Nigerian Bank in Gambia sells shares to increase capital requirement

Skye Bank Gambia Limited, subsidiary of Skye Bank Plc in Nigeria, is in the process of selling about D100,000 worth of its shares to a foreign financial institution through private placement to meet the Central Bank of The Gambia’s directive that all banks in the country must augment their capital to D200 million by the end of this year, the paper can reveal. 

Impeccable sources close to this paper states further that the bank is in negotiation with some international financial institutions targeted for private placement, which is the sale of securities, including shares, of a company to a small number of selected investors as a way of raising capital.

Private placement is an attractive alternative for growing companies and it is a quicker form of raising money for a business.

Skye Bank Gambia MD, Mr Yusuf

Skye Bank’s Managing Director Akim Yusuf has confirmed the transactions but says “we are still in the preliminary stages”.

He explains further: “What we have agreed with the international financial institutions is to increase our capital by D100 million; so rather than the [additional] D50 million that the Central Bank is asking for, we have actually found an agreement for a D100 million (increment).” 

Mr Yusuf added that the bank is going to have above D200 million at the Central Bank by the end of this year. 

“Our target is D250 million but in case of any disappointment or shortfall from the side of the financial institutions, it will still be more than the D200 statutory capital requirement,” MD Yusuf said, adding: “Even in the case of a shortfall, from the work we have done we will not be below D210 or D220 million by the end of the year.” 

The Skye Bank boss said some of the financial institutions have already made financial commitment, not just on paper but by handing out cash.  “So we are very hopeful that the exercise is going to be a success,” he said.

Bad debts grip Gambian banks

Trust Bank's Ofori-Atta and Macoumba Njie The revolution in the financial industry of The Gambia in recent years has augured well for the national economy and arguably business transactions, but the competition in the banking industry has left commercial banks in the country rocking the boat of bad debts due to unprecedented rate of loans and advances given out to customers. Commercial banks in The Gambia are grappling with bad debts more than ever before as their loans and advances portfolio continue to swell while increasing sums of monies given out as loans to customers continue to remain as bad debts, which are debts not likely to be paid, giving rise to banks losing millions of dalasis in profits. Skye Bank's MD, Akim Yusuf The situation of FIBank, which by the end of last year published a long list of bad debtors owing the bank tens of millions of dalasis, is a case in point. The International Commercial Bank of The Gambia also threatened to publish its list of bad debtors last year, due to huge sums of money or loans that are not likely to be paid by the debtors. Impeccable sources in the banking industry have also revealed to Gambia News Online that banks such as Sky Bank Limited are contemplating publishing names of loan defaulters. The wave of bad debts in the financial industry is also sensed in the air as banks and non-banking financial institutions continue to drag their clients to court to settle huge sums of money owed to them, some leading to the confiscation of landed properties of defaulting customers. Trust Bank Gambia Limited and Standard Chartered Bank Gambia Limited are also struggling with controlling their loan portfolios. While Trust Bank is concerned that non-performing loans has been increasing and requires some checks, Standard Chartered Bank (SCB) is fighting tooth and nail to clean up its balance sheet of loan impairment. “The Wholesale Banking business [of SCB] saw an increase in its loans and advances portfolio, but this was offset by a decline in the Consumer Banking loan and advances portfolio, resulting in a marginal decline of 2 per cent in the Bank’s loan and advances portfolio,” said SCB Executive Director for Finance, Richard Ahulu. In the same vein, Trust Bank Board Chairman Ken Ofori-Atta cried out: “The loan books of Banks have consequently shown unprecedented levels of impairment and requires an urgent need for balance sheets to be cleaned up.” The incidence of loan default is greater and intensive than even the competition, as a risk to the banking system, Sky Bank Managing Director Akim Yusuf said in an interview with Gambia News Online. “At the end of the day banks would also have to make provisions from their profits, which will also eventually reduce bank profitability,” Mr Yusuf noted, saying: “So it is a greater risk than even the competition between banks. It can affect the overall macroeconomic policy of the government, because it reduces bank capacity to lend to the real sectors of the economy.” According to the IMF mid-2010 report, while the increased number of banks in The Gambia helped to fuel a deepening of financial intermediation, it has also heralded intense competition among the banks in the country in a small market of 1.7 million people, which makes banks vulnerable to bad debts. “As a result of the competition for instance,” Mr. Ofori-Atta observes, “there has been increased lending in both the public and private sectors, which unfortunately led to increased risks and Non-Performing Loans (NPLs) to the banking system.” The intense competition has also resulted in a sharp rise in the cost of deposits and staff remuneration, noted the Trust Bank board chairman, who says “all of these have combined to amplify the pressure on banks’ earnings”. Total earnings for the banking sector as a whole was negative in 2009, provision for loan losses increased and the level of non-performing loans also increased, according to Ofori-Atta. “Although the capital adequacy ratio of 19% indicated the banking sector was still adequately capitalised, this still represented a massive drop from the preceding years and the aggregate percent masked a wide dispersion across banks,” he added. The Central Bank of The Gambia is, however, applauded by the banks for “taking steps to mitigate emerging risks in the industry”, such as the introduction of the Credit Reference Bureau, to place checks and control on loan seekers and debtors across banks.  “We expect that with all of these policy measures [by the Central Bank of The Gambia], banks in The Gambia should be much healthier,” Mr. Atta said.

