Uzoma Dozie, the CEO of Diamond Bank, is an astute advocate of leveraging on technology for financial inclusion. In this exclusive interview, he speaks of how access to digital banking services is changing the banking culture in Nigeria. Excerpts:
More and more Nigerians are taking to digital devices by the day, what plan does Diamond Bank have for such people?
What people want is convenience and convenience has many factors. Cost is a convenience and time is a convenience. For us there are two parts: We are providing banking services and we are looking at the most cost effective way to do that. It certainly cannot be people walking into a branch, leaving whatever they are doing, even if it is just relaxing at home – look at even the journey, the search for where to park your car, then going through our machines, then waiting to get service before leaving…
In the past, if we did 20 transactions in the bank, it meant 20 people walked into the bank. Today by providing convenient services, you can increase transaction count.
People do transactions every day, but how many banking transactions do they do? So by providing a platform that allows them to do their transaction, whether banking or not, it means that, you are now laying a big role in their life.
So for us, it is not just in the middle class but for all of us. The thinking for us is how to use this same platform to provide services for people at the rural areas that we could never have reached before. That is where the opportunity is not even the middle class, which is a small per cent of the Nigerian market. The rural area is the mass market that is under banked, and digital access allows you to provide effective service, in a cost effective and scalable manner and you can make money from it. The question is in the numbers and margin.
Even in the mass affluence base, we have seen a successful shift. Right now, we have two and half million people on our mobile app. We have nine million people who have opened account using the Diamond Y’ello.
In the market place, we have said, you know what, these people are never going to come to a bank because the bank is 9 to 5 and their business is 5 to 9. It’s a one man business, so who is going to man the store. So we decided to take the mobile application to them since they have mobile phones.
The innovation in digital tech is happening more in Africa than it is happening in other parts of the world that even have better infrastructure.
How do you manage the deficit in infrastructure, especially in reaching the unbanked in the rural areas?
Once you have a mobile phone with a signal, you have the basic infrastructure. The banking need of someone in the village is different from the banking needs of someone in the urban area. It is either people to people or business to people in those areas.
Every single day, we are seeing innovation that makes it easy to provide these services. Today we have mCASH which allows traders to get a USSD merchant code and get instant value.
There are things we don’t just have to copy but we can leapfrog. We can leapfrog point of sales because with your bank account, I can transfer money to you immediately. You can’t do that in the United Kingdom, you have to pay for that service. In Nigeria, if I charge you extra, you probably report to the central bank. I don’t like point of sales because it cost me money to bring it into the country. It is a great technology but I don’t need it anymore. We have invested in enough infrastructure to leapfrog that.
Recently, someone was talking to me about the ATM and I said, this is the 50th year of the ATM. But apart from cash, what does it do that my mobile app does not do. I see its importance while we are still waiting for Nigerians to move from dumb phones to smart phones but even then, we are beginning to see some USSD services that hitherto were done only on smart phones. So I am even confused to the future of ATM, but we have a mobile first philosophy.
How does this whole digital space integrate the activities of the SMEs especially with regards to access to finance?
The future of Nigeria’s development or success is the SMEs. The key thing in every successful country is that the SMEs are the biggest contributors it’s GDP (Gross Domestic Product) by 70 per cent. They are also the biggest employers of labour, not government. That is what we are after. The opportunity is in those 70 million people that are not banked.
I always say if 17 or 20 million businesses employ five people each, then you have solved our unemployment problem.
I think parents are beginning to strip there minds of the mentality that everybody must be a doctor or a lawyer or even a banker, because those people are not making money. People are going into retail, food and agriculture because that is where the opportunity is. So we need to start providing services for those areas.
There is a lot of money in Nigeria. I always say that, the capital invested in entrepreneurship is more than the money available to borrow. Money is not a problem, but you must be in a state of readiness to use money. You would not let somebody drive if he does not know how to drive, same way we will not give people cash if they don’t respect cash.
It is also about access to advisory services, capacity building and access to market and awareness for you. So we do, through our programme, a 5-month capacity building exercise for entrepreneurs at the end of which five people get seed money for their businesses.
We usually start with about 100 of them. At the end of the day, those who did not win will tell you, they now see business differently.
We are in the seventh season of that programme and the challenge is how to upscale. So for this year, we will capture the moment, so that if you are not part of it, you can learn from others. People who have data will watch it on our platform.
