Kenya Post Office Savings Bank, popular as Postbank, has been operational since 1910. The State-owned institution is the only fully-fledged savings bank with 97 branches countrywide.
Managing director Raphael Lekolool, who joined the bank in June 2020 after more than two decades in senior managerial roles in privately-held financial institutions, spoke to the Business Daily about why it has been stuck on the banking runway for decades as smaller institutions fly past.
How was it transitioning from the private sector to the public sector?
It is an interesting journey. The issues are quite complex in government. There is bureaucracy and the decision-making process is quite tedious. It just doesn’t stop at the board, there are other layers.
That is quite different from the private sector where the management and the board finish and finalise everything and in a month or so, you are up and running.
Here before you address or implement something, it will take you quite some time. For example, if you want to make changes in staff emolument, you can’t do it yourself.
You have to go to another body like SRC [the Salaries and Remuneration Commission]. If you want to change the way an organogram is, you have to go to another body.
How do you manage the bureaucracy in government?
Building relationships and connections with other institutions is key. That way, if you have things to be approved it can be faster.
The ability to respond to the market is not as dynamic as when you are in the private sector. For example, if somebody comes up with a new savings product, it requires some investment and it was not factored into the budget, you have to wait for it in another year.
So it makes your ability to change things difficult.
It must be frustrating...
You have to be patient and meticulous. You have a chain of institutions you have to go through and convince before you can move.
It can get tiring, especially if you are from the private sector because repeating the same story three or even five times may not be easy.
What is this one thing that has left you frustrated because of the processes?
You can’t change the salaries of the workers yet you are competing with big commercial banks for talent. You really want to review salaries, but you are told, you are parastatal category A and your maximum salary is this and that.
We are the only bank in that category and so you are put in your own box. So you don’t play outside that box while the guys you are competing with play outside the box. It constrains you as an institution.
How necessary are these government processes?
You can see where it is coming from. It is more of a protection of institutions and public resources. There is no room to start second-guessing.
This is unlike the private sector where there’s a lot of room to innovate. There you can try out something, fail and move on to another one by learning from that experience. Here, you will face questions. Why did you do that? We have lost money.
How has this experience shaped your managerial philosophy?
It has changed a bit. I have had to improve my report writing and convincing skills. In my former life in the commercial world, it used to be that you are looking at the board and you know what they want and deliver it.
Here you have other entities who have a different view of the institution. It has made me realise that it is not one bullet that will finish the job.
I have to wear different hats at different times depending on the audience and address the needs of different audiences differently.
Generally, Kenya is not doing well when it comes to savings as a share of GDP, and we are even lagging neighbours in the region…
We are doing very badly in terms of savings in relation to the GDP. Even in the region, looking at Uganda and Tanzania, they are about 20 percent of the GDP.
In more developed countries, it is above 40 percent. It means there is a gap in what we need to do to encourage a savings culture and that’s where Postbank comes in.
What feedback have you gotten from your interaction with the youth and adults for not saving?
Most of them cite the high cost of living and indebtedness. We have much more credit products than savings. If you look at the push on digital lending, it is really high but you don’t see the same push in terms of savings.
Most people look at the money they have and conclude ‘we don’t have enough to save’. But that should not be the case. No matter how little you have, you should save a portion of that.
If you start saving, say 30 percent of your earnings and stop that YOLO [you only live once] mentality for once, you will have a decent life in future.
As a State-backed savings bank, what have you done about this?
We are trying to inculcate saving discipline from a young age. For adults, we educate them that they are saving for their future. The future will not take care of itself, you need to take care of it by saving today.
How can Kenyans in a debt trap recover and start saving?
The key thing is understanding your whole debt situation. When you look at most Kenyans today, they have borrowed from multiple lenders.
So they keep borrowing from one to pay off the other. That continues that cycle of indebtedness. They should take stock of where they are, then start to pay off small debts so that they create room to clear the bigger ones. At times, people only look at bigger loans and it frustrates them.
Starting with smaller ones gives you some breathing room. If you start small, you’ll be able to target the bigger ones. You may have setbacks here and there, but if you’re consistent on that journey, you will make it. Discipline is key here.
How do you maintain that discipline?
Discipline yourself by saying ‘no’ to expenditures which can wait. Cut off what you don’t need. Do not live a lifestyle that is not yours.
Live a lifestyle that you can afford. That means cutting down things you’re doing for other people to see. Do not look over the fence and do what your neighbours are doing because you’ll be failing.
You will realise that out of those small, small savings that you do, you’ll end up saving a lot and clear all those debts that you have all over the place.
Within two to three years, you will find you are living a decent life that is debt-free with some savings.
On average, what share of income should go into savings?
If you can, do 30 percent. But on average it should be 15 percent.
The return sometimes pushes away people from saving.
So to speak, you may not get the biggest return out of your savings because you can do many other businesses out there which will give better returns.
There is always this craze to get into business. Before you do that you should ask yourself if you understand it and are passionate about it. So what alternative do you have? Save and you will get earnings out of it.
At Postbank, what return will I get?
You get a return of between four and nine percent. Your interest does not attract withholding tax and the way our products have been structured, the account itself does not attract charges.
When you are not prepared for business, that return may be a better option than the business you are going to do out there which could wipe out the capital you have.
Some people associate Postbank with old members of society.
When you look at the clientele in the past, we used to be the one to process university Helb [student loans]. We used to interact a lot with youth. When they transitioned to the working class, most of them stopped banking with us because it was more of a bank for getting stipends from the government.
We want to change that perspective for people to look at Postbank as a retail bank. We want people to start looking at Postbank as the most innovative bank that is there. We were the first bank to offer the first money transfer from Western Union, one of the first banks to give credit cards and amongst the first to do agency banking.
We now want to bring out digital products in the banking industry. We will be coming up with innovative products for saving. Watch this space.
Where do you see Postbank in three years?
We will be much more digital. The ability for us to adapt to what the customer want has really changed. We have brought on board new systems to accommodate the needs of digital customers.
