Saving should be our key lesson from Covid-19 pandemic - BRAC Bank

Tuesday July 28 2020

Mr Jimmy Adiga, the chief executive officer of

Mr Jimmy Adiga, the chief executive officer of BRAC Bank. PHOTO/FILE 

By Charlotte Ninsiima

It has been a year since you were declared a bank. How has it been with the new transformation?
The transition from tier IV regulation to tier II regulated by Central Bank has been both exciting and challenging in equal measure.
It was challenging because of the complexity and magnitude of activities to be executed while exciting because we are responding to the voice of the customer at the bottom of the pyramid enabling them to do more. So for us, we are focused on our ability to enable the poor to access full formal financial services within their community conveniently.

What challenges have you witnessed and how have you dealt with them in the new chapter?
There have been challenges in the process to adapt and adopt the new mode of doing business as a regulated entity and since we anticipated these, we prepared to deal with them.
Enabling our clients to access full financial services such as loans, savings, money transfers and micro insurance services means facing multiple risks which have to be managed in line with policy, controls and compliance guidelines.
Regulated operations have many processes and controls which are time bound so our staff had to learn and adapt to handle multiple processes in a timely manner.
These have been challenging, but the staff have demonstrated unwavering level of commitment to learn and improve day by day and we had put in place deliberate staff development and capacity building plans to enable them cope up with the changes.
Our customers were faced with new requirements and these came with additional costs to access financial services such as National ID, Financial card and CRB searches for loans which were not being done before transformation.
We had to engage in customer sensitisation before the transition to prepare them for the new mode of operation and how they will be impacted so they were prepared to expect these changes. However, some of them have had to drop out due to lack of National ID to fulfil the key requirements.
Compliance with regulation and accounting standards IFRS9 and IFR16 as a regulated entity impacted our numbers because of additional provisions and related costs and thus lower profitability than before transformation. Other operating compliance requirements such as IT systems and security meant more investment to comply, but good investment for the business as it enables us to operate in a secure environment not only for safety of our customer funds but for the safety of the entire financial services sector.
Increased operating expenses such as rent since we had to improve the location and size of some of our branches, personnel costs as head count increased, security and ICT costs etc.
The Covid-19 pandemic ended our first year of operation in style!

How have you stayed relevant to your clientele during the pandemic?
The Covid-19 pandemic has been disruptive at a global scale but with much deeper impact on the people at the bottom of the pyramid. This is even worse especially women and therefore, it was important that BRAC perform our noble societal obligation to ensure safety, health and survival of our clients so that we continue our journey with them out of poverty.
To reduce stress on our customers and boost morale to deal with the lock down, we granted repayment holiday to our borrowers during the three months of lockdown.
This enabled our customers to comply with SOPs from Ministry of Health and prevent infection and transmission but also focus on wellbeing of their families.

What does the capital structure look like five years from today?
We are sufficiently capitalised with more than Shs67b which represents 25.8 per cent of total assets which is way above the regulatory requirements and will keep this level of capitalisation growing since we are profitable and in line with the five year strategic plan.

What are the risk management policies and practices at the bank?

Risk management is at the heart of BRAC Bank while changing lives and livelihoods so as to be sustainable. We have a well laid down strategic plan with clear risk management framework as approved by the board; policies and procedures which guide us in implementation of the strategy in line with regulations.
Give an insight into your business performance from April 2019 to date.
In our first year of operating as a bank, we have registered 6.2 per cent growth in our loan book and 6.5 per cent growth in balance sheet size. We are particularly proud for remaining profitable after transformation.
We rank second among the nine regulated Tier II and Tier III (MDIs) while we rank between number 10 and 15 out of more than 34 regulated financial institutions in Uganda in terms of profitability, total assets and key performance ratios.


What lessons have you taken during the pandemic?
The pandemic has provided us with valuable lessons for the future.
We need to take good care of our staff, they will take care of the customers who will then take care of our business/ revenue. Pandemics have happened before and will continue to happen but after the pandemic, what makes the staff to remain loyal and committed to the organisation is how you treat them before and during the times of crisis.
The pandemic has also revealed that cash flow management is critical. Therefore, manage cash and liquidity prudently, ensure cost discipline and adapt resources to meet critical business needs while monitoring and responding to the unfolding scenarios. Also deliberately prepare to bounce back by keeping alive in the market, through customer surveys.
Partnerships are critical in times of crisis such as lenders with whom you can re-negotiate loan repayment obligations to enable the organisation cope up, donors to provide grants for recovery and support to clients to recover.
Digital channels make organisations remain in service of their customers in times of crisis and can keep accessing services. During lockdown, organisations with limited digitisation faced challenges from their customers demanding to access services. This leads to panic investment decisions and can be disastrous to cashflow as well.
The pandemic also brought out clear distinction between sectors that are fragile and those that are resistant to risks and disasters. Business or services that were allowed to operate during lockdown fall under sectors that are resistant while those that were closed are clearly fragile or lifestyle driven sectors. For risk managers or investors, there is something that has been learned.
Savings is important. The degree of the lockdown severity on households and individuals depended greatly on savings levels.
Those who had no savings or little had the worst impact compared to those who regularly saved for rainy day. So going forward, we must save and no amount of savings is small, cumulatively over a year. We have already engaged all our staff to save but also engaged in the drive towards saving among the bottom of the pyramid clientele.

What is your client focus and why?
We focus on providing a range of financial services responsibly to people at the bottom of the pyramid, particularly women and youth living in rural areas and peri-urban areas.
The reason for this focus is our vision where we look forward to a world free of discrimination and exploitation that is fair, equitable and works for all.

Since the segment of the community most at risk of discrimination, exploitation, unfair practices are the poor and particularly women and youth, to achieve our vision, we needed to focus on this particular segment.