Are 13 Banks Too Many for Gambia?

Bankers divided in opinion

The question of whether 13 banks in The Gambia are too many for The Gambia with about 1.8 million people (2010 estimates) is hot in the hearts and minds of many people, especially financial players and banking practitioners in the country, who have divergent views over the issue.

The influx of banks in the country over the years has made the country a highly competitive financial sector in Africa.

With a banking population of less than 25% of about 1.8 million people, it is just normal that concerns are raised on whether 13 banks is not too much for the system, which is why some senior  bank officials continue to make viable comments on the issue, with some nursing the view that “Gambia is too small for 13 banks”.

Dodou Nyang, Sales and Marketing Manager of Trust Bank

For instance, Trust Bank Sales and Marketing Manager Dodou Nyang is reported to have said that The Gambia is too small for 13 commercial banks, hence making the country the most competitive banking country in Africa.

This is partly responsible for the failure or bad performance of some banks in the last two years, says Mr Nyang, who is of the view that in the next two to three years, there would be more bank failures “because the country is too small for 13 banks”. 

“Inevitably, the Gambian banking industry will be reduced to may be seven, six, or eight banks at the most in the next five years,” Mr Nyang said.

Six Gambian banks rated high in world ranking

The parent companies of six of the thirteen banks in The Gambia have been rated among the top 1000 banks in the world by tier one capital, according to the latest ranking by The Banker, the world's premier banking and finance resource.  All six of them also rank prominently among the top 25 banks in Africa.

According to the ranking, Standard Chartered Group, parent company of Standard Chartered Bank Gambia, is the strongest bank in Africa as it is rated 1 out of the Top 100 Banks in Africa and 106 of the Top 1000 World Banks Ranking.

Ecobank Transitional Inc is rated 11 in Africa and 423 in the world.  The other four banks are the parent companies of Zenith Bank (rated 7 in Africa and 287 in the world), followed by Guaranty Trust Bank (ranked 12 in Africa and 429 globally), Access Bank (13 in Africa and 438 in the world), and Skye Bank (21 in Africa and 596 in the world).

The Banker’s Top 1000 World Banks ranking has been setting the industry benchmark since 1970, providing comprehensive intelligence about the health and wealth of the banking sector.  The Banker is the key source of data and analysis for the banking industry globally.

Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. This term is used to describe the capital adequacy of a bank, and it also refers to the financial health of a bank. The ranking measures the financial strength of the banks.

GTBank doles out D65,000 to ‘Smart Kids’ account holders

In a bid to contributing to building a brighter future for children of The Gambia, GTBank has continued to upkeep its business ethics by sharing with its ‘Smart Kids’ account holders to encourage parents to inculcate the habit of saving for their children. Guaranty Trust Bank on Thursday disbursed D65,000 to twenty ‘Smart Kids Save’ (SKS) account holders as a way of “rewarding them for their patronage as well as instill the habit of savings into children. Pic: Managing Director, Guaranty Trust Bank, Mr. Olalekan Sanusi At the presentation ceremony held at the bank’s Jimpex branch, five of the twenty awardees were given a cheque for D2,500 each, for being the first people to nurture the confidence and trust in GTBank to open the SKS account for their children, and the fifteen were awarded cheques for amounts ranging from D1,500 to D10,000, based on how the account is managed. SKS is one of GTBank’s superb accounts parents can use to save for the future of their children. It is designed to introduce kids to the habit of banking and to give them a sense of responsibility. The minimum opening balance of the account is D200. “These children and their parents were selected based on criteria,” Olalekan Sanusi, managing director of GTBank explained. “It’s is not based on how much money is in your account but how the account is managed. It is to award parents who every month, consistently, will put at least a token into this account and they don’t make any withdrawal; such parents need to be commended and encouraged. Parents who maintain very high level of balance in their [children’s] accounts and keep on adding more money are the ones we select to give them cash that they can add on to their SKS account. “It’s our own little way of contributing to build a brighter future for their children and also to encourage other parents to emulate them in building a strong future for the children of The Gambia.” He said further: “Also, we are awarding the five first people who opened the SKS account for their children because they are the first set of people who developed the confidence and trust in GTBank as earlier as 2002 to open the SKS account for their children with the aim of putting their children on a stronger footing. “What each of you as a parent is doing is of great significance to the development of The Gambia as a country. In simple economic terms, savings is key to economic development of any country.  Every income you earn and save something aside helps the economic development of our children and the country at large. This is so because, the level of savings in a country actually determines the level of investment that can take place in that economy; the level of savings in an economy actually determines the amount of money at the disposal of the commercial banks to lend to those who want to invest, and the level of investment in turn determines the level of economic growth in every economy. “Growth is a short term thing, consistent growth over a long period would lead to economic development and eventually development leads to eradication of poverty, and every government wants to put poverty into the dustbin and one way of putting poverty into the dustbin permanently is for every citizen to inculcate the habit of saving.” The message of GTBank this year is: ‘Let’s all of us inculcate the habit of savings’.  MD Sanusi says that though it is difficult sometimes to sustain, savings is good for a person and once the habit of saving has been developed it can be sustained propelled by the benefits and merits that are gained from savings, which range from salvaging one in a rainy day to being able to develop the seed capital for investment.  “It’s only a game of determination,” Olalekan Sanusi noted. With 15 branches across the length and breadth of the country, GTBank, the 3rd largest bank in The Gambia, has firmly positioned itself to meeting the banking needs of the people of The Gambia. In 2009, GTBank was the 2nd most profitable bank in The Gambia and is determined to meeting the banking aspirations of people across the length and breadth of the country. MD Sanusi again: “We have been in operation for about nine years now and this year we will be in our ten years of operation in The Gambia. The Gambian society has been very supportive of GTBank, as they continue to patronize the bank. “As we speak today GTBank is the third largest bank in The Gambia. We owe that to the Gambian people, who have developed confidence in us, because to patronise a bank there must be confidence that you have in the bank.”

