The Mobile Money Revolution Is The One Killing The Banking
Sector
The Banking Sector Is Getting Killed by the Phone in the
Same Way Newspapers Are Being Destroyed By Social Media Or The Way The Email
Killed Post Office
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| The proprietor of crane bank Sudhir Ruparelia shakes hands with president Museveni |
A lot has already been written and said about the sudden insolvent
state that crane banks finds itself after being taken over by bank of Uganda.
Most of Uganda’s celebrated economists have attributed the collapse
of crane bank to non performing loans (NPL).
This normally happens when the citizens borrow money from the
banks and fail to service or pay back the loans, the banks seize their assets.
Ordinarily, the banks are supposed to sell off the seized assets
to recapitalize its financial base of the depositors.
In the case of crane bank, assets from the loan defaulters were
seized but not sold. Instead the bank transformed those seized assets into alternative
business ventures hence hurting the capital base of the bank.
This is what the Americans referred to as credit crunch.
In America People borrowed money and invested it into real
estate but they did not yield the intended profits. The banks ended up seizing
the mortgaged assets but also got stuck with them because there were no buyers.
So can you can safely say that Uganda is currently enduring
a credit crunch of its own.
Lets Apply Some Logic
But could it amount to this under capitalization of the
bank?
I don’t think so because non performing loans alone cannot account
for the under capitalization of the bank because the bank doesn’t just lend
anyhow. The bank cannot just go on giving loans without looking at its capital
base. They do it systematically such
that money borrowed from one group of borrowers must first be recovered before
they give others.
For the last eight years I have been receiving my salary
from crane bank but I applied for a salary loan and they declined. Yet a salary loan is the easiest to service.
And in any case, the assets from these NPLs have not
evaporated in thin air. This means that crane bank could have asked for more
time to recapitalize itself by selling off those assets.
This was the same argument that was raised during the issue
of bailouts. President Museveni requested
these banks to give the indebted Ugandans more time to pay their loans instead
of seizing their assets.
This was the same favor crane bank required to stay afloat.
But the fact that bank of Uganda moved faster to take over
tells a different story which shows that there was more to this TAKEOVER than
what we are being told.
Irrational Conspiracy
Theory
There is an
irrational conspiracy theory that has been cooked up attributing the whole crane
bank saga to former Ugandan Prime Minister Amama Mbabazi, as the root cause. one peddlers of that theory if former press secretary to the Ugandan president Tamale Mirundi.
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| AN exited Tamale Mirundi shakes hands with Amama |
Tamale and his theorists claim that Amama Mbabazi and a clique of prominent
Bakiga was one of the majority shareholders of the defunct national bank of
commerce that was easily dissolved and taken over by crane bank. tamale therefore claims that these Bakiga effectively managed to revenge by bankrupting crane bank .
We agree that the banking sector operates on trust and customer
confidence to an extent that once someone hatches a series of negative stories about a given bank
in the national media, it affects the confidence of the customers and they
either stop depositing or withdraw their funds.
But we also know that customers also operate on evidence not hearsay.
I have not seen any bank that has ever been brought down by
simply publishing negative stories in the media.
Secondly, nobody has endeavored to explain a clear method
that these prominent Bakiga used to bankrupt crane bank.
Of course someone said that Kiiza Besigye withdrew his dime
four days before the bank went into receivership.
Was crane bank operating
on Kiiza Besigye’s money?
Critical Reasoning
So am trying to tell you that conspiracy theory that
implicates prominent Bakiga for having brought down crane bank in revenge for consuming
their NBC bank is irrational and doesnt make sense because there is no empirical evidence to prove
it other than hearsay and assumption.
The second one about non performing loans is also a false because
it could be rectified by granting time for defaulters to pay back.
In any case if it was non performing loans that brought down
crane bank then centenary bank which gives out more loans than any other bank
in the country could have been the first to close. But centenary bank is growing
from strength to strength even when it’s giving out loans to so many Ugandans.
So what other factor can we attribute the fall of crane
bank?
The Real Issues
One; the management of crane bank embarked on a massive
expansion drive that stretched and drained its resource envelope.
In a space of just two years, Crane bank opened massive
branches in Ntinda, Kawempe, Kalerwe, Fort portal and other parts of the country.
It’s obvious that it couldn’t sustain the operation of those
branches without bleeding financially.
The Phenomenon Of
Mobile Money Banking
but the fundamental factor why crane bank bled can be attributed to the emergence of the phenomenon of mobile money transactions that obviously affected the traffic of account holders in the banking sector as most Ugandans opted
to conveniently keep their money on their phone accounts.
Today, there are more Ugandans with a mobile money accounts
than with a bank account.
This means that while crane bank has been opening branches all
over the country, it has not got the clients to bank with it.
This phenomenon of mobile money obviously spells doom for the
banking sector.
In the next five years, the number of Ugandans with a bank
account will shrink to considerably negative numbers in comparison to the increasing
number of Ugandans with mobile money accounts.
I can predict with utmost confidence that the banking sector
will only thrive on salary accounts and loan services.
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Banks that don’t have agencies paying salaries with them and
granting loan services will perish completely.
Centenary bank might survive this mobile money revolution because
it has managed to deal with those two aforementioned exigencies.
The mobile money revolution is going to have the similar
effect to what the email did to post office (which made it redundant to write letters
with postage stamps since you could easily email the same to the intended
target), similar to what phones did to watches (it’s pointless to buy a watch
since you can easily refer to the one on the phone.
This phenomenon is also similar to the effect that social
media has had on print media. Today the social media breaks stories before they
are printed in the papers making the papers completely redundant.
In fact I can predict that in future newspapers will become cheaper
and cheaper and even go for free.
It’s the same way that machines replaced human power.
Thanks for reading this far.
Fred Daka Kamwada is a
journalist and a blogger you can connect with him on kamwadafred@gmail.com
