Sustainably lowering the cost of doing business, is one of the key areas that have been identified by the Government of Uganda in its National Development Plan (NDPIII) 2020/21 – 2024/25. To do this, the government must be able to influence and or increase access to affordable credit largely targeting the Micro, Small and Medium Size Enterprises (MSME), increase access to long-term finance as well as mobilize alternative financing sources to finance private investment.
Since government can’t wholly rely on private financial institutions, it is now looking at using its owned financial institutions to lend, at preferential interest to the private sector, especially those in key sectors, such as commercial agriculture, Industrialisation, Services and Information and Communications Technology (ICT).
PostBank Uganda (PBU), Uganda Development Bank (UDB) and Pride Microfinance, are some of the government-owned financial institutions that the government is looking to use, to channel affordable financing.
To prepare PostBank to handle this delicate and strategic task, especially at PostBank Uganda, the government, which owns 100% of the tier-two financial institution, decided to first restructure the bank.
To lead this task, the Board and Ministry of Finance, through KPMG Uganda, in October 2019, tapped Julius Kakeeto, a Ugandan banker with two decades’ private sector banking experience. Kakeeto was recruited from Orient Bank where he was the Managing Director /CEO.
During his 5 years at Orient Bank, the Alliance Manchester Business School (MBA, Finance) and Strathmore University alumni oversaw a 69.3% growth in assets, underlined by an equally good performance in deposits and lending and profitability.
At a media briefing held last week, to update the public on the progress of the restructuring at the bank, Kakeeto said, the restructuring is almost complete, putting PostBank on an unstoppable transformation journey.
He told the media that the restructuring was born out of an organization-wide review, recommended by the board and done by a consultant- True North Africa.
“The review was to advise us on how to improve both the bank’s operations and performance, but also how to address and avoid relapsing into these challenges,” he explains. “Amongst the recommendations of the review, was that, for the bank to achieve its aspirations and move forward, it needed to restructure itself,” he adds.
With the review and the restructuring came a new strategy as well.
Our vision now is: “To be to be a pacesetter in transforming lives and livelihoods”, which is a very powerful vision. Our mission is “offering affordable and sustainable financial services that drive financial inclusion for socio-economic development.”
One of the hallmarks of the new strategy is to become a tier-one commercial bank within 5 years and as such, most of the bank’s activities are geared towards this big hairy goal.
The consultant, True North Africa, also recommended and designed a new organisational structure that involved retaining some roles, scrapping others as well as merging some and creating new ones altogether.
“To fill all the senior executive roles in the new structure, the board decided that they all had to be competitively filled, meaning that they had to be advertised inside and outside the bank. Even those roles that were retained, but had existing holders, they had to be readvertised and their holders defend their roles,” explained Kakeeto.
A fully constituted experienced Exco
He also explains that the process to competently fill key positions in the bank has taken almost a year, but the wait has been worth it.
“We are at the tail end of the process, and we should conclude it by the end of this month. We now have a full line-up of the new structure of the bank. We have retained some very good talent such as the Head of Human Resources, the Company Secretary and the Head of Distribution, but they too had to defend their jobs. But we have also been able to attract particularly good talent from top tier-one banks, such as Standard Chartered Bank, KCB Bank Uganda, dfcu Bank, Bank of Africa, Orient Bank etc,” he stresses.
“We’ve got a lot of seasoned experienced people. If you look at the profile of our senior management team, it is as good as most commercial banks. It is a very competitive team,” boasts Kakeeto.
For example, Andrew Kabeera the Bank’s new Executive Director and Chief Operating Officer joined from dfcu Bank, one of Uganda’s top 5 banks where he was the Chief Operating Officer and Chief Change and Innovation Officer. At dfcu Bank, he had just completed the bank’s digitization, centralization and productivity monitoring agenda, saving the bank some UGX15 billion in costs.
Ssenyange Peter, the current Chief Finance Officer, was until June 2020, the CFO for United Bank for Africa for over 4 years.
Martin Mugisha, the Chief Risk Officer, joined the bank in January 2021 from Ecobank Uganda where he was the Head of Credit Risk since February 2014.
Andrew Agaba joined PostBank in April 2020 as the Chief Business Officer from Orient Bank, where he was the Head of Retail and SME Banking.
Judy Namanda Kikonyogo the Chief HR and Administration Officer is one of those who were retained from the old exco- but her role was elevated from just being Head of HR. Before PostBank, in 2013, Judy worked for Barclays Bank Uganda (now Absa Bank Uganda) where among other achievements, she successfully oversaw the merger of Barclays Bank and Nile Bank human capital.
Justine Tumuheki Wabwire, the Chief Legal Officer and Company Secretary who has been with PostBank for the last 10 years was also retained. She previously worked at the Uganda Law Reform Commission as an Assistant Commissioner, Law Revision and before that as a State Attorney at the Directorate of Public Prosecutions. She is a seasoned lawyer and boasts of over 20 years of experience in legal, regulatory, and corporate governance in Uganda’s civil service and the banking sectors.
“Our people strategy is focused on feeding our 5-year strategic ambition to become a fully-fledged tier-one commercial bank. The people we have brought in have come with a lot of expertise in terms of risk management, we needed help there; in terms of portfolio management, IT skills- we had to do a lot of work around our ICT especially on IT security, processes etc,” explains Kakeeto.
Building a “do more with less culture”
Over and above people and processes, Kakeeto says the bank is also investing in the right technologies to get the best from its people.
“We have revamped our distribution channels. A year ago, over 90% of our customers relied on over-the-counter transactions, but that has been reduced to 60%- meaning that over 30% are now reliant on digital channels. We have achieved this by availing cards- we launched Union Pay international card, we are revamping our ATMs to become faster and do more. We have enabled mobile phone banking- the mobile app is up and running and can do several transactions. The USSD code for *263# is running and with that, you can do a number of transactions such as checking your balance statements, internal payments, mobile money and so forth,” he optimistically says.
