Interview with Dr. J. Sanpha Koroma, Founder and CEO, Union Trust Bank Limited

Union Trust Bank, the only private, indigenous bank in the West African nation of Sierra Leone,has since 1995 been providing financial products and services to its varied commercial customers, sometimes under less than advantageous conditions. Today, we are fortunate to have UTB’s founder and CEO Dr. J. Sanpha Korma here with us to explain how the bank has succeeded in meeting customer expectations throughout the past 23 years, even when confronted by destructive foes, such as the Ebola virus. Union Trust Bank, never satisfied to stay in one place, is continually on the lookout for new opportunities—and has been rewarded by first finding then exploiting them.

Dr. Koroma, thank you for joining us today.

Part of Union Trust Bank’s (UTB’s) stated mission is to “gainfully explore the tremendous human and material potentials of the country in order to create national wealth and ensure lasting prosperity”. How are those “material potentials” explored by UTB in practice?

Sierra Leone possesses an appreciable level of natural- and human-resources potential worth tapping into. The 2015 national census puts Sierra Leone’s population at 7,050,000. It is estimated that about 62 percent are youths between the ages of 15 and 35 years. The educational infrastructure is being developed. Currently there are five universities: University of Sierra Leone, Njala University, College of Medicine and Allied Health Sciences, University of Makeni and Limkokwing University. Added to these are two other affiliate colleges (IPAM and IAMTECH) and two polytechnics (the Eastern and Northern Polytechnics).

All of these are turning out, on an annual basis, young, brilliant and highly motivated graduates fit to enter and energize in the private sector, particularly in UTB. In alignment with the bank’s expansion strategy and corporate objective of creating employment for youth, a good number of the young graduates are recruited every year, either as interns, or part-time or full-time employees who want to pursue a career in banking and finance. This constitutes a resource for the development of the banking industry.

Moreover, the country’s rich natural-resources endowments (large mineral deposits, vast arable land, abundant rainfall and water resources, pristine tourist attractions, etc.) offer the bank a huge opportunity for diversifying its investment portfolio into several more viable sectors like mining, tourism, agribusiness, energy manufacturing and export.

Thus, those material potentials are explored continually and on a sectoral basis using our 5-Year Strategic Business Plan planning process. 

Part of the bank’s business model is dedicated to microfinance. How developed is the microfinance sector in Sierra Leone, and what unique offerings do you believe Union Trust Bank can provide to borrowers in this space?

Microfinance is currently a great potential yet a very challenging field, due largely to the numerous players, numerous instruments and programmes and different sources of funding. These challenges, therefore, account for a large part of the nonperforming assets in the banking system across the board.

There are in total 78 MFIs (microfinance institutions) in Sierra Leone. Two are deposit-taking (Ecobank and A Call to Business); 12 are credit-only; 13 are community banks and 51 are financial services associations (FSAs). The MFIs have a combined branch network of 104 branches, of which 56 branches are in urban areas and 48 branches are in rural areas.

The mix of products offered by MFIs include small-business loans, salary loans and loans for the purchase of household items. With a continuous down-trend in the value of the local currency, the leone, the minimum loan amounts have risen from Le400,000 to Le5,000,000 in the last few years. A few MFIs have started up-scaling and piloting SME (small and medium-sized enterprise) loans with maximum loan amounts between Le60 million to Le100 million, with loan terms of up to 24 months. The majority of the MFIs have loan terms of less than 12 months. The lowest interest rate in the sector is 20 percent per year, and the majority of the MFIs charge flat interest rates at 25 percent to 36 percent per year.

The MFI lending space has been challenging. As a result of the worsening macroeconomic environment, high default rates have been recorded, particularly as a result of the Ebola virus. MFIs are also saddled with operational costs, resulting in loan-loss provisions, thus preventing them from reaching operational sustainability at a faster pace.

UTB is involved in microfinance operations largely through its subsidiary, Finance Salone. As the bank takes a foothold in the promotion of access to affordable solar energy in rural communities through microfinance in its next planning phase, it plans to channel this product through the subsidiary to promote access to affordable solar home systems.

Because of the difficulties associated with SME lending, particularly in emerging economies like ours, the methodology of intervention and the delivery mechanism of the services has had to be reviewed very seriously. The new lending-strategy policies and procedures reflecting the socio-economic realities in the lending space are now being implemented. 

Dr. J. Sanpha Koroma, Founder and CEO, Union Trust Bank Limited

How much of an impact is the advent of digital banking having on Sierra Leone’s banking sector, as well as the ways in which people in the country are now conducting many of their banking affairs?

Digital financial services became an important feature of banking over the last 10 years. The application of digital finance as a robust financial-services delivery tool is currently on the increase countrywide. Its efficacy was tested during the Ebola period, during which the salaries of 30,000 Ebola response workers were paid through mobile-money transfer technology.

Over the years, mobile-phone use has increased tremendously and continues to rise. It is estimated that about 70 percent of the adult population are mobile-phone users. Therefore, the currency of mobile telephony and network coverage offer commercial banks, including UTB, a huge opportunity for leveraging digital financial-services delivery solutions, thus playing a transformative role in expanding financial inclusion in Sierra Leone. To date, Orange Money alone has over 800,000 customers. UTB has finalized agency arrangements to provide this service.

