When Mega Bank was launched about two years ago, its CEO Anil Shah, declared the bank´s was to become Nepal´s leading financial institution by 2015. Since then the bank has focused on growth by targeting the rural population, small-to-medium enterprises (SMEs), and people at “the bottom of the pyramid”. Republica´s Emilia Terzon spoke to Shah about the bank´s ongoing performance. Excerpts:
This month commercial banks announced net profit increase of 12 percent. How does Mega Bank´s growth compare?
Because our base is so small, the increment is in hundreds of percent. We are only two years old, so it is increasing exponentially. If you look at last year´s third quarter results, our loan growth was the highest among commercial banks. For a new bank that´s quite phenomenal.
Are you generating that growth by taking on customers who have never used banks before or are you poaching existing customers?
It´s a mix. I don´t think we have the luxury of choosing. At this point, our backbone is SMEs. The corporate sector is completely over-banked. We have 32 commercial banks (in Nepal) and they are all targeting the same clients. So we want to develop a new market.
If you go down any road in Nepal, almost every house comprises one or two shops. Every one of them is a potential customer because they have need for cash and need to get finance from somewhere.
Nepal suffered a huge liquidity problem last year. Are you still feeling its effects?
We´ve come to the reverse problem now. We have lots of money and nobody to give it to right now because of low business confidence. That´s why we need to find new markets.
Has the absence of full-fledged budget affected Mega Bank as well?
It hasn´t yet, but it definitely will. It hasn´t yet because we are still running off the last year´s liquidity, but now with the government as it is and the partial budget, again we could face a liquidity crunch. It´s very possible.
There´s been a lot of talk of mergers among banking institutions. Is Mega Bank considering a merger?
We´re too new. We don´t need to merge for capital. If we do merge, it will be for business advantage. If we find a financial institution in certain region where we are not present with a good customer base, then we would merge.
The biggest hurdle for me with merging is cultural. We´re trying to develop a certain culture here at Mega Bank which is quite unique and an open-culture. Merging with an institution that brings an injection of say 100 people may hamper my culture.
In Australia, for instance, Commonwealth Bank is known as the bank of the SMEs and common people. What banks have you modeled Mega Bank´s culture off?
We look at the ICICI bank in India. That´s very much in line with the philosophy that we have. Commonwealth Bank is also there. Maybank in Malaysia is another one.
In June you announced Mega Bank was looking into an alliance with Asian banks. Have you formed any relationships yet?
We have not entered into any alliances yet but we are looking at it. This is for a simple reason: we haven´t even had an IPO
[initial public offering] yet. Before we go out and look at alliance partners, we need to be a full-fledged bank. We have to be publicly listed.
What banks and countries would you look most seriously at for an alliance?
I would look at Indian and Chinese banks. There´s a lot of synergy not only in the way we do business but also the opportunities. A lot of projects that come into Nepal will be funded by India or joint ventures with China.
What do you see as the biggest challenge to the banking sector in Nepal in 2012?
People. We do not have the depth of quality people that we require for the growth and the plans we have. It´s not that we don´t have the youth, but they are going to Australia, US, Europe, and now even Qatar, Korea, and Malaysia. The brains are going abroad. This is going to be (a problem) for every sector and not just banking.
How do you give people a different incentive to stay and work in Nepal?
You have to give them “name and money”. If you go overseas, you can earn lots of money and all, but if you stay here you can make a name. We give good salaries and good bonuses, and you can also stay and be with your family.