“Receiving a national licence was our biggest achievement in 2016 “
Hassan Usman, Managing Director/CEO, Jaiz Bank plc, is a first class degree graduate in Accounting. In this interview with BusinessDay’s John Osadolor(Deputy Edtor-Abuja), Bashir Hassan(General Manager-North) and Kenneth Azahan, he speaks on issues that shaped the bank’s activities in 2016. Excerpt:
How was 2016 like to this bank in terms of growth and development? What strategies were put in place?
I believe 2016 was such an interesting and a very challenging year for every Nigerian irrespective of whatever they were doing. However challenging it was, we thank God that all the indices show that Jaiz Bank as an institution has grown significantly. For example, our deposit base grew by 30 percent, our assets similarly grew from N27 billion in December 2015 to about N36-N37 billion which is also another 30 percent plus. These are the key ingredients for banking.
We are not as bullish as we would want yet. In the foreign exchange market, we have not done well for obvious reasons. The market was difficult and also the way we do things also means we will not be able to play in the market very well because of our calling. Overall, I can say that it was very challenging, our aspirations to meet with some level of profitability have not being realized but looking at the perspective of how difficult the economy was, I believe we did fairly well. If you look at other activities, I can tell you we have also being active in putting the pillars that will make the institution grow and get strength.
We increased our share capital by about 50 percent from N10 to N15 billion. The requirement for us is just N10 billion but we proactively increased the share by about 50 percent; our share capital now is about N15 billion. We also got the national license to increase our branch network to reach Lagos, Ibadan, Ilorin and Port-Harcourt in the southern part of the country and more in the northern part. We also, during this period, listed the shares with Nigerian Stock Exchange which, God willing, we will do the ceremony later this month or early February to commence official trading of our shares. I can say that yes it was challenging but quite eventful for us. In 2016, we grew the business by an average of 30 percent whereas in other climes Islamic banking institutions grew by between 15 to 20 percent.
What was your target when you began the year? Usually, institutions like yours set targets at the beginning of every financial year?
What we targeted if I can recall, was to increase the balance sheet to about N80-85 billion and we ended up having N70 billion. In December 2015, we had about N55 billion and we grew our balance sheet to about N70 billion by the end of 2016. But as I said, this was less than what we targeted. We appreciate it was because of the challenges of the year.
Could you have achieved more without the challenges?
Yes, because if not that 2016 was that challenging until the end of the year, may be the last quarter, there were no much activities- deposits were not growing, businesses were having difficulties paying their obligations. You know our type of business, we cannot earn when there is past due, and we have to persevere with the customer until we can work out the situation.
What can you say was your biggest achievement in 2016?
The biggest achievement for me I think is getting the national licence. It’s a significant milestone because we have agreed that this bank is for all Nigerians and it is supposed to be in every nook and cranny of the country. Yes, you have information technology that allows you to reach people but you still need to have block and mortar branches that can be pivotal for people to reach you. So, getting the national licence was the major achievement for the year. The others follow, but also the fact that in spite of the difficulties and also our own model, we were able to live above the waters, we were able to grow the business by more than 30 percent is by no means a small milestone.
What would you say was the greatest challenge for the bank in 2016?
The greatest challenge for me was the foreign exchange: lack of availability of foreign exchange was a big issue because many of our customers could not have the patience to follow our own way of doing things. You know when a customer with foreign exchange who has a deposit looks elsewhere; he will also take the deposit. So, if we had foreign exchange availability, our balance sheet and profitability would have achieved 100 percent of our budget.
Was there a possibility for you to foresee the foreign exchange challenge and find a way around it?
Even from the beginning of the year, it was clear that foreign exchange will be a problem because the main source of revenue was crude oil sale and things were going down south; prices were plunging, Niger Delta restiveness was growing and all that. So, everything pointed to the fact that we were going to have shortage and the government will not just spend the reserves because if they do, everything will collapse. Whether the strategy taken was right or wrong is something different. Yes, it was foreseen, but you must have to know that we are still a baby organisation so we do not have multiple sources or channels of getting foreign exchange. Also, the disruptions of 2016 affected our plans for other contacts such as MoneyGram, Western Union amongst others that bring foreign exchange into the country either from Diaspora or any NGO that is sending money. Because of the circumstances of our young age we have not developed those competencies or capacities and that definitely means we do not have fall back. We don’t have our customers who have either exported or the CBN when it comes to your turn to sell it means you do not have foreign exchange.
How has it been like at the NSE in terms of acceptance, investor sentiments in the listing?
