It’s now time for banks to rethink their profit strategy

• For a start, owners of the bank can be asked to deposit a minimum of Sh100,000, which is not refundable. This will form the bank’s initial capital and its return is prohibited by the Companies Act.
• It needs to be understood that the owners of the new bank will be at liberty to continue operating at other banks as they buy time for the day they will cut and run to their bank for ever.
• The new bank will need to be run by bankers who truly understand the task at hand and as such, the chance of the bank succeeding will be expected to be high.

I read the article by Dr Mbui Wagacha in the Business Daily of Tuesday 14th August 2012. Dr Wagacha illustrated how banks in Kenya pursue a narrow angle when chasing profits forgetting that they stand to reap even more profits in the long run if they decided to play ball with the policy makers.

I have over the years being of the view that it is not too late to teach these banks a lesson. Kenyans need to be awake to the fact that they can come together and form their own bank.

Word needs to be spread far and wide and form a bank in which you will feel that you are a real owner. It is not enough to own a few shares in the established banks and rest on your laurels that you partly own a bank.No.

That bank in which you own a few shares will not know who you are when you go there to apply for a loan. You will be treated like any other stranger walking in to try his or her luck.

For a start, owners of the bank can be asked to deposit a minimum of Sh100,000, which is not refundable. This will form the bank’s initial capital and its return is prohibited by the Companies Act.

Lending
Given the capital contributed by each member, which can be increased gradually, a point will come when an owner will afford to get a reasonable loan say for his or her business upon meeting the set parameters for lending.

It needs to be understood that the owners of the new bank will be at liberty to continue operating at other banks as they buy time for the day they will cut and run to their bank for ever.

The new bank will need to be run by bankers who truly understand the task at hand and as such, the chance of the bank succeeding will be expected to be high.

Those employees will occupy a special place in the hearts of the other shareholders and as the bank thrives, a time may come in future when the hardworking employees will be remunerated with generous bonuses. Such a bank can be seen to be the bellwether if you like.

It will serve to dictate to other banks which had never known what a narrow margin was that if they did not mend their ways, they risked losing another customer to the now a few years old bank.

The government ought to assist wananchi to form the bank based on the lines that I have set out. The bank will be expected to take a keen interest on the welfare of its members by offering value-added advice here and there.

The bank can, as it gets a good foundation, even buy loans at other banks by some shareholders in the formed bank on mutually agreed terms.

I think when the banks see these happenings, they will rethink their “ profit strategy” and start to ameliorate the suffering of their borrowers by reducing  lending rates.
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