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Tuesday, February 7, 2017


Last week the central bank announced that dfcu would be taking over the liabilities and some assets of Crane Bank.

The Bank of Uganda took over Crane Bank in October last year after adjudging it to be “significantly undercapitalised”. In putting it under receivership and handing its liabilities to dfcu the central bank did so after coming to the conclusion that Crane Bank was insolvent – meaning it was unable to meet its financial obligations.

On the surface of it the Bank of Uganda’s past experience means that Crane Bank’s clients will suffer the minimum inconvenience during the transition. It helps too that dfcu took over Global Trust’s business two years ago, a much smaller operation but which experience means dfcu is no stranger to such a transaction.

"However the distress will come with the change in cultures between the two institutions and a wider scale affect the future credibility of our local businessman...

Crane Bank was opened in 1995 to save Crane Forex Bureau, which was suffering some underhand competition from the banks.

The bank adopted much of the culture of Crane Forex Bureau, which was servicing the SMEs (Small & Medium Enterprises), whose distaste for red tape and regular liquidity needs is universal. It helped too that the founder, Sudhir Ruparelia had his roots in the SME sector, so his understanding of the sector’s needs were more than academic.

A cursory look over the bank’s books shows this bias towards the SME sector. As a business strategy it was hard to fault. In the last few decades the SME sector – retail, transport and real estate mostly, has been the fastest growing sector of the economy. This rise has been mirrored by Crane Bank’s fortunes which in the space of the twenty years grew to the third largest bank by assets in the country.

In a way Crane Bank served to bridge the dusty informality of downtown Kampala with the black tie conventionalism of the high street bank.

And one could say Crane Bank was winning, because in the last decade or so the high street banks have had to mix it up by going down town, to tap into this energy that was unleashed by a more liberalised and open economy.

Believe it or not there was a time when all the bank branches in Kampala were on Kampala road and opened from 9am to 1 pm on Monday to Friday.

By force of will banks like Crane Bank and Greenland Bank before it, demystified the banking experience for hundreds, even thousands of new account holders.

"Maybe Crane Bank’s undoing was that as the SME sector grew and the bank along with it and their clients’ needs grew, there was a need for more formality and more prudent risk assessment. Failure to make the transition may have caused them to trip up...

The truth of what really happened will be known in the fullness of time.

It’s safe to say SMEs will suffer the brunt of the changes that are going to have to be made.

But even sadder is that an indigenous bank with its finger firmly on the pulse of the local economy has come up short, yet again.

One of the challenges in our economy is the inadequacy of our indigenous capital class.

We are very good at starting up businesses – in fact at one time we were judged the best in the world, but we struggle, even fail dismally, to grow our businesses to significant size.

According to a list of a hundred top tax payers on seven indigenous companies – not counting parastatals, made onto the list.

The knee jerk reaction is to argue that foreign firms have access to cheaper funding compared to our local businessmen and hence the bias.

That is true to some extent, but what is even truer is that the foreign companies come with well-established systems and institutional frameworks that allow them to not only be more efficient but also take maximum advantage of opportunity.

"So our failures start with our business practice. And because our business practices are wishy washy we can’t get access to finance. Finance follows organisation not the other way around...

Crane Bank showed us that if we are organised we can even own our own banks which relate to our own peculiar circumstances.

And the need for a credible indigenous capital class is not based on some corrosive xenophobia but for desire to get more of our businessmen to the next level of achievement.

The lack of enough mentors in our society to lead others along the path they have taken is a serious issue.

Brazil churn out thousands of quality soccer players annually because every child in Brazil know an older boy who has made and more importantly saw him work towards professionalism. Every Kalenjin kid in the Kenyan Rift Valley knows another kid who made it. Closer to home every kid In Kisubi or Budo or Namagunga or Gayaza knows what it takes to get first division – it helps that they are of above average intelligence, but it helps more that they have seen not one or two or three people achieve but whole classes, year after year. That’s the mentorship we lack for our businessmen – forget the MBAs with their power point presentations.

For every member of America’s Fortune 500 list there are thousands who failed and hundreds who have not risen to their full potential.

It is a numbers game. That is why an indigenous bank is important. Because it is so integrated in the local economy and not driven by profit targets set in London, Johannesburg or even Kenya they are the ones who can build that class of businessman – that is if they can stay alive long enough.


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