Globus will target path where big banks fail to tread – CEO

Globus Bank is fresh off securing a regional banking license from the Central Bank of Nigeria. The Bank will be looking to leverage on a gaping loan deficit in the country, according to CEO, Elias Igbinakenzua, who sat down for an interview with Business Day’s senior analysts Lolade Akinmurele and Bala Augie.

Globus bank was incorporated early this year and we got our banking license in the middle of the year. As of the end of September, we were ready for operations but we took time to ensure we had dotted the I’s and crossed the T’s before opening our doors to the public officially on the 6th of November.

Before the official launch, we were already doing skeletal operations and effecting payments across the industry; our door has been opened and within we already have over 200 accounts.

As a bank we have our internal target I would rather not divulge but we understand we are a new bank and one of the first in fourth-generation banking and we are going to use technology to drive transactional volume immensely.

We are going to allow people from all walks of life have access to banking.

So we will be aggressive towards our account acquisition which we have seen grow rapidly. We also have plans to cover the nook and crannies of Nigeria in a short while. In the next 24 months we should have over 24 branches and in less than five years to cover the entire country. Account acquisition and growth will be rapid.

We are excited about everything. I have been asked several times why I am venturing into banking at this time.

We have an industry that is over-concentrated, we have about five banks holding on to over 60 percent of customer deposits and we have those banks already sliding into complacency because they have everything and are unbothered.

There is also what I call customer experience deficiency and if you recall CBN has made it clear we are under-banked with over 40 percent of bankable Nigerians having no bank accounts, so there is a lot of room to grow in banking.

Like I said, the big banks are already comfortable and have no need to go further into the trenches; they are making hundreds of billion without having to take much risk why do more? So we saw the need for hungry institutions to come up and make banking more available and affordable.

We have over 180 million people in Nigeria, and more than half of them are young, so there is a lot banking can do, and we are coming to bridge that experience gap.

Banking is not charity, it is a business and has to make a profit. However, there must be corresponding value for such profit and a sense of responsibility on the part of the banks.

There must be margin when you are lending. Today you find people in need of funds going to money sharks to borrow at 5 percent flat rate of interest monthly. There is clearly a market and it is profitable that is why you have people able to lend at that rate.

As a bank you have access to public money. A bank is a public trust that must ensure depositors’’ funds loaned is paid back, so safety is the issue. Once banks can provide the necessary infrastructure to ensure safety, they can lend and make money.

Even going down the market is more risky which is why the big banks do not go down there but a more hungry bank can go and put the risk architecture, make money from it and ensure people’s financial needs are met.

Nigerians are not as bad as people portray. Nigerians are known to respect contract and repay loans.

It is for a bank like ours to design a risk management criteria that define who qualifies for the credit. Banks have the customers’ history of borrowing loans. Today we have the Credit Bureaus, they can tell this history over the years. Three are functional as of today.

It is not the number but the coverage. Let us appreciate where we are coming from; years ago we did not have any bird’s eye view of the credit history of Nigerians and so people could default in Bank A and still approach Bank B for a loan, but that is no longer possible today.

This is what avails abroad and that is why if you have a fund line abroad you hurry to pay so you avoid entering bad books.

We have seen people borrow from money sharks and payback. Look at the Federal government’s Trader Moni scheme, people are paying back to access more credit. So we should separate the Nigerians doing well from the defaulters.

I have not done the study to give an accurate figure but from the little we have seen, the young and openly mobile people that need funding in this country will not be less than 20 million people as a conservative estimate.

Such funds are needed because many people working cannot even pay their rent. For instance, if I know you are employed and stay in Ajah where you have to pay N2 million, why can’t I avail you that support knowing well that your employer is aware of such loan and would ensure repayment?

Today they have no help and some are living where they have to leave home as early as 3 am to get to work in search of cheaper accommodation.

That is not okay, we aspire to be a catalyst to grow the system and let people express themselves and increase the productivity of our economy. So we think there is a lot of banks can do. We believe that we would invest in technology and have the right people that would be risk-aware and put in the necessary architecture to ensure loans are good.

We have a service mantra “to be quick, to be safe, and to be convenient”. So whether we are lending to the rich or the poor we ensure that all times all we do speaks to that mantra.

Let me start by saying the issue with CBN regulation is that a lot is being misunderstood by the public. CBN said OMO bills should be limited to banks and foreign investors.

OMO bills are meant to be a CBN monetary management tool and is not meant to be an investment option for the public. The debt office had offered T-bills and you have some level of under subscription that is taken back, and CBN is using that now to manage liquidty in the banking system. It was never meant to be something you and I are meant to invest in.

