Don’t get me wrong. My mission is just to talk about the year in general and not to issue a verdict condemning it in its entirety. And yes, there are positives as well. Things are ultimately starting to open up but most of us have war wounds to dress. However, although confronted with the harsh realities, a lot of good and bad lessons were learnt on both sides of the bench (bankers and clients). As I wrote a couple of months ago, the future can no longer be what it used to be. Banks worldwide had to review a lot of things to remain operationally sound.
According to an article by Deloitte titled “2022 Banking and Capital Market Outlook,” the pronouncement is that Banks are at a make-or-break moment. The pandemic was the ultimate punch to the gut, testing banks’ resilience in unforeseen ways. The good story to tell, however, is the fact that many banks are emerging stronger and have a newfound conviction that they can overcome almost any challenge that comes their way. The overwhelming evidence before our very eyes is that there has been phenomenal growth in digitisation, convergence of industries, fusion of technologies, proliferation of increasingly intertwined ecosystems and blurring of product constructs.
These developments are at the very least assisting us to find some solace in the hangover from our immediate past. In all honesty, both the banks and their clients were greatly inconvenienced. Cashflows were affected while other clients and businesses could not even generate any revenue. Clients, be it individuals, SMEs or large corporates, struggled as loan book underperformance for banks became a serious risk. Most banks struggled with liquidity as deposits from clients were no longer forthcoming.
For core banking activities to take place, there must be a healthy balance between lending and funding activities. Banks need deposits from clients to be able to lend out money, hence keeping the loan to deposit ratio (LDR) at desirable levels. We have been through a lot and some attempts were even made to cushion clients and businesses. Some clients were granted payment moratoriums but others faced earth-shattering consequences as assets such as homes, offices and property were lost. Similarly, banks faced their own devils. Credit recovery through repossession is never a desirable choice by any bank and the process is very expensive and emotionally draining for all involved. Moreover, banks had to part ways with some of their most priced human capital as they could not keep everyone on board. The workplace had to be redefined, thus presenting additional costs such as installing WiFis, ensuring connectivity, and providing ergonomically sound furniture for staff members working from home.
But the greatest lesson is how we do things differently, going forward. How banks review credit policies, lending standards, appetites, distributions channels, staff productivity and output, the list is endless. How do we ensure that clients continue to perform transactions even if physical branches are closed or Relationship Managers are forced to be at home due to lockdowns and curfews? Life still has to go on and clients want to interact with their banks to transact, acquire insurance, and invest or obtain credit. Comparably, although banks are mandated to practise responsible lending, for clients, more than before caution has to be applied when financial choices are made. Businesses likewise must match their assets with suitable insurance products, assess credit risk and select the right credit products and mitigate the risk, should things tun awry. For a better Botswana, generally speaking, we need financial literacy to improve from where we are and to attain a higher level of financial inclusion where everyone, regardless their income, can contribute to the overall economy.
Anyway, as I already declared, today’s article is not meant to be abstruse but to reflect more on the years 2020 and 2021. This being the last article for this year, it is only fitting that I use the opportunity to thank The Business Weekly & Review team for availing platforms in both print and digital to share my thoughts. A very special thank you to my readers for their continued feedback. We are bringing the curtain down on 2021 and 2022 is almost upon us. Gears ought to be shifted and lessons learnt used to create a better tomorrow. Lastly, may God bless the souls of all the industry we lost. Rest in peace to every man, woman and child we lost in 2021. Ladies and gentlemen, Merry Christmas and Happy New Year!
LinkedIn: Gomolemo Kololo Manake