Barclays in Africa: Antony Jenkins on microfinance and the future of banks

It's banking, Africa-style: Ugandan loan societies that pay interest to investors, or a mobile phone scheme making 670 million payments in Kenya. Barclays plans to draw on such energy and spin a thread from the City to an £80 loan for fresh veg.

by Matthew Gwyther
Last Updated: 19 Aug 2016

Where better to consider what comprises 'socially useful' banking than at the small village of Ndimugezi, an hour's drive east from the Ugandan capital, Kampala? The 30 members of the Village Savings and Loans Association (VSLA) - 16 women and 14 men - are conducting a regular meeting, with the padlocked cashbox placed prominently on a table in the middle of the compound.

VSLA chairman Patrick Isabirye calls the meeting to order with a prayer. The members agree to put aside 15,000 Ugandan shillings (£4.10) for the welfare fund. Then it's down to business. In August, Abdul Bamingba took out a USh300,000 loan (around £80) - a large sum in a country where many earn US$1 a day - to buy vegetables to sell and to support his wife and eight children. Bamingba has been repaying it little by little, at 10% per month, and has found it a bit of a stretch. However, this is not an unusual rate in such associations, which charge anything between 5% and 20% per month, according to what they view as the risk. Association members share any interest earned, according to their stake in the total pot.

Joy Tumwesigye, more confident and articulate than Bamingba, tells how the VSLA has helped her improve her lot. Several years back, she borrowed 800,000 'bob' (£220) for a cow. She also borrowed to send two of her children to university and opened two 'simple hotels'. She has earned more interest than anyone. A round of applause for a true entrepreneur, maybe even a banker, in the making.

Unusually, this meeting is being attended by a professional banker - Antony Jenkins, chief executive of Barclays Global Retail and, with 14 million customers, one of the most powerful in Africa. Barclays has been in Africa since the late 19th century and is well established in 11 countries. Jenkins is on a whistle-stop tour. The bank has a good history of CSR, working with bodies such as Unicef.

Barclays was a partner in the groundbreaking £2.5m Ugandan Katine project, run by The Guardian, Farm-Africa and the African Medical and Research Foundation.

Most recently, Barclays has launched its Banking on Change project, a three-year, £10m commitment to use savings-led microfinance to help half a million poor and unbanked Africans. In Uganda, Barclays wants to recruit 35,000 people and persuade them to deposit the VSLA cash into a special feeless but interest-earning account - the first rung on the ladder of formal financial services. This has advantages: not least, safety. The cashbox is vulnerable in a country where security is a real problem. The Barclays down the road in Iganga is protected by a guard with a pump-action shotgun.

MT has been invited by Barclays to Uganda as the debate in the west about banks, their bonuses, 'social use' and structures is as heated as ever. (Back in Kampala, I had watched George Osborne announcing his cuts live from Westminster.) It's a long way from the tin box on the table in Ndimugezi to Canary Wharf - and to Bob Diamond, who becomes CEO of Barclays at the end of March, a Master of the Universe who took home £22m in 2007. But in our globalised world, the link is there - a thread that leads from the highest echelons of investment banking, with its quants, derivatives and CDOs, right down to £80 loans for fresh veg. It's a vital link for the long-term welfare and development of Ugandans.

The phrase 'socially useless activity' was coined by Lord Turner, chairman of the Financial Services Authority, to describe a host of investment bank trading activity. Barclays protests strongly that it does much of social worth and - with its universal status as retail and investment bank under threat - it needs to prove its point.

Jenkins was appointed to his post in September 2008 after joining Barclays in 1982, straight after university. He spent 13 years in New York with Citibank, but was lured back to the UK to run Barclaycard. He is the 'acceptable public face' of Barclays, described by the The Telegraph and the BBC as the 'nice guy' of banking. He is mild and thoughtful, and also one of the most intensively media-trained bosses I have ever come across. It was Jenkins, rather than outgoing chief executive John Varley or his successor, Diamond, who entered the lions' den of Which?'s Future of Banking Commission.

Jenkins knows full well that the banks have an image problem. 'The reputation of banks is at an all-time low in the developed world,' he admits, as we speed back towards Kampala in a four-wheel drive with police escort. 'There's been a collapse of trust and that's down to the credit crisis, for which banks have to take a large degree of responsibility. It will take a long time to bring trust back.'

But what of the argument about social use? Didn't Lord Turner have a point about all these useless, rent-seeking activities? 'There are a lot of aspects of banking that are socially useful, from home mortgages right up to investment banks providing loans for infrastructure in developing counties,' he counters. 'I don't know what Adair Turner's standard of social use is, but I do know that banking underpins economic activity. It allows people to buy cows, to make some money and to educate their children.'

Cows aside, the activity of traders in investment banks turned out to be toxic, didn't it? 'The securitisation of mortgages is not bad. What's bad is doing it to a degree of complexity where you simply don't understand the true nature of the risks and the rewards.' Did Barclays ever do that? 'We don't do things we don't understand.'

Hmm. Barclays didn't come so unstuck that it had to rely on a government bailout, but isn't it true that, as noble as the Barclays business in Africa may be, it is never going to make the returns of the casino banking game? Barclays Africa contributed less than 10% of total first half profits last year, while Bob Diamond's baby, Barcap, contributed seven times the pre-tax profits of Barclays UK's retail bank in the first half of 2010.

Didn't Jenkins ever feel it would be an easier - and even more lucrative - life as an investment banker? 'Some people like sushi and some like curry. I like retail banking. It's what I've wanted to do since I was 11 and I still get a tremendous kick from what I do. What I do sits at the heart of the economy.' So he's not one for big risk-taking, then? 'I like to ski, but I ski with a helmet on.'

Does he think he is fairly rewarded? (He was awarded a multi-million pound compensation package for a promotion he initially failed to receive when he returned from the US.) 'I'm very happy in what I do.' And what about Bob Diamond's legendary salary? Was he worth more than Bob? 'Bob is a very talented executive and we're very lucky to have him as our future CEO.' With this, there was the slightest of smiles. This line of questioning was clearly going nowhere - and Diamond turned down a request for a chat.

It would be naive to think Africa is simply waiting in poverty for western banks to help it develop. In the absence of orthodox banking, Africa has set about putting itself on a better financial footing.

The day before, in Kenya, I had been in Nairobi's largest slum, Kibera, the second largest in all Africa. I spent a while at an M-Pesa agency that was doing a very brisk trade. Created in Newbury, Berkshire by Vodafone, M-Pesa is the leading payment-transfer-by-mobile-phone scheme on the continent and it has left the UK and western banks looking flat-footed.

In a country where there are few bank branches and tiny numbers of ATMs, M-Pesa - the M stands for mobile and pesa is the Swahili for cash - is the answer. In Kenya, there are 13 million M-Pesa users and the annual cash sum transferred between phones on Safaricom (45% owned by Vodafone) is equivalent to 11% of the country's GDP. Money is transferred to pay school fees, buy petrol and electricity and make loans to friends. Hard currency is not replaced, but the network of 19,000 wakalas, or agents, in Kenya acts to handle transactions for M-Pesa customers, processing 670 million transactions a year. It could be that the internet will be skipped entirely in much of Africa because of the lack of fixed phone lines and the continent will go straight to handheld devices. Barclays is an M-Pesa super-agent, but it's hard to avoid the impression that it is playing catch-up.

So, back finally to Uganda and Patrick Isabirye, savings association chair, Ndimugezi. Asked about his hopes for the future and the new relationship with his bank, he said: 'We are sure if we maintain a good record with the bank, it can help us finance most of our dreams.' Words with which, one feels sure, his bank manager would concur.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today