Dozie: Our Retail Strategy Gives Us an Edge over Competition

Diamond’s Chief Sparkling Officer!

On one of the floors in the PGD’s Place headquarters of Diamond Bank PLC in Lekki sits the rectangle-shaped office of the Group Managing Director/Chief Executive Officer. The tinted window blinds cozied up the room, creating an ambience of a good mix of comfort and workplace.

Wearing a white shirt on fitted black trousers, with his jacket neatly hanging on a coat rack standing just a few inches from his desk, Uzoma Dozie cuts the image of a simple but vibrant, knowledgeable and articulate business leader. Even though he heads one of Nigeria’s fastest growing banks, there are no airs around him. A warm personality, Dozie picks his calls by himself, even if from an unknown number – a habit uncommon with several of his peers. ‘I pick all my calls because I don’t know where opportunities would come from”, he said while explaining what has become a habit.

With a banking career spanning over two decades – close to a decade of which was spent as executive director across various roles and strategic business units including Credit and Marketing, Strategic Planning, Financial Control, Corporate Banking and Retail Banking – Dozie is no doubt a seasoned banker. The Diamond Bank helmsman also has a very rich resume. He graduated in 1991 with a Bachelor of Science degree in Chemistry from the University of Reading, England and obtained a Master of Science degree in Chemical Research from University College, London in 1992. A year later, he started his banking career in Guaranty Trust Bank PLC, where he worked in the Commercial Banking Unit, before moving to Citizens International Bank Limited, where he worked in the Oil and Gas Division. He joined Diamond Bank PLC in 1998 as an Assistant Manager and Head of the Bank’s Oil and Gas Group during which he expanded the bank’s Oil and Gas businesses.

He also served as the bank’s Financial Controller, its Chief Financial Officer, and later its Deputy Managing Director. In the course of his professional career, he attended the Imperial College Management School, London, where he obtained an MBA with specialisation in Finance. Dozie also spent time with the Amalgamated Bank of South Africa (ABSA), where he was exposed to the rudiments of Retail Banking and Wealth Management, Organizational Behaviour and Human Resources Management – a rewarding experience that led to the setting up of the Personal Banking Group with focus on offering propositions to the Affluent and Mass Market customer segments (Retail Business) upon his return home.

Presiding over the affairs of a major player in the banking industry at a time of financial turbulence – caused by the fall in oil prices, recent withdrawal of about N3 trillion government funds from the banking system following the introduction of Treasury Single Account (TSA) policy of the federal government, regulatory headwinds and loan impairments that have eroded profits – could be challenging.

In his office from where he directs the affairs of the bank and where he has been serving as the driving force behind the bank’s market leadership in the Nigerian Retail Banking space, Dozie fielded questions from Tokunbo Adedoja, Kunle Aderinokun and Abiodun Eromosele on how the bank has employed a robust retail strategy to stay ahead of competition and its contributions to the growth of several sectors of the Nigerian economy. He also spoke on the future of banking in the country

With the economic down turn, what kind of strategies are you adopting to ensure that you stay afloat?

Let me take you back to when we started 25 years ago. We started on two premises. We just got a licence, there were old generation banks then, and new generation banks were coming up, like Guaranty Trust Bank, Diamond Bank and a few others. For us, we were looking at which segment of the market is not been served appropriately and what we can do to enter there and provide service. It was the traders, the middle market, the traders who were moving goods from Lagos to the East and the East to the North and vice versa.

They were moving the goods with cash. They take physical cash and go and buy the goods. For us, what we said was that how can we provide service for them in a different manner. There was technology available and Diamond Bank spent 80 per cent of its capital on deploying a state of the art banking solution. It enabled us to be online real time then. So people will pay money into the account by cheque or by cash and they will travel down to where they were buying or selling goods and do their transactions, make the payment into Diamond bank and move on.

Diamond Bank did not follow the traditional pattern of branch expansion where banks opened in Lagos and start moving out of Lagos. We opened in Lagos, then Aba, then Kano, we were following the trade routes. We followed suppliers and distributors to open accounts. We were providing a service that all the other banks were not providing. All the other banks were focused on corporate businesses and government businesses. For us, that route to the middle market allowed us to enter the corporate market much quicker as a new generation bank than most other banks.

