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Mr. Simon Hughes of International Banker interviews Ms. Mukwandi Chibesakunda, Chief Executive Officer of Zanaco to discuss the bank’s financial performance, technological advances and strategic plans.
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Today, International Banker is joined by Ms. Mukwandi Chibesakunda, Chief Executive Officer of Zanaco, to discuss the bank’s financial performance, technological advances and strategic plans. Mukwandi, lovely to have you with us today.
Thank you for having me, Simon.
Now, last year saw Zanaco celebrate its 55th anniversary with customers, communities and staff through various initiatives and activities. Can you tell us what were some of the most significant of those initiatives and activities? And would you say the bank is wholly unrecognizable from the Zanaco that was founded back in 1969? Or are there core values and objectives that have endured over the years and remain visible today 55 years later?
Thanks, Simon. It’s a bit of both, actually. Just to give a bit of context, Zanaco was formed in 1969 by our founding father, Dr. Kenneth David Kaunda, who was the first president post-independence in Zambia. And it was formed primarily to serve the financial needs of the Zambian people. That’s the time when the Zambian University was also set up and a number of other institutions to cater to the local community. And we believe at the core of who we are that remains over the years. However, obviously, with the advent of technology, with the growth in the economy, the growth in the population. At the time of independence, there were two million people in Zambia. We’re now at 20 million. And, so, that has meant that Zanaco has had to shift. But even as we shift, we bear in mind that the youthful population, with about 50 percent of Zambians being below the age of 18, is the future of Zambia. And we try to make sure that we stay relevant for that community. To achieve that, we must evolve. So, the products that we had initially, when it was a fully government-owned financial institution, are very different from the products that we have now because we are mobile first. And we also are able to then deal with financial inclusion because of the nature of the last mile. And, so, yes, there is a big difference. But at the core, we remain who we are, existing for the people of Zambia.
And underpinning all of that, of course, is performance. And in terms of Zanaco’s financial performance in 2024, the group closed the year at ZK1.79 billion profit, which represented a marginal growth of 3 percent, that’s ZK51 million, as well as a really solid 6 percent ZK302 million growth in operating income. What do you think the main factors are that you attribute these gains to?
So, 2024 was a year with many headwinds. As you know, the region faced a drought, and we do recognize that that impacted the people of Zambia and the wider community in Southern Africa. However, what we were able to do was to pivot in terms of how we positioned. And we were also able to play our role as Zanaco in growing the resilience of the Zambian economy and also demonstrating the resilience of Zanaco itself. Just giving a bit of perspective, when you go back about three, four years, we were able to grow from a PAT, profit after tax, of in the region of about 200 million kwacha to a one-billion-kwacha profit after tax. And having done that in 2021, we’ve been able to do that every year since. And for that to happen, we’ve had to just create sustainable solutions that speak to the needs of our customers, our loyal customers. Our staff also were able to demonstrate resilience in terms of how we’re dealing on the ground with our solutions. And we were also able to assess how we could improve our cost-to-income ratio over a period of time. So, we started some initiatives during the course of 2023 and 2024 to begin to address some of those issues and to just make more. Whatever amount we have in revenue to get a little bit more feeding into the bottom-line. So, in a tough year, such as 2024, we stayed in the one-billion-kwacha race, which a few banks are able to do in Zambia. And we believe that that resilience is one that we can call a win.
So, the 2024 integrated report mentioned that the bank’s diversity metrics have improved on the human-capital front. Can you disclose with us the specific gains that demonstrate improvement in this area? And are you satisfied with the gender balance across Zanaco’s workforce? And in which areas of the bank is this balance most sorely lacking, if at all?
I think, bearing in mind the reason why we have set those statistics. The Zambian population is 52 percent female and 48 percent male. However, we found that the workforce was not quite matching that. And, so, our initial target was simply to get to 50/50 in terms of the workforce. That has been achieved. And we’ve ticked that box, and we’re very happy. However, what we haven’t quite achieved is the same kind of stats going up the ladder, particularly in middle management. We’ve just achieved 30 percent, and even that was quite a stretch. And, so, what we have to do is to identify how we can create a bit more of a balance in terms of our workforce. But bearing in mind that this is a meritorious process. And that is why we do it, to create sustainability, mirror our community, but also create a structure that everyone can buy into and understand. And it’s transparent and open. And it also recognizes that our male leaders have to grow as well. So, we grow our female leaders, and we also grow our male leaders. And everyone is given the opportunity to deliver. So, the 50/50 has been achieved. However, we’re at 30 percent in middle management. And I think we will get there over time. But it’s not something that we will fit into just for the sake of it. We’ll do it in the right way over time, so that it’s sustainable.
