Kenyan banks should be wary of ‘too big to fail’ attitude

Too big to fail. That’s what some financial institutions were deemed to be during the credit crunch in the US. The too big to fail theory asserts that certain corporations must be supported by government when they face potential failure because they are so large and interconnected that their failure would be disastrous to the greater economic system.

I will use the term loosely here to refer to institutions that, propelled by complacency, feel they are too big to fail and see no need to change how they sell.
With the capping of interest rates, I hope our banks won’t fall into the same ‘‘too big to fail’’ trap as did some media houses with the digital migration. This is the thrust of this article.

With the digital migration tsunami announcing its impending media disruption a whole decade in advance, it is instructive that major media houses in Kenya were still caught flat-footed.

Even when the tsunami was upon them they were still in denial. ‘‘We are too big to fail,’’ must have been their attitude; plus ‘‘we are a cartel’’.
And so they fought to stop an idea whose time had come. Of course they lost. They were switched off and over half of Kenya was plunged into TV darkness.

Decoder vendors like StarTimes had taken heed of the tsunami warning and ridden the wave of change.

Part of the futile fight some media houses put up was to take StarTimes to court for carrying their free-to-air content for, er, free. Then they took the Communications Authority of Kenya to court and Parliament seeking to have the decision reversed. They insisted on carrying their content solely on their set-top boxes, which they hurriedly imported and distributed first for Sh500, then for free; something they should have done a whole decade earlier and led, not followed, the digital migration.

And when all this failed, they clutched at straws with the final gambit: Kenyans will protest the ‘‘TV darkness’’ and influence a reversal. We didn’t. Instead, some Kenyans discovered they could live without TV.

Haemorrhaging revenue
Just as many discovered they could easily walk home when matatus went on strike protesting the installation of safety belts, speed governors and carrying excess passengers (what a cheek!). Even they thought they were too big to fail. Meanwhile, media houses were haemorrhaging revenue. With half of Kenya switched off, advertising reach was compromised. Consequently, advertising contracts had to be reviewed and sales suffered.

Long story short, they fought a futile battle for about three months and finally went digital, and became another statistic that nothing (not even a cartel) can stop an idea whose time has come. The price some are paying today for the ‘‘too big to fail’’ attitude is evident with retrenchments happening and stations being closed.

Admittedly, in a credit-starved and SME-propelled economy access to funds has far greater ramifications than ‘‘TV darkness’’. Further, Kenyan banks may not have had a globally sustained, decade old warning of the impending interest rate capping.

Still, it’s here now and it doesn’t help that culturally, banks don’t lead, they follow. Innovation is also not in their DNA. And judging by their knee-jerk reactions so far, they appear to be going the way of media houses. Will they succeed? Time will tell.

Is this an opportunity for them to interrogate if their selling is led, not by capacity to adapt, but by a too big to fail attitude? I think so.
What do you think?

Kageche runs the practical programme ELECTRC, (Exploring Leadership in a Time of Rapid Change). www.lendmeyourears.co.ke; [email protected]