Zambia National Commercial Bank (Zanaco) is a home-grown bank established in 1969 by the Government Republic of Zambia (GRZ) to service the financial needs of the Zambian people, foster financial inclusion and promote economic development.
Over the last 55 years, it has evolved into a leading financial institution, fondly known as the “People’s Bank” and recognized for its commitment to “growing” its country’s people, communities, businesses and Zambia (“our home”). Zanaco offers a universal set of transactional, lending, investment and insurance products and services with the goal of making banking more convenient, less costly and more accessible for its customers.
The bank was the first financial institution in Zambia to introduce innovations such as the automated teller machine and mobile banking. One of its major contributions has been agency banking, notable for bringing banking products and services to underbanked areas. The bank continues to grow to best serve Zambia’s relatively young, tech-savvy customers through every channel possible.
Until 2007, the bank was fully owned by the government. Rabobank Group purchased nearly half of its shares that year (later transferred to the holding company Arise B.V.), and the following year, Zanaco’s shares were listed on the Lusaka Securities Exchange (LuSE).
Today, the ambitious bank boasts one of the largest distribution networks in Zambia, including branches, agencies and automated teller machines spread across the country alongside thousands of Zanaco Xpress agents in various locations. During its five-and-a-half decades of operation, Zanaco has led its peers in numerous financial-performance metrics. In 2021, for example, it was the first Zambian bank to log the milestone of ZMW1 billion in profit after tax.
The Interview….
International Banker enjoyed speaking with the bank’s chief executive officer, Ms. Mukwandi Chibesakunda, about Zanaco’s recent feats and goals for the future.
Ms. Chibesakunda, thank you very much for your time today….
Q According to your “Integrated Report 2023”, Zanaco delivered stellar growth in group revenue of 34 percent to K5.28 billion, as well as growth in group profit after tax of 44 percent to K1.74 billion. To what main factors do you attribute last year’s strong performance?
A. The growth in profitability was driven by the increase in total operating income and the astute management of costs and impairments. Total operating income grew by 34 percent (K1.3 billion), driven mainly by the increase in interest income by 22 percent (K850 million), supported by the growth of the loan book and the 128-percent (K770 million) growth in treasury trading income.
Efficient credit-monitoring practices and our focus on the origination of quality assets resulted in a notable decrease in impairments in the year by 88 percent, from K186 million recorded in the prior year to K22 million at the close of the 2023 financial year.
Q. How competitive is the Zambian banking sector in 2024? What are Zanaco’s most significant attributes that set it apart from or above the local market competition?
A. The Zambian banking sector is incredibly competitive. This is driven by a diverse mix of traditional players, such as banks, and non-traditional players, including mobile network operators (MNOs) and fintech (financial technology) companies. This competitive environment is driving innovation and enhancing service delivery across the board.
Over the past five years, the sector has seen significant growth. Total assets have grown by approximately 30.81 percent, reflecting a compound annual growth rate (CAGR) of 4.56 percent. Profitability has also improved, with industry-wide profitability increasing by over 10 percent annually. The number of points of presence, including branches and agencies, has expanded, making banking services more accessible to a broader population.
One of the standout aspects of this competitive landscape is the significant push towards financial inclusion, particularly benefiting our youthful population. Zambia’s demographic profile, with a median age of 17.6 years, presents a unique opportunity to leverage digital and mobile technologies to meet the needs of a tech-savvy generation. Enhanced accessibility through mobile and digital platforms, competitive pricing and innovative financial products are empowering youth to take control of their financial futures.
By bridging the gap between traditional banking and modern technology, we ensure that every Zambian, regardless of their location, has access to high-quality financial services.
We believe several key attributes set us apart in this competitive market:
Q. In August 2023, Zanaco launched its inaugural Green Innovation Challenge in partnership with the non-profit organization Water for Water (WfW), aiming to advance innovation in sustainability by identifying, supporting and celebrating Zambian-owned green initiatives and businesses. How has this initiative progressed?
A. The Zanaco Green Innovation Challenge was designed to support sustainability-focused startups in Zambia to boost their innovative solutions.
Currently, the three winners have been paired with experienced mentors to provide them with guidance as they grow their businesses. The seed funding is scheduled to be distributed during the year following the participants’ meeting of various contracted milestones.
Q. In 2020, the bank embarked on its 2025 medium-term plan to become the number one bank in the Zambian market based on all metrics. Are you still on track to achieve this goal?
A. This journey has seen us exceed many of the performance metrics we initially set out at the start of the planning period. We exist because of our customers—therefore, we put our customer experience across interactions with Zanaco at the heart of everything we do. We have also focused on attaining and maintaining our market leadership while creating efficiencies in how we do things through innovation.
This approach has seen us deepen our customer relationships as we continually look to meet more of their financial needs through improved service delivery and more personalized offerings.
I consider the solid foundation we have created for future success to be our greatest achievement in the past few years, creating the platform for future success and embedding a culture of innovation, collaboration and going beyond what is expected of us for our customers—a culture fit for today and the future.
Q. Zanaco’s sustainability mission is to “strive to be a bank that is socially inclusive, environmentally accountable, and well-governed. We aspire to help our clients with their own sustainability transitions.” What is the most significant way in which you help your clients with their sustainability transitions?
A. In our quest to be socially inclusive, we support communities, especially women, through various interventions, as we believe we have a role to play in unlocking women’s potential and, most importantly, contributing to the SADC (Southern African Development Community) protocol of 50-percent women representation.
