My chat with a bank CEO

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1 Issue 18 - Quarter E-newsletter Issue 36 FEBRUARY 2015 EDITOR S NOTE T he importance of customer service in any organization cannot be overemphasized. In this issue, Ali Hassan, one of Gulf African Bank s most loyal clients shares his experience with the bank and provides insights worth adopting to enhance the bank s customer experience. We also take a look at salient issues arising from the recent Kenya Bankers Association s CEO s informative chat involving GAB CEO and Board member Abdalla Abdulkhalik with an interesting online audience. We further profile GAB s Structured Trade Finance expert as she talks about her product and her many years of experience with the bank. Read on for this and more! Edwin Savatia - Editor Basra Haji - Sub Editor INSIDE NAIROBI TRADE FINANCE AND THE KENYA BANK'S REFERENCE RATE (KBRR) ONE ON ONE WITH LILIAN WALUCHIO MOMBASA MY EXPERIENCE WITH GULF AFRICAN BANK ALI-HASSAN GAB CEO & Board Member Abdalla Abdulkhalik (in white hat) flanked by a team from Kenya Bankers Association and GAB during the online CEO chat session. My chat with a bank CEO G ulf African Bank CEO and Board Member Abdalla Abdulkhalik was recently hosted on Kenya Bankers Association s live online chat forum dubbed My chat with a Bank CEO talking about Trade under the broader theme of Drivers of the real economy. The session was very interactive with different users logging onto the platform to give their contributions by seeking clarifications aside presenting their points of view informed by their interaction with the industry. Abdalla pointed out that to access credit as an SME, you need to have a business idea, premises you will operate from, and projected cash flows for the business. This will allow the bank to make proper assessment of your business and extend credit to you as the customer, he insisted, adding that SMEs should try to formalize their business by attempting to keep formal records (accounts) which helps a great deal in enabling banks to assess their credit worthiness and in the long run, make access to financing easy to them. SME s According to the CEO, if an SME partners with people or groups that have had initial experience in business, then the chances of getting a loan to grow will be higher since for most start ups the risk is higher. Besides the cost of operations, banks also consider, security and insurance amongst other issues before disbursing a facility. Of core concern to the audience was the role that financial institutions can play in helping SME s access trade, how international trade for young entrepreneurs can be facilitated as well as how the Kenya Bank's Reference Rate (KBRR) has helped bring down the cost of credit in the country....cont'd in page 2

2 My chat with a bank CEO - Kenya Bankers Association & Gulf African Bank s Abdalla Abdulkhalik (Contn'd)...cont'd from page 1 This pushes financial institutions to charge interests commensurate to the risk the business portends. He pointed out that Kenya, in spite of its rigorous business health checks, the country still leads in terms of total value of credit advanced to SME s. He further encouraged SME s to visit and engage bank officials on the viability of their businesses and different financing options available as these institutions provide capacity building to customers. Trade Finance and The Kenya Bank's Reference Rate (KBRR) Trade Finance businesses, and in particular letters of credit, are naturally Shari ah compliant. This is majorly because it is a trade transaction and the fees and commissions charged are market driven and largely standard. Gulf African Bank s Trade Finance activities are directed to both the commercial and trade customer. The CEO encouraged more people to visit financial institutions, notably Gulf African Bank due to its interest free banking model and borrow since there has been increased transparency in how lending rates are derived after the introduction of the Kenya Bank's Reference Rate (KBRR). This rate is controlled by the Central Bank of Kenya and is not influenced by the bank. In as much as Trade Finance is mostly preferred when it comes to financing by banks compared to SME s, the latter are the lifeline of any economy, especially for developing nations like Kenya and still need support, he commented on the sidelines of this session.