In those days, there were either cash or cheque books. Clearing days for cheques was five days; it means that if a distributor pays money into a corporate account, it will take five days to get it. We found out that most of the middle market businesses were paying Diamond Bank cheques into their banking account.

If they open their accounts in Diamond Bank, it means that they will get value immediately as opposed to five working days. Our move into that space was much faster. We got in there much quicker through our relationship with small businesses. Secondly, we started lending to this space which no one was doing. We understood the cash flows; they were putting their monies with us digitally. We could lend to them because we understood their cash flows.

We followed our customers to the WAMU region. We did so because there was a lot of trade between Nigeria and Benin Republic. Twenty five years later, we are coming back to what we know best, we are deploying a retail strategy and financial inclusion strategy. We are using the retail strategy even with our corporate clients. We know that lending to corporate clients is a…., now with the development in the market; it also means that the corporate clients can raise money by themselves via commercial papers.

Just like it used to happen in 1993, 1994 they get it cheaper and pay high interest to people than they will get for bank deposit. So, we know that that is not a sustainable business model for us. What a sustainable business model for us is how to partner with our corporate clients to help them move their goods and services, help them sell it to businesses. How do we help them improve their cash circles just as we did before? The new way to do that is by helping them digitalize their value chain.

This means that all cash payments from distributors, how to develop the distributor to give them point of sale or enable them pay electronically and pay their suppliers on time. When you digitalize that value chain, money is faster; you get more information from the customers. 90 per cent of my payments are digital because in Diamond Bank, our staff don’t use cheque books anymore, they either use their mobile payments or ATM.

So it means that if someone has paid through me for two years, I have an idea if he is single or married, whether their children are in Nigeria or abroad because you can see that from their statements. So that is where we are moving to as a bank. This has made us the biggest mobile financial service. We have about 8million people who use mobile banking to do their transactions.

Five million from the Diamond Y’ello space, 1.2 million from our core business and 300,000 from our market women. It means that our deposit base is predominantly from individuals and small businesses. It is their working capital, and working capital is monies they cannot put in savings, they need it for their business. From a liquidity perspective, we have always been very liquid. Before the new currency regulation, we had 50 per cent liquidity and that is because our customers can access their monies 24/7.

Part of customer’s decision making when it comes to putting their monies in a bank is whether they can get the money at anytime at anywhere. People will always put their monies where they can access it at anytime, and that is what Diamond Bank provides. From a liquidity perspective, we are very liquid because our deposit base is 75 per cent low cost deposit and 60 per cent of that are our retail customers.

It is cost effective and diversified. Our fixed deposit is minimal. So our need for expensive fix deposit is very minimal. Some of our customers complain that we don’t give high interest rate; we don’t do so because we don’t have to. From a capital perspective, we are strong as a systematically important bank. We are above the 15 per cent threshold. In this kind of turbulent environment, liquidity is very important. Capital is second.

If you do not have liquidity to meet your day-to-day obligations, there will be a run on the bank and your capital cannot save you. Capital helps you absorb the shocks from losses on lending. Nigeria is one of the highest in the world in terms of capital requirements. So, it poses a lot of challenge for us, we are supposed to be enablers of economic growth in the country.

Regardless of that, you want us to stimulate credit into that environment that is most risky, especially with limited capital. Because of the structures we have on ground and the models we are working on, lending in the retail space is less risky than lending to big business-taking N5 billion to one business. We have been in this business for twenty five years; we know how we started when we banked in the middle market, no concentration in a particular area. In times of economic challenges, if your customer base is diversified, you will have a hedged portfolio.

For us, we want to lend to multiple segments, multiple people in multiple areas and you can only do that if you have retail structure. You cannot do that in power sector, oil sector or manufacturing. The only way you can get that diversity is when you go lower down the pyramid. We believe we can serve the corporate segment, the middle market and the unbanked, using a retail strategy.

For the corporate clients like Dangote, Nigerian Breweries, they are all in the retail strategy, they are serving retail customers. So they understand retail, we understand their business and their logistics, distributions and cash flows. So, when we have a conversation with our corporate clients, we talk about the business model, where the customers’ preferences are and the customers” changing lifestyle. For example if I talk to a customer of a fast moving consumer goods company or Telco, I know that there business model will change because of people like my children.

For my kids, it is not voice that they are interested in, it is data. If they don’t come up with data models, very soon those people are going to look for other providers. Voice is just secondary, data is now the primary. Nigerian Breweries sells to distributors and distributors sell to the end users. Nigerian Breweries do not actually have an idea of what the customers wants, they rely on its distributors to give them feedback.

