Kudakwashe Chideme, News Editor 
Seasoned banker, Mutemwa Ushewokunze (MU), was recently appointed First Capital Bank (FCB) commercial director. Our markets editor, Kuda Chideme (KC), sat down with him to get some insight into the bank’s operations and strategies going forward.
Below are excerpts of the interview:
KC: What is your assessment of the state of the country’s banking sector?
MU: The banking sector landscape in Zimbabwe is highly competitive especially when one considers the number of deposit-taking institutions.
One might go as far as to argue that perhaps the economy is over-banked, which may lead to cannibalisation among market players. In addition, the banking offering in some contexts is very one dimensional and generic, with limited differentiation and intermediary participation.
Notwithstanding, the desire to innovate is not lacking, as a highly fluid operating environment can only result in advancement. It is encouraging to see that despite risk and volatility concerns, foreign participation remains ever present.
Mutemwa-Ushewokunze
As First Capital we participate in this alongside other banks, which is important for the diversity of the industry. The presence of microfinance institutions, and development banks is also necessary for our national economic development in serving under-serviced or unbanked groups. Most estimates place Zimbabwe’s unbanked population at between 30-40 percent which is around the regional average.
As the industry faces a wave of innovation, it is fair to predict a future comprising of branchless or tech-only offerings, over and above digital driven money transfer options already seen in the marketplace today.
KC: The banking landscape is changing at a rapid pace with new complexities arising every other day. What would you say is the biggest risk facing the local banking industry today?
MU: Policy will always remain key as the banking industry continues to evolve, but our greatest challenge is in keeping pace with global developments and ensuring we remain integrated as technological advancements become mainstay in the financial sector. Other risks we may face are as follows;
Increased competition: Fintech is targeting the most profitable areas in financial services and will divert revenue from traditional offerings.
Culture of innovation: Manual processes and systems are being replaced by digital solutions — artificial intelligence pops up in most conversations and it is critical that management teams embody a culture of innovation. Tech-first is no longer a phenomenon, but rather a religion in global banking and so it means as an industry we must adapt, and I believe we are responding.
Regulation: This remains a critical challenge as compliance and associated costs in meeting Basel and other domestic rules requires a significant allocation of resources.
Customer expectations: Today’s customer is more informed than ever and is expecting a high degree of personalisation and convenience in their digitised banking experience over and above a high sensitivity to costs. As the digital migration occurs commensurate attention to detail is required to balance the needs of the old and the new customer.
In conclusion, the digital move raises security risks as we are required to ensure that measures are in place to ensure safe custody of not only money but also personal information.
KC: The central bank has expressed concern over low loans-to-deposits ratios among local banks, are there issues that are keeping banks from lending and what is First Capital Bank’s current approach to lending?
MU: As an industry we have experienced several “non-performing loan” (NPL) cycles which have had self-fulfilling outcomes and have deteriorated the integrity of the borrower-lender mechanism.
The adage, “once bitten, twice shy” perhaps describes the lending attitude of the banking sector and being over-cautious is median behaviour.
This is not likely to change in the near to medium term. For banks, the main consideration is whether they can create economic value in the current environment, and the present signals provided by prevailing interest rates suggest that risks in the market economy remain high.
At First Capital Bank our strategy is to broaden our lending strategy into the SME and micro-SME space. It is a play on this idea of the “missing middle,” and we believe that in our developing economy, it is these enterprises that form the base of strong economies. SMEs still need institutions that they can trust, but also ones who understand their needs and contexts, while providing for their financial requirements.
We have observed that this segment is under-serviced and the best way to overcome information asymmetry issues in the segment is to walk side-by-side with them on their entrepreneurial journey.
KC: What is the current size of your loan book and how have you managed it in the wake of the Covid-19 constraints? Is the bank also lending in foreign currency?
MU: Our loan book has been growing and through the pandemic we have seen limited impact. You must remember that there are segments of the economy that continued to function throughout the lockdowns. In fact, the non-discretionary segment of the consumer economy seemingly accelerated.
This has coincided with good rains which will serve to underpin the expansion of the agricultural sector and perhaps an oversupply of agricultural produce could create a tailwind for lower inflation.
There is a lot of preparation going on for this year’s winter crop and producers need to be well funded. Over and above that the economy is opening steadily post the second wave, and as the vaccine proliferates, we expect a healthy demand for capital into Q2, Q3 and Q4. Suffice to say that here at First Capital Bank we have positive economic outlook in the balance of the year.
Our local currency lending is currently at c70 percent lending to deposit ratio (LDR) while our US$ lending has been slower with both bank and customers taking a more cautious approach.
KC: The central bank says there is very little compliance to laws that require banks to pay interest on all accounts, is FCB compliant?
MU: Within our organisation we assign interest to our bank specific deposit related products such as fixed deposits and so on. As an industry there are certain issues around interest payment issues that are currently, being handled through BAZ and the central bank.
KC: Can you give us an insight into the bank’s digital strategy going forward?
MU: We are working on various projects that are very close to market launch and will significantly increase user experience on our platforms across both retail and commercial.
First Capital Bank’s WhatsApp Banking Chatbot, Alisa and Reverse Billing have recently been launched onto market.
Alisa will materially improve our retail client’s customer experience, our goal is that it becomes a ubiquitous in-app experience.
We have also launched Infini-Pay, which is a simple and efficient online bulk payments solution for our business customers allowing them to initiate these transactions to accounts within and outside First Capital Bank Limited.
We continue to work on several exciting projects which we fully expect to positively shift our customer experience journey and make us more competitive in the market.
KC: The Reserve Bank of Zimbabwe has also raised alarm over poor KYC practices by local banks, what measures has First Capital Bank put in place to ensure diligence?
MU: First Capital Bank adheres to best practice standards of KYC requirements as set out by the regulator. These practices fit within the broader scope of the banks anti-money laundering policy. We are constantly working to continually enhance our processes through digitisation, which helps in the optimisation of data collection while limiting human error.
We also acknowledge that KYC is an on-going process, and we are establishing pathways to ensure that we know our clients through the cycle of their relationship with us.
KC: What corporate banking products should your customer look forward to under this period?
MU: We are working on some interesting products which should be well suited for the domestic market.
Beyond our SME intentions which have already been explained, we believe that over the coming seasons there exists significant opportunities in the agriculture space, and we are working on a competitive offering across several agricultural commodities. In addition, we have embraced the view that we have entered a commodities super cycle and therefore small-to-medium scale mining space will present funding opportunities.
The FMCG value chain cannot be ignored, and we are curating a platform that meets this segment’s need for financing.
We also believe that there is a demand to get creative by leveraging off both private and public markets in order to raise capital, we believe within this scope we could find a solution to the lack of longer-term instruments in the market.
Over and above this our commercial team has a depth of experience, superior customer service, and execution capabilities that support our traditional product offering.
We believe it is an exciting time for Zimbabwe as we emerge from the pandemic, there is some capacity that needs to be restored and growth will return to the market, this is inevitable.
No matter the circumstances, we maintain a positive outlook on what is to come and as First Capital Bank we are looking to maximise on the opportunity. For us #BeliefComesFirst
