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 on 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, have been the
fastest growing sectors 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 only seven
indigenous companies – not counting parastatals, made it 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 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 knows 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 a 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 Nairobi they are the ones who can
build that class of businessman – that is if they can stay alive long enough.