What we are doing as a bank is that if our customers are paying electronically and I know exactly where they are spending the money, what time of the day, which area in Nigeria. That information is useful for a company to determine it resource allocation, it product mix and who is actually consuming it products. When you have 1.2 million customers using mobile banking, there is something that you get.

These people are using different devices and networks to access data, it means that I can go to MTN and tell them the customer base using their services. Our competition is banks and companies that have a large customer base. If you look at Diamond Bank 25 years till date, you will notice that our last rebranding was optimization of our brands. We know that banking is not what people go to anymore, it is what should be done extensively.

Today, Diamond Bank is a platform for which banking is just an aspect. For any segment that we are in, we are going beyond banking. This is so because if it is just banking services you are offering, you will die very quickly. In our financial inclusion segment like Diamond Y’ello, we are going beyond banking by doing payment of utility bills. The MSME space is key to Nigerian growth. There are 17 million people unbanked, financial services is not the problem its just 30 per cent of the problem. There are financial advisory services issues, access to market and that is key.

Currently, there is over a N1 trillion available to small businesses in different areas. The Central Bank alone has N300 billion available for that space. We are working with partners from the IFC in different segments who have millions of dollars available to these people to lend to them. You have to be in a state of readiness as a small business to accept that money. So, it means there must be capacity building, infrastructure available and a business plan that says the business is sustainable. So not only have we provided the finances, we have also partnered with institutions like Lagos Business School so as to provide that capacity building. We try to create access to market for people.

So we have to move our small business owners to digital because you cannot do business if you are not digital enabled. So we have to decide on how to collect payments. Is it cash or electronic? How do you create market awareness? Is it by fliers? Are you using over-the-counter easy to use or digital media? Are you getting information about your customers? Information for us is the basis of competition for the future.

How much information do you know about your customers? What are their names? Who are their children? When is their birthday and what creative ways do you collect that information? I went to England and I bought some accessories and the woman said to me that she could give me a paper receipt or get my email address and send the receipt to me and in that receipt, there is insurance for one year. Some people often misplace paper receipt, even before they get home.

The company is doing three things, they are collecting data about the person so that can send him information later, they are saving cost because they are not printing and they are creating a customer experience. These three things are very powerful and it is repeat business that makes a difference between a business that is good and one that is not. So, that is the kind of thing that we are trying to imbibe in our business and help our customers put into their own business.

For us it is not how big our balance sheet size is, size for us is important but it depends on the quality of the size. For us the key determining factors of our success are the number of active customers that we have in our business. If we have 20 million active customers that you know their lifestyle, their preferences and needs, it is important.

Like you mentioned, banks are the engines of growth in any economy, what is the contribution of Diamond Bank to the development of other sectors of the Nigerian economy?

Fantastic! We are in 300 locations in Nigeria, providing direct and indirect employment. Secondly, we have over 11 million customers that we are serving, six million on mobile and five million traditionally. We are not just providing banking services for people. We are also showing people better ways of doing things. We have brought over one million people that were unbanked into the banking space in the last two years. So, it means that we have improved their way of doing business.

One of them is the BETA Proposition; it is a collaboration between Diamond Bank and women world banking, where we provide better financial services for people in the market space. Most women do not have time to come to the bank because of the nature of their businesses so they have to rely on ‘Ajo’ (thrift), but in this is that the risks are high and there are uncertainties. So in line with our beyond banking philosophy, we decided to take the bank to them. So, we did this on the mobile phone.

We built a banking solution around them which was centered on their mobile phone. We added a new layer of bankers, which are called better bankers who were HND holders. They did the work of the ‘ajo’ and the only difference was that they went to the market women and did their jobs for them using the mobile phones. They were given a banking card and we had their identities.

Anytime they give them money, they get a credit in their accounts. So, when they want to withdraw money, the person goes to them and they give them cash from their account and it is keyed into the system and the women get the notification of cash withdrawal and she knows her balance. In two years, 330,000 market people have signed up with balances in excess of N4 billion. In an average balance of account, it is actually higher than our savings account holders.