He also says that PostBank has ordered new and smarter ATMs that accept deposits in real-time and new banking switch and a core system to drive all these new technologies. The bank has also rolled out a multi-lingual contact centre, that can support customers remotely, 6 days a week in 5 languages. Soon, there are plans to make the centre operate 24-7.
“This is all aimed at becoming more efficient and we are starting to see it in the bottom line. When you see our financials that will be coming out before the end of the month, you will see that for example, the bank’s operating expenses have dropped by 5%, despite doing all these investments. [JK1] This gives us a very solid foundation to build on and take the bank to the next level. Our transformation journey is just starting,” says Kakeeto, adding: [JK2]
“Our thought process, our philosophy has been, how do you achieve more with less? How do we keep our eyes on the prize without literally bursting the bank? In fact, in some cases, we have found cheaper people who can even do more. What we’re going through is a process of trying to cut excess fat, get more agile and dynamic and that never comes without pain- but it is sweet pain,” explains Kabeera, the Executive Director and Chief Operating Officer.
“For example, even something as simple as account opening or loan approvals used to take quite long, but today, an employee loan, if you have an account with us, it takes one day- it would take two weeks with files and paperwork,” he adds.
“With this new momentum, new energy- we have grown faster than the three preceding years in aggregate. Our deposits and loans growth is equal to or more than what we grew, between 2017 to 2019,” he further says.
According to Kakeeto, these efficiencies are not just important for the bottom line, but they are also important for the sustainability of the bank.
“We have requested the government for more capital and we know the government has several other priorities. So, in the meantime, we have asked them to allow us to retain our profits so we can be able to self-fund a part of our strategy,” he says, adding: “So far, we have been able to self-fund all these activities through savings on our operations.”
Unleashing PostBank’s full potential
Kakeeto says the strong foundation laid thus far, has been complemented by the full constitution of the bank’s board, this January, further anchoring the bank’s transformation agenda and the journey to tier-one.
The board is now chaired by investment banker and corporate finance expert, Andrew Otengo Owiny.
He wields over 32 years of practical experience in Banking, particularly Investment Banking, Corporate Finance/Financial & Investment Advisory and Capital Markets activities in the USA, Europe & Africa. Also appointed to the PBU board, is Ms Farida Mukasa Kasujja, a banker and Francis Onebe, an audit, accounting and taxation expert. The trio joined Beatrice Amongi Lagada, Lawrence Kasenge, Julius Kakeeto, Andrew Kabeera and Justine Tumuheki Wabwire, whose terms as board members were still running.
“Now that we have a fully functional board, it will help us move faster in terms of our transformation,” says Kakeeto.
PostBank may be a tier two financial institution in regulatory classification, but in a pound for pound with tier one bank, and going by 2019 financial results, it had the 12th largest loan book and was the 12th most profitable. With about 47 branches and one pending approval at Bank of Uganda and serving about 1 million customers, it is also among the top 10 by footprint and number of customers served.
“We serve about 57,000 borrowers, out of whom 9,400 are agriculture borrowers. In terms of borrower numbers, PostBank is the leading lender to agriculture,” Kakeeto reiterates.
“The numbers for 2020 will soon be out and we will soon be able to give you the up to date market ranking, but we are quite big in tier two and by all means a very powerful player in the industry, much as we have a tier two license,” Kakeeto emphasises, adding: “Even in the market, for some portfolios, our direct competition is Stanbic, Standard Chartered Bank, Centenary Bank, Equity Bank etc and not tier two institutions.”
Challenges ahead
Even amidst this optimism, fuelled by an ambition to become the leading inclusive financial services institution, Kabeera says there are still a few hurdles to clear, so the bank’s full potential can be unleashed.
First, he says the restructuring of the bank has unsettled a few individuals within the institution who are yet to get used to the fresh “do more, with less” culture, but that will soon be ironed out through a series of staff engagements and corporate culture readjustment programmes.
“As anticipated, every restructuring comes with some bit of discomfort- because, in the actual sense, that’s the nature of the task- to shake up things, that were previously not aligned. So, a lot of questions have been asked. But we are managing this by being very transparent and openly engaging with staff, every step of the way. It has been and continues to be an open process, with open communication,” he says.
He also says, that given the critical task assigned to the bank in NDP III of becoming one of the three preferential interest rates lenders to the private sector, there is a need for more recapitalisation.
“We are well capitalised to meet the Financial Institutions’ Act (FIA 2004) requirements for a commercial bank, which UGX25 billion in capital; in fact, our capital is UGX100 billion, but given our key role in the NDP and Vision 2040, it would be more helpful if we can have more capital from our shareholder, which is government,” he says.
“To play the kind of role that PostBank is made for— to serve and enrich MSMEs and other lower segments of the market, you need patient capital. If you are going to support farmers, you don’t need money that is like for any other investments, you need patient capital.”
Kakeeto however says, that as they wait in government, for more capital, the focus will remain becoming more efficient and profitable.
“If we are loss-making, we can’t finance all these things we are talking about. We are doing all these things with our internal resources, but if the government gave us more capital, there’s a lot more that Postbank can contribute towards improving and transforming the livelihoods of Ugandan households,” he says.
Asked when PostBank is really going to get the tier-one license, an optimistic Kakeeto won’t say but says a lot of work has been done in preparation and now it is a question of when.
“The board has already given us a blessing, but I cannot specify the actual dates as this process is handled by the central Bank who carry out a thorough review and evaluation. Our fingers are crossed, we can’t give an actual timeline.”