United Bank bets on SMEs for Kenya expansion

United Bank of Africa (UBA Bank) is the second bank from West Africa to enter the local market following the entry of Ecobank in mid 2008.

UBA , which has started a green field operation, is looking at entrenching its presence in the market through a cocktail of banking services and establishment of branches across the country.

The bank intends to leverage on its global reach to provide local businesses with a platform dubbed Afritrade to transact their businesses much more cheaply through the use of trade instruments such as trade finance and letter of credit.

The bank is looking at sharing its global success locally. It recently moved up 161 places to be ranked 285th from position 451 in the latest ranking of the Top 500 Banking Brands by the Banker Magazine.

UBA is one of Africa’s leading financial institutions, offering universal banking to more than seven million customer accounts.

It currently operates in 16 countries including Nigeria, Ghana, Uganda, Cameroon and Côte d’Ivoire. Other countries of operation are Liberia, Sierra Leone, Senegal, Burkina Faso, Chad, Benin, Tanzania, Uganda, Zambia, and Guinea. It also has presence in international markets such as New York, London and Paris.

Business Daily spoke to Mr Manz Denga, the regional chief executive officer of UBA Bank operations and the managing director of Kenya’s UBA operations.

What necessitated the entry of UBA into the local banking industry?

Our entry into the Kenya banking industry is actually belated as UBA’s first attempt to enter Kenya dates back to 2005. In 2005, we applied for a licence to start operation in Kenya as a green field operation.

But the application was turned down on the premise that Kenya had too many banks. We were given the option of entering the market by acquiring an existing bank. At the initial stage, we started negotiating with three banks which we thought we could acquire.

But we differed with the management of the three banks over pricing, with our due diligence indicating we could only offer lower prices than what the owners were asking for.

After failing to agree with the owners of the three banks, we decided to set up our operations in Uganda where we started in 2007.

In 2008 we re-applied and were granted a licence by the Central Bank of Kenya . We opened up our first branch four months ago. Currently, we have three branches.

What is your business plan for Kenya in terms of expansion and product offering?

We intend to extend our reach throughout the country through branch expansion and products and services targeting all sectors of the economy.

In terms of branch expansion, we are looking at opening up 150 branches in the next three to five years across the country.

The expansion drive will be through new brick and mortar branches and possible acquisition of existing banks.

In terms of product offering, we are targeting individual customers, corporate and commercial clients with a wide range of market driven savings and credit products.

Given the central role of the small and medium size enterprises in the Kenyan economy, we have innovative and business friendly products that have flexible features catering to their unique needs.

Branch expansion is an expensive undertaking for a bank, especially a new entity like UBA. How much capital has been set aside for such a project?

It is true it is quite expensive to set up new branches and with our plan to roll out services across the country, it is certainly going to cost us a fortune.

But given that we intend to make our presence felt across the country, the bank has no option but to set up operations.

We estimate that a new branch will cost us approximately $15 million and the funds will be provided by the bank group through a $450 million Africa expansion kitty .

Are you considering other affordable options such as the yet-to-be rolled out agency banking model?

We are open to other options that will allow us to hasten our rollout programme.

Once the agency banking model becomes operational, we will actively pursue it to allow us to enhance our reach at the lowest possible cost.

In addition, we are still looking out for potential buyout of an existing bank which will allow us to expand much faster.

But we intend to roll out more branches as planned to ensure we are actively present in the market in the coming years.

UBA Bank has operations across Africa. What value proposition does your regional presence have for the Kenya business?

UBA bank is both a Pan African bank and an international one, with operations in 14 countries across Africa. We also have international operations in London, China, USA and France.

This regional and global outreach is the best value proposition we can give to the Kenyan businesses which carry out transactional services with other businesses in these countries through our Afritrade.

Given that Kenya imports are largely sourced from some of these countries, our presence lowers the cost of transaction as businesses do not need to wire their funds through other international banks.

In addition, we are able to arrange financial services such as trade finance and letter of credit, hence allowing businesses to leverage their cash flow operations without providing the finances upfront.

The local financial industry is looking at the concept of bancassurance to drive the penetration of insurance services. What is UBA experience and does it plan to provide the service locally?

UBA bank has an insurance subsidiary, UBA Metropolitan ,which has enabled the bank to provide bancassurance services much more easily to its client in other markets.

The traditional selling methodology of insurance locks out many people from accessing the service.

But through bancassurance, we hope to reach more clients who are our database through “under-one roof service” concept.