Banks merge branches to cut costs
Posted Friday, March 4 2016 at 02:00
Kampala-In 2009, mobile money services were rolled out in the country by MTN, and other telecom companies soon followed suite registering 1000 subscribers.
Five years down the road, mobile money subscribers have reached 19.5 million today.
This coupled with the evolution of new technologies and recent developments like agency banking has out-competed the banks in their previous space causing them to rethink their operational strategies, most embracing mobile banking.
This week alone, two banks, Stanbic Bank Uganda and Equity Bank issued notices in the press notifying the public about the closure and merger of some branches as well as relocation and phasing out of some customer service points.
Equity Bank, with a network of 28 branches in the country, has transferred Masindi Branch to Hoima Branch, Tororo Branch to Mbale Branch and Jinja Road branch in Kampala to Oasis Branch.
Stanbic Bank also merged Bushenyi Branch with Ishaka Branch to create a new Ishaka Branch.
Katwe Branch was merged with Aponye Mall Branch in Kampala to create a new Aponye Branch.
The mergers, according to Mr Brian Mukisa, the head of marketing and communications at Stanbic Bank Uganda, are “… a normal business exercise to consolidate our existing branch network and utilise new service channels to serve our customers better.”
With a network of 79 branches countrywide, Mr Mukisa said the bank has significantly invested in new ATMs where customers can withdraw and also make deposits with instant feedback to their accounts.
However, according to experts, the move is intended to cut operational costs as well as close down non-performing branches.
Mr Sydney Asubo, the executive director Financial Intelligence Authority, said it is a normal occurrence for banks to merge or close branches, and that there is no cause for the customers to worry.
Mr Fred Muhumuza, an economist and senior researcher at the ministry of Finance, Planning and Economic Development, also holds this view saying the scale-back on their networks could be to reduce on high operation costs.
He said in mid 2000s, many banks embarked on an expansion drive largely driven by expectations.
However, after operation in these areas, they realised that their targets and projections are not being met.
“,” he said.
He further said that on a review basis, banks make a decision to scale back since globally the economy has not grown as had been expected so many banks realise that the inflows coming in are not enough to run the branches.
Dr Muhumuza, however, states that mergers and withdrawals of branches by banks should not be looked at as a negative occurrence but “… it is for the survival of the banks because we need them capitalised and sound. “
He says this only reflects negatively about the economy. “It means the economy has not performed well, not growing as fast as expected and there are no business opportunities for these banks to ride on.”