Salary accounts for civil servants: a step in the right direction

By Lamin Jahateh, Banjul A recent statement from The Gambia government through the directorate of the National Treasury urges all civil servants within the Greater Banjul Area from grade 2 and above to open salary accounts “through which their salaries will be paid”. The new development has a lot of positive effects it can engender in the national economy, such as giving the banks greater financial intermediation, and enabling them to have more resources to lend to the people, which can spur investment growth and national development. It can also give civil servants a good track record of banking relationship as well as enable them to get loans from banks. The association of bankers in the country has therefore lent its support to the initiative saying “it is a step in the right direction” since it will ensure all civil servants within the Greater Banjul Area open salary accounts. Pic: Mr. Mamour Malick Jagne, Executive Secretary of Gambia Bankers Association “This is a most welcome move. It is a step in the right direction,” said Mamoud Jagne, executive secretary of Gambia Bankers Association (GBA).  “It is a means of incorporating all those who are not in the formal banking sector to come to the banking sector.” Mr Jagne also encourages civil servants in the provinces that have access to banks to also open salary account. “I would even encourage those who are not within the Greater Banjul Area, but they are in the provinces - in places that are not far from banks - to open salary accounts,” he said. Outlining the benefits mass civil servant salary accounts would have in the economy and to civil servants, the GBA executive secretary said: “This has a lot of positive effects in the economy: It helps to strengthen the banking industry; it gives the banks greater financial intermediation, and it enables the banks to have more resources to lend to the people. “Furthermore, on the side of the civil servants, it gives you a history of banking relationship, it enables you to get some loans from the bank, and it also gives you security of your funds and you can access it at anytime. “This is a very good development and I will encourage everyone, whether in the civil service, in the parastatals or anybody who is earning an income to open an account and use the account so that you have a financial history with an institutions that in the day of need they can support you.” Mixed concerns However, since the announcement was made, many people have expressed concern and worries that the new development will give rise to congestion of banking halls and delay in receiving salaries, as lots of employees would swarm the banks at the end of each month to collect their salaries. Some civil servants who spoke to this reporter on the issue, expressed dissatisfaction with the directives from the National Treasury, saying that apart from the hours they will spend at the bank waiting to receive their salaries, their take-home pay will suffer charge cuts and deductions that can be unbearable.  “Really I am not encouraged by the whole system,” said Fabakary Kujabi, a grade 4 salary earner. However, Ousman Sonko, another government employee, said a salary account will make it possible for employees to have loan from the banks. “So it is a welcome move and it has come at the right time”. The banks, it is expected, can live up to the challenge of serving the banking public and the mass of would-be salary account holders. “This is because the banks are businesses that are concerned about quality and efficient service delivery,” the GBA executive secretary said. He added: “The banks are businesses and are concerned about the comfort and the quality of their services. I can say that the banks, as from now, will respond by making sure that people spend less time, and if they know that more people are coming they will employ more staff, and that alone have its own benefits in the sense that you employ more cashiers to attend to these people, and people will spend less time in the banks.” The order of day in the region Creating salary accounts for government employees is fast becoming the order of the day in many countries in the region, such as Malawi, whose government has just issued a similar directive that all civil servants in the country should open salary accounts; although many civil servants in that southern African country have so far condemned the move saying the banks will cut some charges from their already “small salaries”. As similar fears as those of the Malawians loom large among government employees in The Gambia, the GBA executive secretary says favourable terms of accounts and their benefits can be differed from bank to bank. “In The Gambia, we have 13 banks that are competing and I am sure if you go to a bank and negotiate your terms and conditions you will get a good deal that you can afford,” Mr Jagne argued. “So I am not worried about that aspect of it because the competition will force the banks to give customers the best deal possible. When you go to any bank to open a salary account, you can negotiate with them and have a good deal.”