UTB will continue to leverage agency banking in its strategic planning process with the aim of reaching over 800 agents countrywide during the 2019-20 financial year of the bank.

Digital finance is thus creating a very strong impact, but the biggest handicaps in this sector are the low level of literacy and the scope of connectivity, which hinder these efforts.

If I’m not mistaken, Union Trust Bank also works in support of the government’s efforts in economic regeneration, in part through developing financial products. What have been some of the most positively received of those products?

Union Trust Bank has been very instrumental in sourcing external funding to support some critical government developmental initiatives. In 2011, the bank secured an approval of US$3 million from the Kuwait Fund for Arab Economic Development for the promotion of food security in Sierra Leone. A substantial amount of this funding was applied to the implementation of a contract-farming financing model jointly practicalized, through a tripartite institutional arrangement, by the bank and the World Food Programme in support of the national school feeding programme utilising locally produced rice.

Similarly, with funds from the Islamic Development Bank through the National Commission for Social Action (NaCSA), the bank implemented from 2013 to 2017, on behalf of the Sierra Leone government, a special MSME (micro, small and medium-sized enterprise) financing program for youth-enterprise development and employment promotion through a special micro-lending platform.

Presently the bank is on the verge of signing a line of credit agreement with the African Development Bank (AfDB) valued at US$3 million for a women’s entrepreneurship-development programme geared towards enhancing financial access and entrepreneurship training, exclusively for women entrepreneurs in all viable sectors of the national economy.

Furthermore, the bank has been directly involved in government strategy and policy with regards to financial-intermediation implementation and literacy-promotion programs countrywide. In 2016, UTB played a major role in the formulation of the present national SME Development Policy and Strategy, which led to the creation of an SME Development Agency (SMEDA) under the auspices of the Ministry of Trade and Industry.

According to the bank’s business documents on the website, you are engaged in a Strategic Business Plan, from 2013 to 2018, meaning that it is scheduled to be completed this year. Are you on course to successfully complete the plan in time? Have all objectives of the plan been achieved?

The bank has not met a number of its goals and objectives because of the very challenging operating environment: the severe economic downturn as a result of the Ebola Virus Disease outbreak, the Dr.op in iron-ore prices, the mudslide catastrophe—and their socioeconomic challenges and consequences, all within the plan period.

As I understand, the bank is particularly keen on attracting foreign direct investment through strategic partnerships. Have any such partnerships been formed recently? And if so, how have they helped the bank?

We have achieved quite handsomely in our strategic partnerships. UTB’s core strategic partners include the Kuwait Fund, the IDB/ICD (Islamic Development Bank/Islamic Corporation for the Development of the Private Sector)and the AfDB, from which the bank has received credit lines and other technical support.

The bank has also received technical assistance from the AfDB in the areas of environmental and social-management systems (ESMS) towards its lending activities, risk management and business development services (BDS). The BDS program is being rolled out specifically to support the Women’s Entrepreneurship Development Program, particularly in entrepreneurship training, mentoring and networking.

We are also pursuing other development assistance and initiatives, under the High 5s Agenda of the African Development Bank for investment in energy, agribusiness and manufacturing.

How does Union Trust Bank continue to effectively differentiate its brand from the increased number of banking competitors?

UTB will continue to do so by reflecting the developmental challenges of the national economy, particularly in food security, energy, financial inclusion.

The bank has a wide branch network, with operational presence in 12 out of 16 districts. Coupled with its rare mobile-banking penetration rate into remote communities countrywide, this makes the bank second to none in terms of national outreach.

Furthermore, UTB’s prime position as the biggest SME lender in agriculture, agribusiness, manufacturing, trade and services sectors and energy gives it a unique competitive advantage in order to enhance its market share.

Would you say that you are currently satisfied with the level of diversification that the bank offers in its products and services? If not, which one product or service would you most like to see the bank adding in the near future?

We are very satisfied with our diversification strategy, but we would like to see more efforts, particularly in agribusiness and energy, both key national developmental imperatives.

The bank is thus preparing for a big leap into energy lending, as already indicated. To remain relevant in the growing digital-finance space, the bank is embarking on agency banking with a strengthened digital-finance platform.

The core values of the bank are anchored in part on customer satisfaction. What, in your view, is the most effective way for a bank to achieve customer satisfaction? Do you feel the customers at Union Trust Bank are sufficiently satisfied at present with the bank’s overall service?

The best way to achieve customer satisfaction, in my view, is caring for customers, providing timely and cost-effective services and delivering value for your customers.

For this, we will continue to leverage quality service delivery through cutting-edge banking technology, excellent customer service and customer relations through welfare interventions, strengthening social bonds and constant training of frontline staff.

The customers of Union Trust Bank are very satisfied with our services, hence the growth of the bank, even with the fierce competitive marketplace.

It certainly sounds as if Union Trust Bank is living up to its name by providing top-notch customer service. Thank you very much for your time today, Dr. Koroma.