As we draw closer to the end of the financial year 2017,it is quite intriguing to sit back as a young spectator and watch 19 financial institutions jostle for a larger piece of the proverbial cake – a modern day race for cash deposits. Year in and year out,this is every bank’s central objective, the reason behind the corporate tug-of-war in Zambia’s financial sector. It’s the not so complicated principle in the banking business. Amass as much money as possible, lend out most of it and enjoy the surplus gained from interest charged to borrowers.
However, it is quite ironic that a country with the sixth largest number of Commercial Banks in Southern Africa has one of the lowest rates of financial inclusion for citizens under the age of 35.This is the Zambian banking sector’s elephant in the room; “Who will bank the Youth in Zambia?” Only 6 of our 19 Commercial Banks have ‘youth-friendly’ bank account packages; 2 other banks have ‘student-friendly’ funds transfer services. The rest have a limited range relatively affordable products and services which they assume the average youth can afford. That beings said, gratitude must be given where it is due, a big thumbs up to the 5 banks that are blazing a trail in this regard. It is even more perplexing to note that only 6 out the 19 market players have at least one tailor made banking product specifically designed to cater for the financial needs of the Youth.
Banks have several valid reasons for not aggressively mobilising deposits from among the young people in Zambia. Firstly, some of the foreign owned banks argue that their parent organisations stipulate their marketing strategies and prohibit their subsidiaries from pursuing such ventures.
A few other banks have stuck to their niche marketing strategies and decided to focus on small but lucrative market segments. Some banks only or rather mainly deal with government, while others focus on international organisations, large scale farmers and multinational corporations. Others focus on the upper and middle class of society and provide first class banking services to wealthy clients.
Pessimist technocrats and opponents of this line of thinking will rightly ask “what is there to bank from the young people? We would rather have one employed middle-aged client who keeps at least an average deposit of ZMW 3,000 per month as opposed to opening 20 accounts for adolescents who can barely keep their account balance above K 250 each week!”
One cannot blame banks for their risk averse stance and reluctance in directing much of their valuable attention and scarce resources towards this segment of Zambia’s population. It’s a free market economy and each player is at liberty to choose what their comparative advantage is and focus on market segments within which they stand a good chance of attaining their financial objectives.
Time and again our renowned economists and financial analysts have lamented the poor saving culture among young people in Zambia. In an article dubbed “Poor Saving Culture or Poor Incentives to Save in Zambia?” ; Zambia Institute for Policy Analysis and Research reports that “some amount of confusion exists about the levels and proportions of savings in Zambia. (a named bank) estimates the savings-to-GDP ratio is below 20 percent while Bankers Association of Zambia estimates it at 5 percent. Surprisingly, however, none of these figures are officially published anywhere, which raises questions about their reliability. We therefore did our own calculations using BOZ data on savings deposits and total commercial bank liabilities (deposits) and Central Statistical Office data on nominal GDP. We found that savings deposits were around 2.8 percent of GDP in 2016. Thus, based on a very narrow definition of savings, one would argue that Zambians are poor at saving.”
That being said, keep in mind the fact that 30% of Zambia’s population comprises of the Youth. The most recent CIA World Factbook demographic profile of Zambia reports that 3,102,889 Zambian citizens are aged between 15 and 25; while 1,480,013.17 are aged between 25 and 35, which comes to a total of 4,582,902.17 Young people! 30% of the bankable population is up for grabs.
Dear banks, allow my financial imagination to run free. If a massive #BankTheYouthZambiaCampaign2018 was embarked upon by one of you, with a ‘K1’ minimum account balance promotion back by a ‘Zero’ bank charges clause; if only half of this target was achieved by the end of 2018, your balance sheet would record a whooping K2,291,451.085 increase in deposits mobilised.
I know my colleagues in the treasury and operations departments are giggling because of the costs that come with this proposition. Indeed such a campaign would require your bank to subsidize the account opening costs with long term benefits in hindsight. My colleagues in the corporate sales or retail banking departments are smiling too because it is easier said than done.
I’ll leave this as food for thought for the Zambia’s ‘top 5 banks’. They know themselves, they are the only ones with a branch network wide enough and staff compliment large enough to efficiently manage such a venture. But alas, the political will to embark of such a journey is usually only found in state owned firms where the the desire to achieve financial inclusion supersedes the appetite for short term profits.
I will conclude by sharing a wise saying from the east “Kugona pakati n’kuyambirira – (In a large household) You have to be first to retire to bed in order to be able to sleep in the middle.”
While the risk averse bank executive flips the page, the Telecoms executive /mobile service provider highlights a diamond in the rough. It is no wonder that mobile service providers have made colossal profits from the youth in the same economy by harnessing the demographic dividend which is still on the rise.
Alas, the race for deposits continues ! Aluta Continua dear banks!
The Bank Monitor.