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First Capital Bank scouts for fresh lines of credit

First Capital Bank (FCB) managing director Ciaran McSharry

SEVERAL propositions have been made about the direction that Zimbabwe must take to stem prolonged economic turbulences. Some experts have suggested that returning to full scale dollarisation will be the panacea to a crisis that seems to deteriorate at a fast pace. But in this wide-ranging interview with our deputy business editor, Kudzai Kuwaza (KK), First Capital Bank (FCB) managing director Ciaran McSharry (CM,) says taking this route would be dangerous. Here is how he sees things.:

KK: Please take us through your experiences as a bank since you entered this market about five years ago.

CM: The overall experience has been positive, but not without its challenges. If you wind back to October 2017 when FCB took over the Barclays business, every single IT system belonged to Barclays, and were imprinted and linked to the Barclays network. We put a project in place to replace all those systems. That took us to March 2019. In that period, about two or three weeks before we went live with our new systems, we had a complete change of currency.

KK: That should have been pretty taxing.

CM: We also went through some restructuring. As a business, we have managed to transition very well. Of course, I was not in charge throughout that. I need to give credit to Sam Matsekete (former FCB MD), who came before me. He really helped us to manage that transition.

KK: What are you working on now?

CM: The main thing that we are still working on now - and these are things that will not change overnight - is culture. You know, we have a lot of people that had been with Barclays for many years. You can take a man out of Barclays, but taking Barclays out of a man can be very challenging.

KK: How did the bank perform in 2022?

CM: We are in a closed period, so we cannot go into detail about our performance. What I can tell you is that I am happy with the performance we achieved in 2022.

We managed to obtain a European Investment Bank line of credit. We are working on other lines of credit. And overall performance was good. It is a very good foundation as we progress into 2023, in the next stage of our journey.

KK: How have you adapted to the shift to digital technology?

CM: We have had our own challenges. Going back to 2017, when we had to focus on changing our systems and upgrading them into FCB systems - that put us a little bit on the back foot.

However, 2022 was a year of huge delivery. We delivered four or five key things: A new mobile banking app, which I think is a huge improvement from what we had.

It is the best on the market. We also delivered a new internet banking platform. But we had a number of challenges when we went live on that. I would say it is certainly up there with the best on the market. We have a payment tool called Infini-Pay, which allows our corporate customers and NGOs to do bulk payments in one file.  We also have the Host to Host (facility).

KK: What should the market expect in 2023?

CM: There is more to come. We have two core products that we (want to) get out there. One of them is an e- commerce platform. The second one is a point of sale (POS).

We have upgraded our POS. We started rolling that out this year. We are just getting more POS machines, and we believe it is one of the best in the market. We have been very busy.

KK: How many POS machines do you intend to have countrywide?

CM: The market is huge. We would be looking to have somewhere around 2 000 by the end of this year. These will be multi-currency POS machines. Where in the past you had to have a Zimbabwean dollar and a USD POS, you just need one.

KK: What plans do you have for Kingdom Hotel after the departure of African Sun?

 CM: The hotel itself is not departing from Victoria Falls, but the Kingdom (Hotel) is temporarily closed. It will reopen after refurbishments. (See full story on Page A1).

 KK: The policy rate was increased to 200% last year. How did this impact your business?

CM: The impact of that on Zimbabwean dollar lending was to dramatically reduce the amount (borrowed). We saw a shift in demand to US dollar loans. That is where the real demand is coming from.

Now, you see the rates coming down. The anticipation is we are going to see demand for Zimbabwean dollar lending starting to pick up. I am sure this is part of the plan.

I do not know if demand for US dollar loans will fall. But it will probably taper off to some extent. What I think you are going to see is a decline in deposits at least in the short term. I think that will normalise over time.

KK: The rate was reduced early this month to 150%. What, in your opinion, should be an ideal rate?

CM: That is a very hard question to answer because of (volatile) inflation. In a normal economic environment, your rate should probably be above inflation.

This is not realistic in this environment because it is pretty hard to say where the rate is going to be. But remember again, you have two rates. You have 150% for the non-productive sector and you have a 75% for productive sectors. The challenge will be defining what is productive and what is not productive.

KK: In terms of lending what is the composition in US and Zimbabwean dollar terms?

CM: We are not different from other banks. We have seen a big shift towards United States dollar lending. I would say at the moment we are somewhere around 60- 65% US dollar lending and 35- 40% Zimbabwean dollar lending.

KK: What is your view of the current macroeconomic environment?

CM: There are two different phenomena. You would see a macroeconomic environment, which is making international headlines. But when you are on the ground, individual businesses (in Harare) are doing quite well.

So, the economy, I would say, is actually buoyant. But the challenge that we have is how much of the economy is formal and how much is informal. You have something like 80% of the economy in the informal sector and 20% in the formal sector. But generally, there is plenty of money. But it is not necessarily going into government coffers.

KK: Tell us about the power situations?

CM: It has cost us significantly. We have got to put diesel in generators when they are running.

We have started investing in solar. But when you are out of power for 12 to 13 hours solar will not necessarily run all the equipment you need to run.

It is a big challenge for many players right across the economy. But for banks in particular, you have to keep your systems running.

If they go down you have a real problem. You have to make sure you invest wisely.

KK: Going into the second quarter of the year, what is your outlook?

CM: It is hard to say. What I am seeing is an increase in demand for Zimbabwean dollar lending and a tightening of liquidity on the US dollar.

There will definitely be more demand for the US dollar in the second quarter, which is going to cause challenges and frustrations to a number of businesses.

We have to look at where every bank across the country will source additional funds.

But what I see is that the cost of the US dollar is going to increase, globally which is going to translate into this country. I see continuing challenges.

With elections on the horizon, that will create uncertainties in the market.

That is something to watch. Then obviously as you get into an election, there is bound to be changes in policy. That is the other thing we just need to watch very closely.

KK:  Should the country take the dollarisation route?

CM: The simple answer is no. I do not think so because if you dollarise, you lose the ability to control your economy. This is because it will not be your currency. You cannot manage currency fluctuations. And you also cannot manage money supply.

To some extent, you cannot control interest rates.

By having your own currency, you can manage that. My view will be that you continue with the multi -currency (regime). But you need to work hard to build confidence in the local currency. You do that by letting the rate float.

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