Tuesday, January 18, 2022

Capital Bank leads the charge of the second-tier banks

The hallmark of Botswana’s nascent banking sector has been its dominance by the Big Four ÔÇô Barclays, Standard Chartered, First National Bank, and Stanbic.

But now new players like Capital Bank are increasingly growing their market share and giving the older banks a run for their money.

More than the size of the economy, the sheer weight of competition from older banks with more established brands was one of the steepest hurdles to Capital Bank’s entry into the market, says Sriram Gade, the bank’s chief executive officer.

But the bank has beaten off the odds, with an ethos that aims to deliver a superior personalised service to customers, fast response times, competitive rates and technologically advanced products.

That has led to swift growth. Achieving break-even in its first year, the bank has expanded at the pace of one new branch each year since its flagship Gaborone branch opened in 2008. This year, Capital Bank breached the P1 billion-mark in deposits. “We believe this is a clear illustration of customer confidence in us,” says Gade.

Indeed, newer entrants like Capital Bank, by carving out niches for themselves, are already trimming the market share of the Big Four, which is now down to 85 percent from nearly 90 percent in 2009.

The competition brought by the smaller banks is good, says Gade, because it encourages improved customer service, technological innovation, rationalization of banking charges and efficiency in the banking sector.

Yet there are areas of growth for the new players like Capital Bank, which include the low income market and underserviced business sectors. About 55 percent of the bank’s customers belong to the SME and institutional sector, while 45 percent are retail customers. “Our focus, as of now, continues to be the SME sector,” says Gade.

To encourage savings, the bank recently removed minimum balance and account maintenance charges on savings accounts. It has also enabled customers to use their ATM VISA electronic debit cards at ATM points of other banks in Botswana by absorbing the extra charge.

In striving for growth and achieving it, Capital Bank is showing that far from being stifling,
Botswana’s banking sector, long being dominated by the big banks, has room smaller banks to flourish. Gade says more banks are likely to enter the market. “All the small banks are making profits,” Gade says. “Any new bank capturing a market share of 2-3% can achieve a reasonable return on equity.”

Capital Bank’s foray into the market has seen it as the first commercial bank with local shareholders from the inception of operations. “Having local shareholders has helped the bank in understanding local conditions and gaining market intelligence,” says Gade.

The bank’s aggressive push, unrolling at the pace of a branch a year, has given the management team confidence they can have at least ten branches by the end of the next five years.

In front of the Capital Bank head office façade along Old Lobatse road is a group of street vendors who ply their trade. Unlike other vendors elsewhere in the capital, they carry on business blissfully aware that the people inside the bank have their interests at heart. At its cost, the bank has taken out insurance policies for all of them.

“This means that the vendor’s families will receive insurance funds when they need them most,” says Gade.

The Capital Bank chief executive says this is only just a measure of how far the bank is willing to carry its role of social responsibility.

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