Some of the interventions are easing access to affordable finance for women in the green space through the US$50-million facility we acquired from British International Investment (BII) for lending to SMEs in the green space, with women being given preference. In November of last year, the bank, in partnership with climate-change organization the Rallying Cry, organized a trailblazer program for women in agriculture and agribusiness to learn about the effects of climate change on agriculture and mitigation measures because women are the worst hit when it comes to climate change.
Q. Through partnerships with chain stores, the bank offers banking services in stores countrywide. Can you briefly explain how these partnerships work in practice and how customers benefit from them?
A. The provision of services at partner locations is done by strategically placing a Zanaco Xpress agent inside the partner’s store to provide banking services onsite.
Partnerships with chain stores such as ShopRite, Choppies and Zamtel are the bedrock of the Zanaco Xpress In-Store Model, an initiative that is anchored on our existing agency-banking model but goes further to provide banking services with extended banking hours through key strategic partnerships, such as chain stores or stores with multiple outlets. The provision of services at partner locations is done by strategically placing a Zanaco Xpress agent inside the partner’s store to provide banking services onsite.
Q. Zanaco states that it provides digital-banking solutions to customers across all segments through a range of alternate channels. Among those channels is Merchant Services. The “Integrated Report 2023” counts 4,890 POS (point-of-sale) merchants through which Zanaco can deliver digital-banking services. Is this level of coverage sufficient across the nation?
A. As a market leader in the banking and financial-services sector, as well as a bank of “many firsts”, Zanaco does indeed pride itself on offering customer-centric solutions across multiple segments. In the merchant-services space, through our key offerings, our customers have multiple benefits.
According to the Bank of Zambia’s (BOZ’s) 2023 National Payment System (NPS) report, nationwide POS terminals stood at 45,531 at the end of 2023. This figure puts Zanaco’s coverage at 11 percent of the market share, demonstrating the considerable strides made in ensuring adequate coverage across the nation. In all provinces, measures are in place to ensure increased touchpoints through robust business-acquisition strategies are on the ground.
Q. According to its “Integrated Report 2023”, Zanaco has collaborated with fintech companies “to ensure continued enhancements of value-added services and microloans on our digital channels”. Can you provide an example of such a collaboration?
A. We have collaborated and will continue co-developing solutions with fintechs and aggregators, such as Cellulant and Savannacom. These collaborations have enabled us to introduce significant convenience for payment services, such as pay TV and instant payments to water-utility companies. These services were not previously fully automated for online payments. Through these collaborations, customers can now access pay TV and water services instantly after making their online payments. This is just one example of how we’re leveraging fintech partnerships to improve our digital offerings and enhance customer convenience. We’re committed to continuous innovation in this space to provide a seamless and efficient banking experience.
Q. With more than five million customers, how does Zanaco ensure that it is sufficiently tailoring its products and services for each customer? How does digital banking help with this process?
A. Over the last few years, the world of banking has undergone a digital transformation. The ways we bank, save, spend and transact have changed significantly, and banks have equally had to evolve in how they deliver their services. Our home-grown bank, Zanaco, has been responsive to customers’ ever-changing needs, and our products and services speak to customer centricity. Hence, we cater to all.
Digital banking under Zanaco is a segment on its own and caters to customers who earn less than or have monthly incomes of less than ZMW5,000. This is where our Think Outside the Branch strategy comes in—our digital customers can transact at any Zanaco Xpress near them.
Under digital banking, we have gone further to provide microloans to customers. These are quick, safe and convenient, with no paperwork or long approval processes. This is a system-requested loan, with how much they qualify for based on the usage of their accounts. With these options available, we then ensure that our products and services are tailored to our customers’ needs.
Q. Zanaco Xpress sounds like a convenient offering. Please explain some of its key features and benefits, particularly how it benefits customers in more remote, rural areas. Xpress agent numbers grew from 22,000 in 2022 to more than 27,000 at the end of 2023. Are you satisfied with this level of coverage?
A. Zanaco Xpress is a partnership with a large number of individuals and businesses in urban and rural areas through which Zanaco customers can deposit cash into a Zanaco account or withdraw money from their own accounts at Zanaco. In this way, Zanaco further expands and strengthens its distribution network.
As a bank, we remain committed to expanding the agency model, as it not only contributes to the national financial-inclusion agenda but also creates income opportunities for many households. Zambia is our home, and as a bank that was created 55 years ago to support the financial inclusion of Zambians, we continue to live by our objective of financial inclusion and economic development.
Q. Zanaco is also leveraging the bank’s digital platform, the Zanaco Xpress Agency model, to provide accessibility across the country’s population to some of the most innovative banking services in the market. What does this initiative say about the crucial role that digitalization can play in improving financial inclusion?
A. Digitization plays a transformative role in advancing financial inclusion through agency banking by expanding access, reducing costs, enhancing convenience, improving data analytics and risk management, and promoting financial literacy and education.
Q. The Zanaco Plant a Million campaign, launched in May 2022, aims to tackle the adverse effects of climate change by planting fruit and/or medicinal trees in Zambian learning institutions. Are you satisfied with this campaign’s progress over the two years it has been active?
A. Zanaco has continued on its “plant a million” journey and has, to date, planted 557,673 trees in schools, chiefdoms and farming communities. Of the total, 530,000 trees have been planted in partnership with One Acre Fund, benefiting more than 1,300 farmers. You will be pleased to note that in three to four years, farmers will start reaping the benefits through carbon credits.
We are optimistic that we will meet our one-million target by next year.
….. You are definitely on course to do that and so much more. Ms. Chibesakunda, it was indeed a pleasure speaking with you today.
Courtesy of the International Banker