The CBN has been trying overtime to push the interest rate of borrowing for the real sector down, now CBN is worried that the real sector players may get these fund at cheaper rate and return to invest them in T-bills leaving their core business which would improve the economy.

The CBN is simply telling the real sector to focus on the business of production and not arbitrage because the returns on T-bills are more attractive than ROI in the real sector.

This is a laudable step towards correcting arbitrage. However, the way it is managed is important because today you will find out there is virtually no activity in the T-bill market and I am sure that even now FMDQ has held a meeting to assess why everyone is pulling back. The market does not have enough information to understand what the CBN is trying to achieve and I think there is a need for more education.

I think the fear is it would create illiquidity. The people who buy bills know that if the CBN says local companies and individual investors cannot buy, the market would not be as liquid as it used to be.

However, that is arguable depending on how participants enter the market and why; if you are just speculative in your investment approach you might have issues and it would force you to enter and stay longer-not going in today and come out with so much money tomorrow.

Another fear is that CBN is pushing banks to lend to the real sector and that may result in more bad loans. You can argue in favour of that, but for me what CBN is asking from us is more rigour in the lending process; take time to know who meets your rack and reach out more.

There are many people who qualify for this loan but like I said the banks have not done so much for them. Instead we have used one set of credit seekers to describe everyone as not credit worthy. So I think if we reach out there, we would see credit worthy people who need these loans.

The CBN is also trying to help the process by ensuring more transparency. So you will find that if one has bad loans anywhere, then such person is not allowed to take new loans.

Today you would see that the CBN is actually connected live to all banks and can see their lending activities as they occur.

There is an obvious deficit in infrastructure; power, road, water and so on. Over the years our leaders have paid lip service to it and that is partly why we do not have the required growth in the SME sector. SMEs shouldn’t have to worry about providing their own energy needs, security, and how to transport his or her goods to the market. These challenges jack up the cost of business in Nigeria. Often, entrepreneurs start a business and for reasons beyond their control, it folds up so that is an issue.

However, banks like ours have a different approach to use the resources we have optimally and today we are one of the few banks with branches utilizing green energy, which means we would not be spending so much money on diesel, fuel and generators.

In our environment, I want to challenge the entrepreneurs and SME owners to be more creative in finding cost-efficient ways of running their businesses. What is important is the will power to succeed.

I believe that the government can do a lot and also believe the present government is making efforts.

The recently announced new economic advisory council chaired by Doyin Salami is a step in the right direction, and they know what to do although the only concern is if they would be listened to and the reporting structure which means the council does not directly report to President Buhari.

I think we have hope as a people and I know our infrastructure challenges will be corrected in time- but it would not happen overnight.

Yes, you are aware that the CBN is giving signals that capital needs to grow in the industry. We are mindful of that.

Our capital raise was actually among very few friends of like minds, including Austin Okere, the founder of Computer Warehouse Group and Isioma Ezeachi, owner of indigenous engineering firm, Sermatech.

As of today, all our owners are local but in the future, we have plans to do a lot more. Actually, as we speak, we already have enough to play as a national bank and we are looking at N50bn in the next 12 to 18 months.

But right now the minimum capital for a national bank is N25bn, we have raised that and are looking at the next level.

What we obtained is regional but since we have the necessary capital, we believe the CBN would not take much time to approve that.

We have a very clear focus; in five years we should be a player to reckon within the industry, covering the entire country adequately and ranking among the industry’s top banks.

I was in Zenith Bank for 20 years, eight out of which I was ED and I had already covered all the key areas of banking as at the time I was leaving to head corporate and investment banking at Access bank.

Thereafter I thought it was time to go for my own license since all I know is banking. My previous experience has prepared me greatly, and was helpful during the capital raise.

I think the goodwill from my previous banking experience is also an advantage as people who know me and the others at Globus are very confident that we can do whatever we set out to.

I thank Jim Ovia for the privilege to have served him for 20 years and also Herbert Wigwe and Aigboje Aig-Imoukhuede. I learnt a lot from those two institutions and they operate differently so bringing experience from both banks would be of immense benefit to Globus bank.

I get the feeling but I think it should not be. The big banks are already big and we are just starting, so they should be not be seeing Globus as a threat.

The big banks should be encouraging us to learn from them instead.

Also, I would ask them to start thinking differently. At  Globus Bank we have a war response “it is time to lead the change”, We believe someone has to lead the change and it does not matter who- whether big or small- someone has to.

We just think that Nigerians deserve a better banking experience.

