Absa Tanzania’s digital banking head commends BoT on Covid-19 relief

14Oct 2021
The Guardian Reporter
Dar es Salaam
The Guardian
Absa Tanzania’s digital banking head commends BoT on Covid-19 relief

MEASURES taken by Bank of Tanzania during the onset of the coronavirus last year such as increasing the daily transaction limited from 3m/- to 5m/- helped the public and financial institutions navigate past the pandemic.

Absa Bank Tanzania’s head of customer experience and digital banking, Samuel Mkuyu.

Absa Bank Tanzania Limited’s Head of Customer Experience and Digital Banking, Samuel Mkuyu said in Dar es Salaam this week during Absa Group’s sponsored inaugural Africa Banking Conference that the central bank as custodian of the country’s monetary policy, continued to strongly support financial inclusion via digital banking.

Mkuyu said the decision to raise MNOs daily balance from 5m/- to 10m/- also encouraged the use of digital payment platforms for transactions. “Additionally, the Bank of Tanzania has also invested in an instant payment system that will enhance the compatibility of digital financial services among payment service providers to make the transaction cost effective and secure,” Mkuyu added.

He pointed out that the Covid-19 outbreak and BoT’s actions thus accelerated the adoption of digital banking by consumers in the market. The Absa Tanzania Head of Customer Experience and Digital Banking further noted that the trend is the same in all markets that the bank operates in Africa.

“Digital banking services continue to expand, driven by convenience, increasing financial inclusion and mobile penetration rate. Local banks have quickly capitalised on alternative channels such as mobile and internet banking, smart ATMs, contactless Point of Sale transactions and virtual assistance,” he said.

Themed, ‘Re-imagining banking in Africa in a post-Covid-19 world,’ the Absa Group organised conference also had experts conceding that banks across the African continent remained profitable and capital ratios stayed comfortably above minimum regulatory requirements against the backdrop of the pandemic.

Furthermore, Absa Bank Tanzania’s financial performance in the first six months of 2021, indicates a recovery as economies re-open and vaccination rates pick up. “This has strengthened the accessibility of banking and related services, and further helped to cater to the needs of customers without any physical interactions or branch visitations,” Mkuyu added.

He was seconding the views of two Absa officials who had earlier written on the findings of the conference, namely Timothy Wambu, CFA, Head of Equity Research, Absa Kenya; and Khayelihle Mthembu, Equity Analyst, South Africa Banks Research, Absa Corporate and Investment Banking.

“Another major trend observed in post Covid-19 in Tanzania is that of mobile network operators and financial technology partnerships with local commercial banks to deliver multiple solutions with the aim of improving financial diversification and inclusion,” he added.

Giving examples like Absa Tanzania’s partnership with Tigo Tanzania and Jumo to deliver a microlending solution dubbed TigoNivushe. Bank of Africa has also partnered with Tigo Tanzania to launch a mobile money savings product called TigoPesaKibubu. “These trends are allowing banks to optimise their physical infrastructure and cost-to-serve,” Mkuyu noted.

The curtain-raising banking conference starred keynote address delivered by the Central Bank of Kenya Governor, Dr Patrick Njoroge, who ‘on a positive note’ said that, “The drive towards digitization that had started before the pandemic has been the saving grace not just in financial services but also in the health, entertainment, retail, education and hospitality sectors.”

The conference featured robust panel discussions graced by eminent and distinguished speakers and strong representation of corporate and institutional investors.  Overall, the experts summarized that, Covid-19 brought substantial disruption in bank operational and financial performance.

 Under lockdown restrictions, banks had to close branches and send employees to work from home. Earnings reduced significantly as banks raised forward-looking impairment provision under IFRS 9 and regulators advised banks to halt dividend payments to conserve capital in the face of uncertainty.

The experts point out that the factors key to the current recovery scenario in the banking sector in Africa are two: First, is loan accommodations and other borrower relief measures carried out by the regulators and governments; and Second is enhanced levels of digitization which, with movement restrictions and social distancing measures, forced customers to use alternative banking channels such as mobile and internet platforms.

“The digital banking revolution is gaining traction, for several years, banks have had to reinvent themselves to keep up with the changing competitive landscape and customer behaviours,” said Khayelihle Mthembu, who is an Equity Analyst at Absa Corporate and Investment Banking.

Mthembu gave an example of how banks had, between 2000 and 2010, internal bias, making huge investments on system changes in support of product-focused innovation. “Over the last decade, we saw banks transition to an external bias, focusing on client experience and undertaking huge investments on large-scale transformation in support of digitization,” he said.

Elsewhere in Africa, the resonant narrative in the banking sector in view of the Covid-19 pandemic, is that of recovery. Closer to home across the border  in Kenya, the year 2021 was a year of recovery with banks reporting significant earnings growth so far (1H21A), primarily from the release of credit loss reserves, noted Timothy Wambu, CFA, Head of Equity Research at Absa Bank Kenya.

Wambu said restructured loans affected by the pandemic had eased to 16 percent in July 2021, with 92 percent of the restructured loans performing as per the terms of the restructuring. “The industry’s NPL ratio has also improved to 13.8 percent during the period,” he noted.

The conclusion from the Absa experts, informed by factual inputs during the conference and backed up by empirical evidence, is that digital banking accelerated financial inclusion across the continent. “It was encouraging to hear our speakers mention solutions that are being implemented against infrastructure constraints,” Mthembu noted.