Now, you’ve already mentioned how you’ve got a kind of young target market as well in the country. And you’ve stated, or the bank has stated, that one of management’s key priority focus areas is on technology. And that’s particularly on cybersecurity enhancements. What are a few of such enhancements you’ve implemented recently? And how do you think these enhancements make the bank more resilient to cyberattacks, which are happening at increasing frequency?
The nature of technology is that it does come with its own risks. But you don’t just shut the door; you figure out how to mitigate those risks. And that is where our cybersecurity initiatives are very critical for us. So, you will, in the nature of risk itself, you will come across situations where you may be ahead of the curve, and in some ways, you may be behind the curve. But as long as you’re moving towards resilience, then that is a good thing. So, within our technology space, what we’ve identified is authentication procedures building trust, building knowledge. Because at the end of the day, the only way in which we’ll be open to those risks is if our people allow that in. So, we have a very strong training curriculum. We’re also trying to just make sure that, at the core, our systems are capable of dealing with whatever comes in the future. And so in the last year, we’ve spent a lot of our resources on building our systems and the resilience within the systems, building our people and our processes, and also educating our customers. You would never believe how people attempt to even position themselves as me to the public. And people actually buy into it. And they’ll say, “Oh, some people have been sending me messages. Is this you?” And they know very well that it’s not me. But they believe that it’s me just because they see a picture of me. And that’s the nature of these fraudsters who try to go through and take advantage of people who may not be suspecting. And, so, what we try to do is to educate the public, educate our people, strengthen our systems with upgrades and new systems and new capabilities, two-factor authentication and various other initiatives that we believe will place us well for the future. We’re also very open to the future in terms of robotics, AI and the use of data to improve our systems. We’ve implemented some initiatives to use cybersecurity to our advantage and also automate within that process. Because then something that would manually take a very long time, maybe an hour, can be done in seconds. And we believe that that is the way to go.
So, during our previous discussion, you highlighted the unique opportunity to leverage digital and mobile technologies to meet the needs of a tech-savvy generation and to ultimately bolster financial inclusion across Zambia, especially with its youth population. Which of Zanaco’s recently launched digital offerings would you say has had the most significant impact in promoting financial inclusion? And in that regard, which particular features of this product or service have proven the most appealing among customers?
Thank you for that. I’ll speak about two initiatives that we’ve had in the innovation, digital-innovation space. The first one being our agency-banking platform, which is a process through which we get to the last mile. And Zambia has 40 percent of its population in the rural areas. And, so, for them to be financially included, we need to figure out a way to deal with cash as well as digital solutions on the ground. And the Xpress-agency solution has been one that has worked very well in this particular sector. Another that I’ll speak about is our Zanaco Xapit mobile-banking solution. And this puts everything that someone needs in terms of financial services on the phone. And it actually speaks to our youthful population. And it’s the first such solution in Zambia. It goes back a few years. And we believe that this is one that is continuing to evolve. And we identify opportunities to keep improving and layering it so that it is able to deal with any kind of transaction that a customer may want or require in the future. So, those are the two products that I’ll speak about that are quite exciting for us and that continue to evolve on the journey. And it’s not just about us being able to deliver to one customer. But it’s about the entire population of Zambia also growing in the process. So, our Xpress-agent fleet of 32,000 serves at least 10 miles for each agent in terms of employment and feeding people. And when you look at our mobile-banking solution, it is then able to allow for financial inclusion across the piece, both for the youthful population, the elderly and anyone else who would like to access financial services. So, we’re quite excited about those two.
Now, let’s talk about another one. Can you provide us with more insight into what exactly Zanaco Xpress-agency banking involves? And how are digital-banking solutions being integrated into this type of banking?
So, the way that the Xpress agents work, it’s a little booth. And it wouldn’t be very familiar here. I wouldn’t know how to exactly describe it. So, it’s almost like a mom-and-pop shop in your community being able to offer banking services. So, what we do is we enable them to offer those banking services. And we give them a point-of-sale terminal, which allows for transactions to take place on that terminal. And that then means that the cash that they have can go back into the community without having to go to a central location. So, that also means that people within the community can open accounts. People within the community can transact. And we’re then also able to participate in initiatives such as the agriculture financing for the wider community. Bearing in mind that in Zambia, about 70 percent of agriculture produce is done by small scale. And for them to be financed adequately, we need to be able to reach them on the ground wherever they are. And some of these initiatives are then dealt with through these Xpress agents. And what we have is a hub-and-spoke kind of structure, so they feed into another agent, who is a super-agent. And then the super-agent feeds into ourselves, our branches. We have about 60, 63 branches currently. So, each of the branches then supports the super-agents who support the Xpress agents. And by doing so, we’re able to reach any part of Zambia.