Providing opportunity for women in business is another area for us. No matter what anybody says, women are very good, astute business people. If you can run a home, you can run a business because the house hold is a business.
We try to create opportunity for women because the way they do their business might be different from the way a man wants to do his business.
Since we have pitched our camp in the retail space, we have to play a role in developing that market through advocacy or through providing an enabling environment for businesses to thrive.
With your mobile first philosophy, aren’t you concerned about cyber-security and consumer protection issues, especially because of the literacy level of our people?
If I look at the fraud rate in digital compared to cash per transactions, cash is dangerous. The best analogy is between flying and using the road. More people die from road travelling than flying but when there is a crash, it is more dramatic and people make a lot of noise about it but people die every day on the road.
In Diamond Bank, 80 per cent of our transactions are digital. One small fraud and there is a large noise, meanwhile, there has been a cash fraud, cheque fraud, cash suppression amongst others. For us, there will always be risk but the risk in digital is far less than in the non-digital transactions.
When MTN first started, they came with the analogy that, these people would not understand SMS, let’s make it zero naira and N35 a minute for voice call. One month later, Nigerians were using SMS at zero naira to communicate simple messages. The adoption became even much higher than in Europe.
It took us 35 years to grow six million customers through our 200 branch network but it took only us one year to get six million customers through Diamond Y’ello.
One of our studies revealed that 70 per cent of market women have smart phones and interestingly, 70 per cent of them had data. They had data because they were using Whatsapp and it’s cheaper than SMS. And they can also get calls from abroad so it’s a no brainer. Where there is opportunity, people will learn very quickly.
What are you doing in the agric space?
We are lending though an outgrower scheme but that is not enough. We believe that agriculture is a very productive area for banks. If you look at America, apart from the tech people, the richest Americans are people who own farms. They supply all the food chains.
The infrastructure, like storage and market, still needs development. In Côte d’Ivoire, they are very big on cocoa, so at the beginning of every farming season, the president goes out on national television to name the price of off-take. So it makes financing available because the banks through historical information, know their production capacity.
Technology has also made it possible to estimate yield based on estimated rainfall and soil testing. Just like oil, if the projected yield is 70 per cent, I can finance 30 per cent and you bring 40 per cent.
We have seen a consistent surge on the purchasing Manager Index, what is your projection of how we will fare in the second half of 2017?
I look at negative but I also look at positives. If I look at the problems six months to one year ago and I look at the indicators now, they are moving in the positive direction. The biggest concern to the market was the price of the naira and we have seen some stability. Availability of forex for raw material is also seeing some liquidity. We have also seen stability in the production of oil and the price has been fairly stable and that gives us comfort.
The growth in the non-oil sector has been up and up. If we can just maintain political stability, it tells us that we are in the right direction. I am in a more optimistic frame of mind than I was, six months ago. And off course, people are beginning to bring money to Nigeria, which was not there before because they were not certain about a number of things.
We have also realised that the economy is fragile. Like the American nation, when the automobile sector was challenged, they came together to say, we can’t watch this go down. We saw that here in the Etisalat issue. We realised that this was a key player in the economy and we must make sure it survives. This proactive action gives people confidence. The various arms of regulators came together and said, there is implication, we can’t fold our arms. It is not what you do during difficult times but what you do during good things.
These actions are reassuring because, if we can do this, then we can go through the hard times.
Diamond Bank’s asset base leapfrogged to N2.7 trillion, what is your message to shareholders of the bank?
The economy is still fragile. It is not yet a profit making environment. But two things are important, to have liquidity and capital and provide services that would make your customers come back. We must be adding value to you to continue to do business with us and it shows in the number of new customers that we are adding to our books.
We are trying to manage our capital well. Two years ago when we had excess capital, we were going places but now we are looking at those capital and saying some of these assets that we have, how do they help our business? If they don’t, give it to somebody else.
We are also talking to people who like the Diamond Bank story, our retail strategy and all we plan to do, to see if they will want to invest in our long term programmes. So we are doing enough to make sure we have adequate capital.
We believe our strategy is in line with what the government is trying to do but we have taken that first move advantage and it has given us comfort.
For our investors’ perspective, dividend and yield may not be much this year, but definitely, once Nigeria goes through this, we are certain of a platform to jump.