The fact that you were not in financial inclusion does not mean that you are poor; it just means that the services that existed were not convenient for your lifestyle. In a small business space, we provide education. For us, the success of any bank is the value of the customers that you have. If I am going to lend to small businesses, I have to educate them on financial discipline and help them sustain their businesses.

We have over 400,000 small businesses in our book, we charge you a fix fee every month regardless of your turnover. This means we will lend to you, we will also give you an opportunity to access our financial opportunities.

We partner with EDC where we ask people to enter into a competition where they come up with their business plans. Last year, we had about 5,000 entries, which was shortlisted to 500 people and finally we selected 50 who went into training for three months and it was shortlisted down to 10 and the last five got a grant of N3 million to further their businesses and if they reach certain level, another N2 million is added over time.

We have trained over 100,000 people through this avenue. We have conferences across the country where we get successful small businesses who come and give lectures to people on how to improve their businesses and they just pay a token of N1,000 and the place is often full. People want to learn about how to succeed. We provide technology to ease transactions and that is where Diamond bank is stronger.

We know that with technology, we can reach more people as we have done with our mobile banking. In 25 years, it took us twenty two and half years to reach 5 million customers and two years to double that number and that was with the help of technology. One of the things we are doing is that our Diamond TV is another access point for customers to access content to help them.

If they have questions, there are avenues for customers to ask questions on how to go about their transactions or access market. Why our contribution is critical is because in any developed economy, 70 per cent of employments are in small businesses, in Nigeria, 80 per cent of employment is the government, it is not a sustainable model. So, we know that the small business market is the engine of growth in Nigeria, so if we focus on providing and developing service for that area, we are going far and beyond in contributing to the economy.

That space is not enough to create the employment that is required to sustain the country. So, if more banks are in that space, then as a banking sector, we will be contributing to the growth of the country.

The profit warnings that banks announced earlier in the year rattled the capital market, what can investors expect from your bank in Q2?

Market is very tough right now and Nigeria is import and oil dependent at the moment and we are trying to diversify. So, if you look at Diamond bank, business portion of our customer base depend on foreign currency, which has been scarce, that is also a driver of risk asset, a driver of income. That also reinforces our strategy of going into the retail space.

What we expect to see from our approach is that in liquidity perspective, we will be better in Q2 because our deposit base is growing, we have been acquiring new customers despite the challenges, we have a diversified customer segment base from the bottom of the pyramid, to individuals, to small business space. That is going to continue to grow. Risk asset will be flat, retail lending is small because we can lend to one thousand people N50 million compare to lending N2 billion to just one customer and because retail loans are small sizes and duration is shorter, we are doing salary and pay day loans.

So, those come and go. What that does is that it impacts your profit line because you are generating fees. We expect 10 per cent growth of deposit in 2017 and we are in line to achieve it. We think that the nonperforming loans will be in line with the expectations and not to the detriment of our capital and we also think that operating income will be buoyant because we are serving a large base of customers. We have multiple products and services that people are buying into. We do not expect a disappointing Q2.

Following the recent action taken by CBN in a tier 2 bank, there are strong indications that banks will soon embark on massive capital raising exercise. Given the situation at the capital market in the moment, how feasible is this?

It is very challenging to raise capital anywhere in the world right now, not just Nigeria. You only have to look at what is happening in England where they are having challenges from a capital perspective. The business model from a country’s perspective has changed, there are a lot of uncertainties and when there are uncertainties, no body starts doling out capital. It is very challenging.

In that type of situation, you look at the capital management perspective. How do I utilize my capital more efficiently? What are the things I will have and what can I forgo and that is the model Diamond Bank is taking and the beauty of that for us is that when we look at it from a capital utilization perspective, we need to manage risk asset portfolio, be close to customers, engage them and make sure you can minimize deterioration of your loan book. For us, when it comes to foot print expansion, we do not have that problem anymore.

We have 300 branches and we believe that is enough and the next phase is how do we now engage with the community and that is part of our contribution. We already have up to 24 thousand agents who are Diamond Y’ello products, so we are providing more economic potentials from 24 thousand existing businesses to add income by providing cash-in and cash-out banking services.

So, we are expanding our footprint through already existing infrastructures and we know that the role of branches will completely change for the next five years. In other parts of the world, when people travel, they do not need to go to a travel agent, they just go online, but that is not the case in Nigeria. Soon, our branches will change, it is not going to be over the counter transactions, and it is going to be more of advisory services, a place to network, and a place to collaborate. If you go to our new branches today, you will see that the look, feel and design are completely different from what it was.

