Business News of 2014-03-11

Stanchart reorganises operations to favour SMEs

Standard Chartered Bank (SCB) is reviewing its business model in favour of small and medium-size enterprises (SMEs) after concentrating much of its funding expertise and resources over the years on the large industries.

The current move will see Stanchart, which is known to have more taste for large businesses, give more funds to SMEs while ensuring that it keeps to its traditionally big-sized clientele base.

The Managing Director of the bank, Mr Kweku Bedu-Addo, who disclosed this in an interview with the GRAPHIC BUSINESS moments after the bank launched its 'Banking in Africa' report in Accra on March 3.

He added that the move towards SMEs was part of a new strategy being adopted by the bank.

With this news, SMEs are likely to heave a sigh of relief, since the players in that sector have always complained about neglect by the commercial banks because they are perceived to be a risk area to venture because of their apparent lack of managerial and institutional structure.

"We are restructuring our business so that we can put a lot more focus on SMEs and what we call middle markets to give it greater attention in terms of how we manage that portfolio," Mr Bedu-Addo said.

The report is the outcome of a self-assessment of Stanchart's impact on five African countries, including Ghana, over the past one-and-a-half centuries that it had operated on the continent.

Report in detail

Among other things, the report found that the financial support of the bank led to the creation of some 1.9 million jobs in sub-Saharan Africa (SSA) and contributed some US$10.7 billion, representing some 1.2 per cent of the region's gross domestic product (GDP), to the SSA economy.

The study also found that the bank supported US$1.8 billion of tax payments to governments within SSA. That represents about 1.1 per cent of the region's GDP and 1.8 per cent of the combined GDP of the countries it operates in currently.

Stanchat, which operates in 36 African countries, is considered the oldest bank to have pitched camp in the continent some 150 years ago.

It currently operates in some 36 African countries where it supports the business community and the various governments with funds and financial expertise to do intra and inter country trades.

The bank's current study, which was conducted using its 2012 financial results, showed that the value of trade that the bank supported over the years was worth US$7.2 billion, an amount the bank said should be expected to rise in the coming years.

"We are banking in Africa, enthusiastic about the continent's potential and determined to be part of its future," the report, which was authored by Prof. Ethan Kapstein, a visiting fellow at the Centre for Global Development in Washington DC and Dr Rene Kim of Steward Redqueen, an environment, social and governance consultancy, said.

On Ghana, the study found that Stanchat's operations supported the creation of some 2,830,000 direct and indirect jobs, which is equivalent to 2.7 per cent of the country's current workforce.

It found further that the bank contributed some US$1.4 billion of value to the local economy and that translates to about 2.7 per cent of GDP – total value of goods and services produced in the country.

"Its own operations supported US$ million in value added through direct salary, taxes and local profits. Total exposure in Ghana was US$1,232 million as of the end of 2012, with about two-thirds being lent to clients in the local corporates and commodity, trade and agriculture segments," the report said.

Going forward

Although the study has exposed the bank to some rigorous scrutiny from the general public and some regulatory institutions in particular, the bank insist it is necessary, given that it serves as a guide to future business modelling.

"I think it’s the issue of relevance. Sometimes, you have to pause and ask 'am I really relevant?' We also thought that we needed to do something like this because with the passage of time, we all forget what actually happened," the MD of the bank's local unit said, prior to the start of a public discussion on the findings in Accra.

The current study is the fourth of its kind after similar ones, albeit limited to specific one country, were done on the bank's operations in Ghana, Indonesia and Bangladesh.

Its global head, Mr Peter Sands, said the findings of the current report confirmed once again that SMEs were powerful job creators.

"We will invest more time in looking at how we can work with our large corporate clients to support more SMEs through the supply chain," Mr Sands said, noting that the bank would be using its Clinton Global Initiative to expand its specialised training programme for SMEs to 5,000, many of which would be in Africa.

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