Going from the kind of micro to the macro, if you like, according to the bank’s website, your partnership with the leading African investment company Arise B.V. is providing Zanaco with benefits from technical assistance, global banking best practices and strategic partnerships that enhance its capabilities. Can you give us a real-world example of how this partnership is working in practice?
Just to give a bit of context as to who Arise B.V. is, this is an institution that holds shares in Zanaco. So, over the years, bearing in mind where we came from, having been set up by the government of Zambia for the people of Zambia. What happened was Zanaco was privatized in the year 2007. And the bank that bought shares in Zanaco was Rabobank from the Netherlands. And over the years, further then shared that shareholding with FMO and Norfund in an entity called Arise B.V. based out of South Africa. And, so, that partnership has meant that Zanaco has access to international models, international best practices and also is able to then share some of what we do so that other African entities that are part of the Arise B.V. group are also able to come together. So, they have shareholding in about 15 entities in Africa and various commercial banks and, in some instances, even some fintechs. And recent developments are going into the technology space as well. And all these entities, then, share best practice. And Arise also helps us with a partnership which was approved by our shareholders to say Arise can support in the IT space, in the credit space and in capacity building. So, over the last two years that we’ve had this partnership with Arise B.V., we’ve seen a significant improvement in our partnerships. So, for example, even the amount of money that we pay for technology we’ve been able to negotiate it down by creating that critical mass and saying to whoever is supplying that, to say, “O.K., it’s not just Zanaco you’re talking to; you’re talking to various institutions within Arise B.V.” What we’ve also been able to do is to learn. So, we have a program where our staff go to various countries to learn how things are done in a particular way. And then to come back and apply that. That has been very welcome. And it just creates the capacity for scale. We’ve also been able to work together on various products and services. So, bearing in mind who Rabobank is and what they’ve done in the agriculture space, and Zambia has been trying to diversify from a copper-led economy for the longest time. We believe that we’re well placed to also play our role in the agriculture space and build resilience into the Zambian economy by improving the way that we feed our people. In the energy-sector space, I spoke about the drought, and the energy space is something that Rabobank and the Arise B.V. team are also experts in. And in terms of solar and other alternative-energy sources which build in climate resilience. So, there’s so many areas. And we have been able to in this partnership implement a number of solutions. And we believe that this is a partnership that will take us a long way.
It’s a great example of, if you like, the power of collaboration, isn’t it? By bringing everybody together, you can collaborate and really share that best practice and understanding and knowledge.
Certainly. And, you know, at the end of the day, it’s about more cooperation than isolation. Because on our own, there are some things that we wouldn’t have thought about or wouldn’t have been able to implement as effectively. But jointly with our colleagues in the rest of Africa, as well as in Arise B.V., we have been able to deliver certain solutions.
Now, let’s have a look at the kind of strategic plan. The bank’s approaching the conclusion of the 2020-2025 plan. Are you satisfied that the objectives that were initially set out in the plan have been achieved? And which is the most significant objective that remains outstanding at this stage? And are you on course to achieve it by the end of the year?
Yes and no. I think the most important objective for any financial institution is to deliver a strong financial performance. And what happened with our 2025 strategic plan, we were able to hit the numbers by 2022 for literally every statistic that we had set for ourselves. And that was a big win. However, what we recognize is that there are some areas where we had set targets—for example, headcount reduction based on automation, we weren’t able to achieve that quite as quickly. And we believe that it’s something that we’ll still have to do. But the nature of headcount reduction is that it does come with its own risks. And, so, you don’t just do it for the sake of it. Rather, grow the business, and then see what is still necessary. And that is the decision we have had to make to be a human institution rather than to just make things happen. Because we could have done it, but it would have been very painful for our staff. And so we’ve made a logical choice to say, rather grow the business beyond our initial expectations. Still automate, because it’s necessary as part of our digital transformation. But to achieve that by the end of the year, I’m not sure about that. I think in the next strategic plan, we’ll be a little more sanguine about how we set this for ourselves as a target, focus more on the financial performance and also on the impact we have in our community. And then everything else should come after.
O.K., well, maybe we’ll get you back to talk about that.
Let’s see what happens.
Thank you very much for your time today. Really much appreciated.
Thank you. Thank you for having us. And looking forward to you buying some shares in Zanaco. And visiting Zambia.