What are the statistics that put you ahead of your peers?

I look at it from the kind of business I am running and where I am going to. We are in the retail business and we are building a business for the future, which is determining how many customers you can bring under your book, how you can sell them in a cost effective manner and how you can create the best customer experience.

For us, we have over 7 million people using mobile, as a way of doing business in Nigeria, I do not think any bank has that number in Nigeria. It means my cost of funding must be one of the lowest in the industry. It also means that my sources of income should be diversified as well. If you look at Diamond Bank’s operating income from a size perspective, it means our operating income is comparable to tier one banks.

We have created a diversified money making machines, so we do not want to rely on the corporate banking system for generation of income, we want to generate our income from a systematically aligned infrastructure, which is connecting corporate to distribution to the end users because we know that money flows from government down to the grassroots. So, we are building a system that captures enough data by coming up with a business model that is appealing to all those businesses.

So, I understand what my corporate clients needs really are, beyond banking needs and I can build services for them around that and I know what my small businesses need just like what we did by coming up with Diamond integrated banking system. We can come up with solutions for them.

We work very strongly with Microsoft because we know technology is going to be key for businesses. We know people’s lifestyle, so we look at how we can partner and work with them so we can come up with the complete value proposition that makes sense. We do this across all our banking chain.

We have 1.2 million customers in our Diamond mobile, 25 years ago anyone when a bank wanted to do 100,000 transactions they must all come to the bank. It is not so anymore. Today, millions of our customers are doing more transactions because our uptime is always high, our mobile application is strong. Recently, the Cable News Network (CNN) featured two mobile applications when they did a story on mobile banking and only two mobile banking applications featured, that of Barclays Bank, which is one of the biggest in the world and Diamond Bank’s mobile application.

The thing about it is that where innovation in banking is coming from now is actually in Africa. And with that innovation, we are looking for how to get people that are in disparate areas into banking. It’s only technology that can do it and it has to be digital and it is only in Africa where you have the highest apart from India and China where you have the highest competition of displaced unbanked people in the world. So that innovation is actually centred around here, East Africa with Kenya and Nigeria, which have the biggest opportunity because we have a 180 million people of which 90 million is bankable, which is bigger than any country is Africa.

As you know, Banks are in a safe mode and are not lending. The question then will be as an industry where will the profits come from when you don’t lend?

Banks are in safe mode but we are lending. Our challenge now is to ask what people come to bank to do and provide different solutions. Once every quarter I go into a branch and do teller work for a couple of hours. One of those times I met a pensioner who told me he came to the bank because he had nothing else to do for that day. People have a choice as to how they do banking transactions. But when you relate that with lending, how do the customers borrow? They come to the branch.

What we have done is to bring technology to revolutionalise the process so that when a customer comes into a branch and says he wants to borrow; when his details are imputed, it initiates the transaction. We are trying to remove the inconveniences of coming to the bank for everything. As banks in Nigeria we have not developed an infrastructure to help people that we say we want to lend to, the small business like the retail people to make it easier for them.

It is only for the corporate banking clients that it’s easy. But for those people we say that this is the future of Nigeria, this is where we need to grow, what infrastructure have we put apart from the branch? So what we are doing now is that we have started our internet banking, we are moving with our ATM, we are moving to our mobile phone. So now if you want to borrow money and you are eligible, you can do it in a very convenient fashion. So we are on safe mode from the commercial sector, but where we are not in safe mode is in that retail space. So for us, what is the challenge? The challenge is how we impact their lives in a manner not to put our shareholders and our depositors’ funds at risk.

Having put the structures you talked about in place, where do you see Diamond Bank say in five years?

First of all, I Know that Diamond Bank is now an organisation not just a bank. In that time I believe we will have over 20 million customers and provide services that will impact their lives. And in doing banking services it will be educational and value addition. We will be doing with our educational services, where we are educating people and it will be life improving. So for us in Diamond Bank, one of the key areas for us is, we can’t be profitable if our customers are not in good shape or if we don’t have a society of people that are empowered.

We need people that are educated to actually drive our business. We need customers that are successful so that we generate income. So for us one of the key areas where we believe there is an opportunity is education. We will invest in education and go beyond banking. Ours is going to be a collaborative one where we will be working with key organisations to add value to people’s lives.