By Sanjeev “Mahatma” Gupta
As this writer was paging through the business section of his favourite Sunday broadsheet a fortnight ago to this day, he happened upon an article which quoted the former chairperson of Nedbank, Ruel Khoza, on the idea of establishing a ‘black’ bank. This got me wondering: “Great idea, but what will its business model be?” How different will it be from the ill-fated African Bank which was said to have created a niche market in the high risk unsecured loans market targeted at the low-end of the market that banks avoided like a plague?
What has emerged from a general observation is that the some lenders have profited from little or lack of financial awareness of the majority of the lower-end of the market. As a layperson in the bank who also happens to be categorised as black, all I can do is render my advice gratis to the directors of the yet-to be-established bank, hoping they will read this piece.
- Realistic and sustainable debt collection
From what we learnt from African Bank it is not easy to collect money from the high risk black population. So a sustainable and realistic debt collection strategy has to be implemented.
- Compromising due diligence
As one popular analyst put it during a discussion on Radio 702 on his assessment of of African Bank: “Money was disbursed with giddy abandon to a black population to be seen to make a statement that it is a bank for people no bank cannot lend a sent. In the process, risk management measures were thrown out of the window.”
- Financial
African Bank was naïve to think that it would profit from low financial awareness of the lower end of the market. With the benefit of hindsight, how much money would it have saved had it carried out credit awareness campaigns amongst its clientele. An informed client cannot commit financial oversights.
Sanjeev “Mahatma” Gupta is a freelancer based in Chatsworth, Kwazulu Natal. He writes in his own capacity.