No, for us it would cut across the board. We will do things to bring in the unbanked into financial inclusion and we will also do things to motivate those already in the banking system to come to Globus.

We would use omni-channel and better banking experience to attract those already in the formal banking net. A unique opportunity for our customers would be to use their phone number as an account number.

 Is Globus Bank going to lean more towards retail banking than corporate banking?

I always say I do not want to concentrate so much on one segment. If you know my history, I am a corporate person. I have being in corporate banking for years so that terrain is my forte.

The commercial banking space is another area of interest but retail is where we would go digital from day one and ensure that form wherever our customers are, they can access our services.

We will also have a virtual account that would attract zero charge as long as the customer does not go to the banking premises.

I have ideas we cannot dwell so much on for now but as we roll them out you will find out.

First of all, you have to look at the risk-free return. Our risk-free rate is about 13 percent and is the benchmark rate.

Added to the risk-free rate is the risk premium and market determines what that is.

 If we find that we are getting deposits at 10 percent then we can lend at a lower rate than we currently are.

But we cannot give what we don’t have. A bank is a financial intermediary and cannot give what they do not have. The market determines the interplay.

We are in a risk-based environment. The 4G is purely risked based in banking and what is important is a bank’s capital adequacy ratio (CAR). We are starting with over 30 percent CAR whereas regulatory requirement is about 15 percent.

Even as we grow we plan to maintain that buffer level so come what may, we would weather the storm.

Importantly, we would not be reckless in lending. In 2016 banks flocked into the oil and gas space because oil price seemed to be good and the banks were even lending in dollars to local names. When oil price came down, exchange rate went up and that loan went bad, some of which were never recovered.

For us, we would be mindful of foreign exposure because we are a local bank. We would not lend to any loan seeker in foreign currency if such party is earning in naira. That way when 2016 repeats itself a bank is not overly exposed.

Banking risks exist in many forms and one must understand how these risks affect each segment of the market.

For a while now we have had a stable exchange rate, I must commend the CBN. After 2016 the apex bank got exchange rate management right as rate has been quite stable since the I&E window and a few other initiatives that have narrowed that gap between FX windows.

The oil price is looking good and we do not expect price to fall below $60 in the near future and as a result we expect the exchange rate to be stable.

Also, with the CBN policy of minimizing overdependence on imports, the demand for FX for import will be moderated and keep FX stable.

Very well, the FX restriction on 43 items is a very commendable move by the CBN because we are importing anything that can be imported and killing our local industries. Since the ban, people have become more focused; today you hear about indigenous rice brands and people are going into the real sector which is adding to our GDP and productivity.

If we keep importing, it would be a loss of foreign exchange to us.

Do not forget again that the bulk of our FX today is going into oil and gas import, and Aliko Dangote is about to change that which is encouraging. That the government supported him to do what he is doing means the government has Nigerians at heart. If by next year we stop importing oil it would benefit us all.

The border closure for me was unfortunate and not what I would really subscribe to.

The government should live up to its own billing by ensuring that our trade laws work and ensure we do not give incentives to people to use our borders wrongly.

For instance we subsidize fuel and our next door neighbours do not but fuel can be taken from here to that place. Instead of closing borders government should have had the courage to remove the subsidy.

I was reading a paper yesterday that said Benin republic is the second largest importer of rice despite its population of around five million which shows they are pumping the rice into Nigeria, which is losing duty and so on.

It is how we have presented ourselves that these countries have taken advantage of, so government has to be firm and do what needs to be done.

We have signed AfCFTA and we should be seen to live by that charter but we have to put in place the right policies.

The border closure is a vote of no confidence on customs.

The game that will drive the next five years will depend on if the banks are efficient, customer-focused and offer the convenience customers need.

Banking is going to move from the conventional structure and would be able to get to three customer nay where anytime through his or her preferred means.

Only banks that take this into focus, plan along that and execute will in five years rule the industry.

Today we have over 60 people who have resumed at Globus and we are hiring for branches now. Each branch requires a minimum of 20 people and we have about four branches coming up before December, hopefully, which would be a total of 80 staff strength for the branches.

We have a plan to roll out at least 20 more branches next year and the numbers would grow.

Here at the head office we have all the staff we need, except one or two which would be resuming shortly.

The branches we would commission very soon we already have staff for those branches. 

First of all, I would take away all forms of subsidies, then I would look at our educational system and create a new framework for our children because what rules the world is knowledge.

I would also be concerned about institutions because today our institutions are not respected because power is either usurped or misused. So I would focus on governance and creating a reliable structure.

I would also cut waste in governance because today we spend too much on governance.

There are many more things to do so those are just starters.