Shared value opportunities for Namibian banks
Creating shared value, not to be confused with corporate social responsibility, is a business practice where businesses create economic and shareholder value in a way that also creates value for society by addressing its needs and challenges.Namibian society is faced with many challenges such as unemployment and poverty. Youth unemployment is believed to be in the region of 30%, while 43% Namibians are believed to be living in multidimensional poverty. While these figures are astronomical and frightening, many large businesses are perceived to be prospering at the expense of the broader society thereby leaving the government in a sole position to address these societal challenges.
Against this background, the government should identify pockets of opportunities for businesses to exploit in a way that not only creates shareholders and economic value, but also addresses the challenges in the society.
This write up therefore explores shared value opportunities that will allow Namibian banks to create shareholder value in a way that creates an environment for small and medium enterprises (SMEs) to thrive and subsequently create jobs.
It is a well-known fact that the SME sector is the backbone of any economy. In Singapore for example, SMEs employment makes up 70% of the total workforce. In the US, small businesses created more than 66% of net new jobs, while accounting for 44% of total economic activities.
In Namibia, banks have a lot to play in the development of the SMEs sector. As any other business, SMEs need capital and customers to grow. To obtain capital, the SMEs require cash flow history. To serve its customers, SMEs need to transact in all forms available such as cash, card and mobile. Establishing capital and transacting in any form available is a great hindrance to the growth of the SME sector in Namibia.
SMEs in Evelyn Street in Katutura or at Kapana or in rural areas or in hair salons, can only transact in cash as the card payments are prohibitively expensive. Mobile payments available are ewallet which are also equivalent to cash with the exception of FNB Pay to Cell. That being the case, most SMEs cash does not get to see the bank to enable them to build cash flow history.
What can be done?
Banks must be encouraged to come up with one, universal mobile/cellphone payment solution for SMEs. The solution can be modelled around the FNB existing digital products: Pay To Cell and Digital Account. Using both USSD & Mobile App technology, the solution should allow SMEs to link their mobile numbers to digital accounts of their bank choice. The solution should also allow customers to link their mobile numbers to their existing bank accounts regardless of a bank. To transact, a customer will either dial a USSD code or use a mobile app, select the account where the fund will come from, enter SME mobile number and make the payment allowing the money to be paid directly into the SME digital account of a bank of their choice. Given the 90% plus coverage of cellular networks in Namibia, SMEs and customers will be able to transact cashless anywhere in Namibia.
The solution will be a Win-Win for both the banks, the SMEs and the overall economy. Firstly, SMEs will not be losing out on sales when customers do not have cash on hand. Secondly, SMEs will be able to build the cash flow history which will allow them to access capital to expand their business thereby creating more jobs. And as for the banks, although the platform is one and interlinked, each bank will be able to accrue revenue from its customers' transaction fees. The banks will also reduce their ATM investments portfolio and ATM associated operating costs as the need to carry cash diminishes.
Although the solution might look like a NO BRAINER, its impact on our economy can be profound and transformative. The solution will also require some banks to give up their competitive, innovative advantages in this specific arena as they combine efforts into one platform in pursuance of this specific Shared Value Opportunity for the greater benefit of our society.
Nabot Uushona is an ICT professional with socio economic interests and holds Master of Science (Electronics) from the University of Pretoria and Bachelor of Science in Chemistry and Physics from the University of Namibia.