3 My experience with Gulf African Bank Ali-Hassan Bondeni branch staff celebrating one of the customer service month initiatives. I t is often said and reiterated that customers are the lifeline of every business and the essence of its very existence. They are the consumers of our products and services, they inform our strategic direction, innovations, revamps in businesses and subsequently pay our salaries. Customer service therefore has been, continues to be and will always be one of the highest ranking competitive advantage for businesses the world over. It is prudent to be in the business of customer service first, for monetary success will be inevitable. A chat with one of the Gulf African Bank s clients is proof enough for this. Ali Hassan, one half of the duo that owns and operates Diamond filling station and a chain of other businesses at the coast has been banking with Gulf African Bank for two years now and he is not about to leave. The Mombasa based business magnet attributes this to the high level of customer service at his domicile branch Bondeni and Nkurumah branch, where he also carries out his transactions. Never, in his two years with the bank has he ever received lackluster service from the bank s staff! Well, didn t Katherine Barchetti wax poetic when she reminded us to always make a customer and not a sale? Mr. Ali describes Gulf African Banks services as perfect and he loves everything about the bank from the appreciation initiatives we do for our customers to the SMS alerts he receives after transacting. Gulf African Bank s internet banking (GABNET) and mobile banking (GAB PESA) facilities are phenomenal. I am able to carry out all my banking activities through my network enabled computer and my mobile phone, he says. Your customer doesn t care how much you know until they know how much you care - Damon Richards As Gulf African Bank grows, the team is always open to constructive feedback and customers, the bank s key focal point, are a great source of ideas. Ali has a few propositions that he hopes the bank will work towards reviewing and implementing. On mobile banking, he suggests that the bank increases the maximum withdrawal limit via the platform. On closing time, he proposes an extension in Bondeni branch s banking hours to allow customers to have the ability to transact for an additional hour and a half. So far, Gulf African Bank s Eastleigh branch is open until 6.00 pm on weekdays, 4.00pm on Saturdays and 1 pm on Sundays. He would equally be elated if he could be able to make duty payments (tax on certain items sourced from abroad) through his domicile branch. On geographical expansion, he commends the institution adding that he can t wait for the bank to open a branch or a representative office at the Kenya Ports Authority. Expansion has been captured in the bank s strategy and soon, depending on the outcome of various feasibility studies to be carried out, physical banking outlets will be opened at various strategic places to ensure convenience for the bank s customers. All in all, Ali Hassan has a strong liking for Gulf African Bank and recommends the institution to any person seeking what he describes as excellent, professional and personalized services

4 One on One w i th Lilian Waluchio When did you join Gulf African Bank? 11th July 2007 Where did you work before joining Gulf African Bank? Commercial Bank of Africa In which department do you work? Structured Trade Finance and Collateral Management Unit within Corporate Department. What does your day to day job involve? My job involves client visits with Relationship Managers (RM s) or Branch managers, preparation of call / Term sheets reports, provide support to trade operations, RMs and Branches. I also process Collateral Management transactions and support the clients when there is a need. I work closely with Correspondent Banking Department to ensure that Letters of credit and other instruments are well routed and accommodated by the existing correspondent banks. Most interesting aspect of your job? When a deal is executed, for instance opening of the Letter of Credit or Guarantee for our new and existing clients. What about the most challenging part? When I receive a deal that has never been done before due to its structure. It is also exciting as it is a learning point. Talking of Trade Finance, what does it really involve? Trade finance is the financing of the purchase of goods or the process that eventually leads to the selling of the goods. Trade finance contains major instruments such as Letters of credit (Import or Export), Guarantees and bills of collection. As noted, goods must be Shari ah compliant and must be acceptable in the country i.e. not banned. The nature of goods must also comply with GAB s credit policy for them to be financed. Is it true that Trade Finance is less risky compared to other forms of financing? Every Banking transaction has risks that are unique to its scope and in the case of Trade financing there is political risk, country risk, foreign exchange risk, product risk, market risks etc. As noted, mitigation of these risks translates into costs which are passed to the banks that need the service and also to their clients. Trade instruments such as Letters of Credit and Guarantees can also be used to clean laundered money and as such, it becomes very important for you to know your clients, their lines of business, their business partners i.e. suppliers and buyers and the financial institutions that are going to be used in the deals. Due diligence is of extreme importance. Trade transactions in a Shari ah setting cannot be abstract.there has to be an underlying well understood transaction involving goods or services which must be ethical in nature. This mitigates the risks of money laundering. However considering that these are off-balance sheet items, it is here that we also earn non funded income where the bank can only act as an agent and generate good revenue without getting funds out of its pockets. How does the Islamic banking model affect GAB s Trade Financing product? The Islamic Banking model is ideal as Trade finance is the only product that is Shari ah compliant by default. The Islamic banking Model was based on trade and that is why we have profit as our earnings as compared to our counterparts in conventional banks who have interest (Riba).This is because of the existence of an underlying asset. The bank can act as an agent in the non-funded letters of Credit (Al Wakala). In the funded arrangement the facility can convert into a Murabaha (Cost plus profit) where the bank and the client can agree on the payment terms. Other Shari ah concepts may be applied where they fit depending on how the transaction is structured. How have GAB s Trade Finance products been received in the market? GAB trade finance products have been fairly well received but there is a lot of competition from the other banks since there is really no major variation from the way this product is handled.the only major difference will come in the way the product is financed which is under the concept of Shari ah. The concept of Murabaha is usually very well received by clients. There is also a need for further sensitization within the market. What makes GAB the best choice for anyone seeking Trade Financing? GAB offers Structured Trade under collateral management financing which is not very common in the market. Trade transactions can also be structured depending on the clients requests as long as it does not contradict the concepts of Shari ah. There is an added advantage of flexibility. In the year 2020, where do you see yourself professionally? I would be heading a Trade, Risk or Operations. Parting shot We have a competitive advantage as GAB and YES, we will compete. 4 Gulf African Bank Newsletter

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