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We are now comfortably past H1 2023. Quickly take through an understanding of how the year has been. Have you been able to maintain 2022’s tempo?
The year started sluggishly. It wasn’t easy. But by the time we finished the first six months, we were progressing quite well. Looking at the bottomline, we had achieved UGX165 billion, which is about UGX20 billion above budget and we’re hoping that we’ll be able to maintain that momentum. We expect to be, slightly above our budget for the year.
By the end of June 2023, we had mobilised UGX4.6 trillion in deposits, again, above budget; we had given out loans of UGX3.2 trillion, also, above budget. In almost all other spheres, the bank had grown ⏤ for example, we not only had very good growth in our loan portfolio, but we also had a very good improvement in the quality of our loans. As we speak now, the portfolio at risk⏤ the loans that are at risk of not being paid, we are at 2.9%, which, by industry standards, is a very good performance.
In terms of outlook, we are seeing a number of things intervening, that could impact H2 2023. Fortunately, inflation has generally gone down, but there are still some areas of attention such as rising fuel prices, the Russo-Ukrainian war, some chasing sentiments in light of the LGBTQ law, as well as a number of offshore investors withdrawing from the market and the impact on the interest rates. But we expect things to normalise by the end of this year and we should be well on course to achieve better than we did last year.
We are thankful to our customers, who continue to patronise our services. We’ve seen our client base grow. We currently have over 2.5 million accounts, which is a quarter of all the accounts that the banking institutions in the country have.
The bank has invested quite heavily in technology, and we are continuing to invest in our digital future. We want to be a smart bank by 2025. Smart in the sense that we would want to see our customers doing almost or getting almost all services digitally and interfacing minimally with the warm bodies (physically), and the staff. That’s what we call a Smart Bank.
Currently, we have almost 8000 bank agents⏤one of the biggest agent networks. Our focus is on growing those digital channels, a lot more. We want to see more of our customers using our mobile banking platform, we have the Cente mobile platform, and we want to see them using more of that. We want to see them using our network of agents more because we believe it will be the biggest sustainable source of convenience and an enhanced customer experience. That’s why we’ve invested quite heavily.
Regardless, we will still continue investing in our branch network where necessary and where we see fit. For example, this year we are opening the Kapeeka branch. It is ready. This year, we also combined the Bwaise and Kawempe branches and we shall be opening the Buliisa branch, early next year. We shall also be considering places like Katakwi. Again, where it is compelling, we will open the branches but that comes as a last resort because we want to focus more on the other digital channels that I mentioned.
Are we going to see some branch rationalisation perhaps, the bank closing some branches in some areas where digital banking has matured and opening others elsewhere?
It is a possibility, but not at the moment because our customers still need us. You know the culture is still that customers want to see us physically.
Well, people still want physical interaction. I think culturally, you know, the Baganda people of Uganda say, “Amaaso g’Omuganda gali mu ngalo” meaning people still need to touch it to believe it. There is still a lot of people who believe in cash, even when we have all these digital solutions, that are even cheaper and more convenient.
The good news though is that we see the usage of cash reducing, each day that goes by. We have about 1.2 million people who are connected to our mobile platform, and 25% of their transactions are on that platform and we are seeing that proportion growing. We are seeing close to 50% of our transactions being made at agent locations. Bank branches now do only 18% of transactions and we want to see that reduce even further. The more it reduces, the closer we get to our objective of promoting a cashless economy and becoming more of a smart bank.
But eventually, I believe in the medium-term to long term, we should be able to rationalise some of our branches to take advantage of our robust and more convenient digital channels.
You can open the branches and have all these agents, but people will still not use you. So, from your own view of things, and based on the insights from the market, what do you think are some of the key drivers, of why more and more people are continuing to embrace the Centenary Bank Brand? What explains this above-normal growth of the bank?
Well, there are four pillars that underpin our services and these are: affordability, accessibility, convenience/simplicity, and sustainability. I want to believe herein lies the secret to our growth. Much of the innovations I have described above are meant to drive the first three.
But let me talk a little bit more about sustainability. Our sustainability agenda is much aligned with creating social impact and transforming lives and is built around the Group’s core sustainability pillars i.e. education, environment, community support, health and the mission of the catholic church.
We can’t forget to mention the huge impact that our business has on the livelihoods and businesses of our customers. The bank is the second biggest lender in the country, especially to vital sectors such as education and agriculture. In 2022, the bank’s agribusiness portfolio stood at UGX352 billion, a UGX30 billion increase from UGX322 billion in 2021. We are also one of the biggest lenders to SMEs, Uganda’s economic engine. Lending to SMEs in 2022 grew by 10% from UGX 368.6 billion to UGX 405.8 billion.
We are also active supporters both through the provision of credit but also direct and indirect support to the health sector. In 2022, the bank donated UGX150 million towards the 11th edition of the Cancer Run. The run is part of the Bridging the Cancer Gap Initiative, a partnership with the Rotary District 9211 and St. Raphael Hospital Nsambya. This program promotes awareness of Cancer prevention and treatment. For 11 years now, the bank has supported the initiative. In 2022, a total of 2600 staff participated in the run. A total of UGX 1 bn was raised towards the construction of two bunkers to house ultra-modern linear accelerators which are cancer testing and treatment machines.
On the pillar of building thriving Ugandan communities, in the year 2022, Centenary Group committed a total of UGX1.2 billion in community support, up from UGX953.5 million in 2021 towards various community initiatives. This allowed the bank to increase the number of community activities from 154 to 214 in 2022. And on supporting communities through the social mission of the church, in 2021 the bank supported a total of 287 church activities up from 202 activities in 2021.
On the environmental front, the bank has undertaken various initiatives such as the Environmental Stewardship campaign aimed at raising staff awareness of the impact of the bank’s activities on the environment. 84% of the bank’s staff have been impacted. Cente Echo, the bank’s internal Stewardship campaign saw the bank in 2022 recycle 22.5 tons of obsolete paper records, and in 2021, 45.620 tons of paper records. A total of 29 branches participated in the environment green campaign engagements. These ranged from community clean-ups to water tanks for water harvesting and tree planting among several others.
Overall sustainability is key because it speaks to our purpose⏤ Transforming Lives.
Looking ahead, for the remaining quarter and going into next year, what can we expect? What can your stakeholders expect from the bank?
Our stakeholders should expect more digitised services. They should expect more convenient channels of accessing our services. That’s why we are promoting agent banking as one of the key channels. We have almost 8,000 agents doing 50% of our transactions currently. Our mobile banking platform is doing about 25% of transactions and the branches are doing only 18%.
Our customers should expect us to be more innovative, riding on our technology investments as well as investments in the right people to drive this innovation in the form of better products and services as well as an enhanced customer experience. We will continue to listen more to our customers, understand all their changing needs and translate them into products, services and solutions to match/respond to those needs.