All the banks except one meet the capital requirement

Lamin Jahateh, Banjul Thirteen out of the fourteen banks in The Gambia have met the minimum capital requirement as of the deadline of 31st December 2010, Central Bank of The Gambia has announced. The Central Bank of The Gambia (CBG) has issued a directive in 2008 to increasing the minimum capital of banks in two stages from D60 million to D150 million and D200 million to be observed by end December 2010 and end December 2012 respectively. All the banks, apart from Oceanic Bank (Gambia) Limited, met the requirement.  However, Oceanic Bank (Gambia) Limited inability to increased its minimum capital requirement is because its parent company, Oceanic Bank International Plc in Nigeria, has decided to divest from all local and international subsidiaries, hence its decision not to augment the capital of Oceanic Bank (Gambia) Limited to the minimum requirement of D150 million. A higher minimum capital requirement serves several purposes, according to the CBG.  “It would ensure that banks are better able to withstand periods of economic and financial stress and therefore support economic growth; maintains market confidence in the solvency of the banking system; (iii) Imposes market discipline, provides a large cushion to protect tax payers from the risk of being called to bail out failing banks.” The capital increase, CBG says, would further enhance the safety and soundness of the Gambian banking system which, in turn, promotes economic growth. Earlier on the CBG has said only eight of the fourteen banks met the capital requirement of D150 million.  The CBG has resolved not to grant request for forbearance if a bank fails to meet the requirement and to mitigate systemic risk that may arise from the revocation of a banking license, the CBG shall take the following actions: invoke section 45 of the Banking Act 2009 and take over the bank; thereafter the CBG may invoke Sections 48 and 51 of the Banking Act 2009 and place the institution in conservatorship to be sold, merged or restructured; and apply to the High Court for compulsory liquidation under Section 52 of the Banking Act as a last resort.

Central Bank to revoke some banking licenses

By Lamin Jahateh, The Gambian Banker, Banjul Six out of the fourteen banks in the country are at risk of having their banking licenses revoked by the Central Bank of The Gambia due to their inability to raise their minimum capital requirement to D150 million by December this year, as directed by the Central Bank of The Gambia. Two years ago, the Central Bank of The Gambia raised the minimum capital requirements of commercial banks to D150 million and D200 million to be observed by end December 2010 and 2012 respectively “in order to strengthen the country’s banking system”. Hitherto, the minimum capital requirement was pegged at D60 million. The Minister of Finance, Hon Abdou Kolley, while tabling the budget statement and economic policy financial year 2011 before the National Assembly in Banjul on Friday, said the latest assessment indicates that eight of the fourteen banks had already met the capital requirement of D150 million. “The six banks that are yet to meet the requirements are being rigorously monitored by the Central Bank of The Gambia,” he said. Although the Central Bank of The Gambia is optimistic that all banks would observe the capital requirement, the Finance Minister said: “The CBG is resolved not to grant request for forbearance if a bank fails to meet the requirement and to mitigate systemic risk that may arise from the revocation of a banking license, the CBG shall take the following actions: invoke section 45 of the Banking Act 2009 and take over the bank, thereafter the CBG may invoke Sections 48 and 51 of the Banking Act 2009 and place the institution in conservatorship to be sold, merged or restructured, and apply to the High Court for compulsory liquidation under Section 52 of the Banking Act as a last resort.” While announcing the increment of the minimum capital two years ago, the Central Bank says the action has been taken in view of its desire to deepen the financial sector and "in pursuance of the Gambia’s Vision 2020 aim of transforming the country into a financial centre" Thisday, a Nigerian newspaper has reported that the Managing Director of GTBank said the new capital base had increased the challenges of banks operating in the country. Mr Lekan Sanusi said only the creative financial institutions were likely to survive the industry competition and deliver returns commensurate to the expanded capital base. The Gambia, which used to be serviced by less than four commercial banks until a few years ago, has in recent times been affected by the phenomenon of an upsurge in the number of banks registered here, mainly from Nigeria. GTBank MD said the Gambia could only take a certain number of banks. He was quoted as saying: "But do we really need as many as 14 banks in a relatively small country like The Gambia? If you divide the number of banks in this country by the population of about 1.7 million, you have an average of 100,000 people per bank. Revenue is going down. What I know is that in the long run, people will count their numbers. At the end of the 2009 financial year, the Gambia’s banking industry recorded total loss of about 45 million Dalasis. Ten of the banks declared losses.