We made a contract with our shareholders. If you go down the history lane in 2003, we did an IPO, no track record, nothing and we raised at that time N2.5 billion. What we got from the IPO was more than N2.5 billion because the offer was oversubscribed but we retained only N2.5 billion which was in line with our prospectus and part of what we promised then was that once we established the bank, after 3 years, we would list the shares. It was a promise that the board wanted to keep.
Even though, there were sentiments that we waited until we started paying dividend but we thought we made a promise and operated profitably in 2014, 2015 and 2016 will be third year of profitable operation, so why don’t you keep your promise and create liquidity for the shares. I believe the Nigerian Stock Exchange was excited by our move to list; our multiple shareholders who were used to going to OTC market when they want to sell their shares were also excited. I believe that will also add confidence to the fact that Islamic banking is now gaining ground in the economy. We are doing a business of confidence and we want the market to know that we are here. Listing increases transparency; you have now two more regulators, the Nigerian Securities and Exchange Commission that will require you to provide information on time, you also have to meet the listing requirement of the Nigerian Stock Exchange.
Corporate governance that is the requirement for listing is also enhanced and so, not only Nigerian shareholders but also international shareholders. People with interest and investors will now have more confidence in the organisation; the depositors will also have more confidence in the organisation and the shareholders are free to go in and out of your shares. You have created liquidity; you relieve any tension that is there for those who would have loved to after ten-twelve years of holding your shares to move in and out.
What is the level of acceptance for your newly established branches in other parts of the country coming from the background that some people have this mindset that Islamic banking is for Muslims alone?
So far, wherever we are, we have all kinds of customers. I think the issue is that whether Muslim or non-Muslim you need to be educated about the product type. It is a variant of financing but it is the same in terms of the utility that we create. The difference is in the way we intervene. So, we try to let the customers know. Also, because they see some of our staff who are non-Muslims they appreciate that the services are not limited to Muslims. I think it is no longer an issue as it is a straight forward thing that everybody knows. The apprehension that it might be some kind of ritual banking is gone now because everybody comes in and out so I feel we have passed that barrier to a large extent. Happily also we are not the only ones selling Islamic products now. Sterling Bank and Stanbic IBTC are selling and we expect a lot more operators to come into the market.
What is going to be the focus and target of Jaiz Bank for the year 2017?
In 2017, we believe it is going to be a lot better than 2016 for Jaiz Bank. We have learnt a lot of lessons in deepening and improving our turf. Collection is a major fundamental issue because when you have recession as we have, collection will be a fundamental activity for a bank. So, we are going to emphasise prompt collection. As I said for us when you have pass dues, that is, people who do not pay you on time, it is critical to our own success. We are going to focus more on that, focus on delivering to the last line using technology and increase in the number of branches. We believe we have to grow and reach as many potential customers as possible. 2017 will be a growth year for us, we are very hopeful that we will improve on the level of growth we have had.
We need to grow the muscle of the organisation. Also, the offerings; the use of technology, I have plans to compliment the branches with robust offerings of technology to be able to reach the customer wherever he/she is. These are some of our aspirations and we also hope to improve significantly in our activities in the foreign exchange market in 2017 and we are hopeful that the federal government will issue the scoop it promised in the first quarter, and so our liquidity management will also be enhanced. These are specifics which we believe will come in 2017. Again, because we have young generation of staff, we need to emphasis on training so that we can generate better customer service and customer experience to be able to have motivated and enhanced capacity of the organisation as a whole. These are some of the things we have put in line for 2017 and we believe that the nation itself has learnt a lot of lessons for not doing things at the right time a situation that caused the bottle up of the economy in 2016. We will do our part; I believe that when we meet in 2018 the story will be different.
How do you run your property section considering the fact that you are not really interest based?
What we do is that we own the property with the customer, which is what they call co-ownership. We co-own a property but when you look at it, it looks like a lease. If the customer brings 20-30 percent of the cost of the property we bring 70 percent and buy the property and lease it to you. You pay us rent gradually and part of what you pay which is the profit that we share with the customers/depositors and part is what you are buying us out with and in due course the actual rent you are paying becomes smaller and the principal investment for the property keeps on increasing. That is how it works and it is sold in all our branches. In addition, we have partners who develop the property/estates so, it is either you bring or you come and we offer you what we have in our stock.
What is the new thing that Jaiz Bank is promising the customers in 2017?
What I can commit is our determination to enhance the quality of service for all our channels. These are areas we will further ensure that the customer experience is enhanced. We have already stated last year robust training of our front line officers and customer officers and we are going to continue that in addition to checking on them to enhance the level of alertness for our front line officers and quality of service. We are doing more customer surveys, touching base with them to find out where they want us to improve our services and what gap are there in what we are offering so that we can make them better partners with us.