mobile Banking and free Internet Banking on Enterprise Online,” the bank says. Along with other current, business and savings accounts as well as insurance products, Standard Lesotho is also introducing a range of new enterprise loans designed to help businesses grow with minimal hassle. “The bank has introduced the Tseke! Loans which give you an option of borrowing against your investment up to 120% of the value of your investment. There are no stringent requirements to access the loan and it becomes available into your account within 24 hours, should you need lending to finance an order, to buy stock or to grow your business, Enterprise
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INDUSTRY FOCUS: FINANCE
// THE FIRST HALF OF THE YEAR WAS BETTER THAN THE LAST AND WE ARE HOPING THAT THE TRAJECTORY IS POSITIVE. I BELIEVE WE ARE ON THE RIGHT TRAJECTORY AND HOPEFULLY IN THE NEXT TWO YEARS OUR POSITION BOTH AS A COMPANY AND AS A COUNTRY WILL HAVE IMPROVED SIGNIFICANTLY // Banking has several lending solutions to meet your needs. We have the Working Capital Loan suitable for providing working capital and shortterm financing requirements for your business. This loan is repayable in instalments of between one and 24 months, structured to meet the nature of your cashflow. There is also a Business Term Loan which is a relatively simple way of securing a loan for any period up to seven years, repayable in equal instalments structured to meet your cashflow. The minimum loan amount is M5,000 and there is no maximum. We also have the Vehicle and Asset finance that you can use
Samuel Koatla - CIO
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to finance your business vehicle and assets such as trucks, yellow goods and machinery,” the bank states. Growth has already been realised following the release of these new products. “Where we have grown recently has been through lending. We have been able to digitise lending and that means you can apply fully for your loan over internet banking or through your smart app,” says Koatla. It is this type of innovation, alongside a culture surrounding problem solving for the customer that keeps Standard Lesotho at the front of the industry. “Competition will always be there.
Everyone else will always want a bite of this banking sector pie,” admits Koatla. Fortunately, Standard Lesotho has the scale and backing that others cannot boast, and this goes a long way. “We are seeing some small technology companies that are coming into the market and take a piece of what the banks are doing, and they are also trying to take a piece of what the Mobile Network Operators (MNOs) are doing. They come in as intermediaries, focussing on a particular solution and the question is, do we really want to challenge those small focussed companies, or do we want to integrate and become a platform where they
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can ride and position their product? That remains a bigger question that we need to test. As a bank right now, we are focussing on both. We are doing both integration of products and development of our own products and seeing which route works best for us,” says Koatla. To date, it looks as though this strategy will bear fruit for the company. At the end of 2018, Standard Lesotho reported a 7% in non-interest revenue through transactional business. PRIMED FOR GROWTH Economic performance in Lesotho has been weak over the past four years. Slow growth has emanated from political instability and a slow economy in South Africa. But with the political climate, in both countries, looking more stable, Standard Lesotho Bank is positioned perfectly for growth. “We have been able to make profits and we didn’t flirt with loss but it wasn’t an increase that we hoped for; the projected outcomes that we hoped for at the end of the financial year were negatively impacted by the slow economy,” says Koatla. “Business is still ok and we always hope for the best, but the political environment has certainly negatively impacted us.” From 2015 to 2017, the economy grew by no more than 1.7% and in 2017/18, GDP revenue contracted by 0.6%. But the expectation is that improvements are imminent following an increase in construction activity as a result of ongoing progress at the Lesotho Highlands Water Project. In June, Standard Bank’s Khotso Moji told CNBC Africa that the economy in Lesotho could be in for a positive change. “We had weak growth in 2017 but we have subsequently seen a lot of recovery with 2018 being a relatively decent year,” he said. He added that legislation to speed up the rate of project investment was also helping, and Koatla agrees, saying: “If you are business-minded
STANDARD LESOTHO BANK
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and if you believe the private sector can drive the economy, you start mobilising the environment for that private sector rather than just thinking that government can drive the economy. The policy around the private sector will change and we will see more investors coming in and that will revitalise the economy and provide an acceleration – which we are firmly behind.” As the economy stabilises and the need for a trusted financial partner for investors materialises further, Standard Lesotho Bank continues to display dominance. “We are hoping for a recovery,” says Koatla. “The first half of the year was better than the last and we are hoping that the trajectory is positive. I believe we are on the right trajectory and hopefully in the
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next two years our position both as a company and as a country will have improved significantly. We remain stable and relatively certain, and we think that helps us to see more of our pipeline realised with investors. Investors want to come in but we have to be able to assist.” Fortunately, the company is moving in the right direction, despite the economic pressures. At the end of 2018, Standard Lesotho Bank posted decent results with a 1% increase in headline earnings up to M241 million, and a strong capital position with a Tier I capital adequacy ratio (CAR) of 21.7%. “The Bank was able to sustain and strengthen its financial position within a very tough trading environment that was characterised by very slow economic growth,” commented Chief Executive, Mpho Vumbukani.
With this evidence that the company’s digital strategy is paying off, albeit slower than management would have liked, it’s fair to assume that Standard Lesotho Bank is perfectly positioned to remain dominant in its market, leveraging its global expertise to delight its customers. Riding the waves of the economy, this is a business that has been through highs and lows, and is now stronger than ever as it looks to aid in building the sustainable and prosperous Lesotho of the future.
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